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Complete Understanding of Futures and Options

Futures and options are widely used derivatives in the stock market. They are financial derivatives that give investors the right to buy or sell a particular asset in the future at a certain price known earlier. Futures and options assist in managing market risks and also present opportunities for profit. So, let's explore what futures and options are, their types, and how they work.

What are Futures and Options?

Futures and options are termed as derivatives because they have their value based on some other assets like stocks, commodities or indices. They assist the investors operate to minimising the risks of fluctuation of prices in contracts and placing bets on future price changes.

How do Futures and Options Work? 

Futures Contracts

Futures contract can be defined as the manner of business wherein the contract is made for the sale of an asset at a fixed price and on a fixed date in the future. Certainly, each of the contracting parties is bound to go through with the transaction on the stipulated date. For instance, if you have agreed to buy 100 shares in a company at $50 each three months from now, you will have to obtain those shares at $50 even if the market price is lower.

Options Contracts

Options contract is a financial derivative that entitles the holder to but does not require him/her to buy or sell an asset at an agreed price by a stated date. There are two types of options: basic types of options such as the call options and put options. A call option gives the holder a right but an obligation to buy a given asset, while a put option gives the holder a right but an obligation to sell that asset. For instance, for a call option to buy a share at $50, one will exercise the option if the price in the market is higher than $50, or the option will lapse if the price is lower than $50.

Visit tickerinvest to know more about F&O. 

Types of Futures and Options

Types of Futures:

Financial Futures: This comprises of stock futures, currency futures and index futures.

Physical Futures: These include agricultural products, energies, and metals such as gold and silver, which are traded in futures contracts.

Types of Options:

Call Options: Conveys the ability of the holder to purchase a certain asset at a certain price, known as the exercise price.

Put Options: It gives the holder the ability to leave with assets through a previously agreed price.

Key Differences Between Futures and Options

Obligations vs. Rights: Futures need the actual completion of a transaction, while options offer the option or right to complete the transaction.

Risk and Reward: Futures can become very profitable or very loss-making since they are a compulsory transaction. Options potentially have less risk than futures because the trade involves an option.

Margin and Premium: Futures involve putting up of margin whereas options involve paying of a premium for the option.

Who Should Invest in Futures and Options?

Hedgers:

Protectors employ futures and options to avoid price fluctuations. For instance, a farmer employing a futures contract can secure the price at which he or she will sell crops. This ensures that they receive a fixed price even when market prices are lowering.

Speculators:

Such as the activity of buyers and sellers who make price movements their target and attempt to make a quick buck from them. HG futures and options are employed in speculating on price trends. For instance, a future contract involves a trader buying it with the expectation that the price of a stock will go up.

Arbitrageurs:

Arbitrageurs are people who seek to profit from the inconsistencies of the various markets. They deal by purchasing goods in one market at a certain price and then reselling them in another market at a much higher price. Tools such as futures and options can prove useful in helping them hedge and avoid price risks.

Benefits of F & O

High potential for returns.

Flexibility in trading strategies.

Protection against price changes.

Risks of F & O

High potential for losses.

Market volatility and unpredictability.

Requires deep market knowledge and analysis.

Conclusion

Futures and options are among the most effective instruments for controlling risks and generating profit. However, they have large potential risks and must be used only when adequately understanding the market conditions. Speculators should, therefore, ensure that they review all traders' contracts and their financial objectives before taking these futures and options.

Tickerinvest offers you the resources and knowledge you need to make smart investment decisions. Do smart invest with us!

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Bangalore Real Estate Crisis: Property Taken Over By KRERA

Bangalore is experiencing a complicated situation of delayed luxury real estate projects. The incident is in the locality of Anekal, where the LGCL Urban Homes LLP has a plan of 73 luxury villas and 6 economically weaker section units. This real estate property was supposed to be delivered in 2014, but even after 10 years, the project isn't completed. 

Due to the excessive delay of the property, hand over Karnataka Real Estate Regulatory Authority to step into the matter. RERA is there mainly to reduce project delays and avoid property fraud. The RERA registration certification is important to ensure everything about the property and location is well established. 

Now, the developer is unable to provide that. "Thus the Authority is required to invoke Section 8 of the RERA Act and allow the cooperative society to intervene for completion of the project," is the order mentioned in MoneyControl. 

Now, following the act, the authority has ordered the sale of the unsold inventories, and by the additional paying amount of the home buyers, it's important to collect the Rs. 24 crore fund. And the homebuyers have already paid 14.3 crore to the land owner for the authority and the use of infrastructure. 

RAW ordered that this project be finished within 18 months of the order date. So that after a long wait, the home buyers can finally receive their properties. All this essential information is required before purchasing a 2-3bhk real estate property. 

On the other hand, another project in Bangalore by Commune Properties Pvt Ltd. and financier Anand Rathi Global Finance Ltd. cost the same amount, as they could not deliver the apartment to the home buyers on time. It has been around 5 years since the project's completion date was dated in December 2019. 

This apartment project in Anekal has only handed over 200 properties without amenities or occupancy certificates. Also, it has 384 flats across 5 towers, which are still incomplete. So, in order to avoid such a situation, it's better to read more.

Then, it is said that the developer mortgaged the entire project with Anand Rathi without obtaining permission from the home buyers, which caused the funds raised from the mortgage to be diverted. The Developers ignored the rules, which stopped them from selling more apartments, and Anand Rathi from selling the mortgaged ones to get their money.

As a result, the association then issued a recovery notice against the developer to take possession of the mortgage flat. Not only that, but those apartments have already been sold to homebuyers. The association approached KRERA so that they could help in completing the project. 

So, after the authority takes over the project, they check the project plan presented by the architect, and based on that, it proves that the project is incomplete. And the devil apart didn't follow the Rules under the RERA act. 

Then, as KRERA was handling the project, they asked the regulator to provide a budget for completing the project. Based on the latest budget documentation, it will take around Rs. 5.3 crore to complete it. However, the association showed a budget of Rs. 22 crore.

Finally, under section 8 of the RERA Act, the KRERA ordered the buyers association to take over the project and finish it within 2 years. Anand Rathi was asked to hand over Rs. 4.8 crore he has collected from the 18 apartments he has sold. 

So you can understand that various sorts of apartment issues happen in various places. Before purchasing or booking any apartment, checking all the information thoroughly and knowing its details is important. That's why, to make things easier for you, you can get help from a trusted real estate website like housepersqft.

Real estate is very expensive nowadays, and not everyone can afford it. So, while you have decided to fulfil your dream with your hard-earned money, it must be worthwhile.