Futures are type of derivative contract which allows Buyers/Sellers an obligation to Buy/Sell the underlying asset at a predetermined price on a predetermined future date it consists of lot size.
E.g. We Buy INFY 30SEP21 Futures at 1700 (600), so in this case, we are obliged to buy INFY at 1700 rs (Predetermined Price) on 30SEP21 (Expiry, Future date) 600 shares (Lot size) so let’s say if INFY on 30SEP21 goes at 1750 we have to buy it at 1700 as we have Futures contract for the same, also if INFY drops at 1650 we still need to buy it because we have entered a contract. Further we can also sell the bought contract intra expiry.
Options are derivative contracts which offers buyer right but not an obligation to buy/sell the underlying at a predetermined price, at a predetermined future date, premium is paid by the buyer & involves lot size. Eg TCS Share price is at 3500, we buy a Call Option 3500 CE of 30SEP21 Expiry at premium of 10 Rs & Lot size is 300. So in this case we have right to buy TCS at 3500 (Strike Price/ Predetermined Price), on 30 SEP 21 (predetermined date), we paid 10 rs x 300 (premium) to get the right to buy TCS 300 Shares (Lot Size) at 3500 rs. So let’s say TCS price goes at 3700 on 30 SEP 21 we will have an opportunity to buy TCS 300 shares at 3500 because we bought a CE Option of 3500 rest the amount would be our PNL.
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