Hull derivatives. The essence and difference between futures and options. What is meant by options?

For many traders, options trading has become a truly stable source of income. There are several reasons for this phenomenon - limited risk, unlimited income, chances to trade even with a small amount in the account, as well as the possibility of using combined strategies. But in order to make money in this field, it is advisable to obtain the necessary set of knowledge. One of the proven ways to obtain information is to read useful literature. We will focus on the best specimens Special attention. At all, good books on options trading domestic market- it is a rarity. I hope that this article will allow you to quickly make your choice and start working with options.

Book No. 1. John Hull "Options and Others"

John Hull is one of the most famous experts in risk management and stock market. In this book, the author introduces his readers to the futures market, options and a number of other useful instruments. The first edition contained only 300 pages. The latest versions of the book are more impressive and contain more than 1000 pages. Many experienced traders call this book a real encyclopedia on derivatives. It provides the most important theoretical and practical knowledge about futures, options, types of markets, and so on. The author managed to combine and describe in detail all the most interesting strategies. In addition, the book contains a good description of the options pricing model, features of volatility smiles, Greeks, etc.

Book No. 2. Mikhail Chekulaev “Risk management. based on volatility analysis.

The book by a talented author is devoted mainly to risk management and the peculiarities of its assessment. Naturally, all this is considered in relation to options trading and a number of other related instruments. The emphasis is placed on the fact that the key success factor for every trader and investor is learning money management and understanding the essence of the risk management system. The pages of the book provide practical recommendations on how to correctly find the balance between risk and profit. In addition, the author provides the best volatility strategies and teaches how to apply them in practice.

Book No. 3. Lawrence McMillan. “Options as a strategic investment”

For many options trading enthusiasts, this book is a real “bible”. It has everything you need for successful trading in the stock market. If we take all Russian-language literature on this topic, then Lawrence MacMillan’s book is definitely included in top five. The author tried to condense his knowledge as much as possible, which resulted in a thick book of more than a thousand pages. This literature is perfect for novice traders. It describes what options are and reveals the essence of their main types and types. An impressive part of the book is devoted to consideration of the most popular strategies, including various delta and vega neutralities. The most important thing is that McMillan, as a successful trader with thirty years of experience, can really be trusted. For a trader or investor, this literature will be very useful.

Book No. 4. Lawrence Maxmillian. "Maximallan about options"

This book about options trading appeared almost one of the first on Russian market, but that makes it more valuable. This is a unique guide that contains everything that is most useful for a modern trader. The author tells how to work with basic trading tools, gives examples of successful trading, including his own experience. I would like to note right away that the book is not entirely for beginners. To understand it, you must have some experience in options trading and understanding the essence of this instrument. But even for beginners it will be very useful, because on the pages of “Maximallan on Options” the most popular terms are deciphered and the secrets of option trading in indices, stocks and, of course, futures are given. The book does not contain full descriptions of trading strategies, but it allows you to form the necessary basis for your independent development. In addition, it contains many other interesting things - calculations of break-even points, recommendations for maintaining option positions, maximum volume practical knowledge and so on. This literature will be very useful for already practicing and experienced players who prefer to work on American exchanges.

Book No. 5. Simon Vine, Options. Complete course for professionals"

Many traders have heard about this book. It reveals the main secrets of using not only options, but also a number of derivative instruments. Again, the author wrote the book with more experienced traders in mind who have already felt the taste of trading and the bitterness of defeat. On the other hand, beginners should not put this book aside, because it contains a number of interesting theoretical exercises and useful tests with answers. This will allow you to better understand the essence of the information you read and test your memory.

Book No. 6. Chekulaev Mikhail. “Riddles and secrets of options trading”

Actually, just by the title of the book it is clear what the author is going to share with his readers. That's right - he reveals the most important secrets of options trading. Mikhail Chekulaev has unique trading experience. He is considered one of the best masters of options trading and risk analysis. The author managed to cover all the most important areas of trade, consider the most effective methods analysis and only proven strategies. Book “Riddles and secrets options trading» is perfect for both market experts and pioneers.

Book No. 7. Kevin Connolly "Selling and Buying Volatility"

The peculiarity of this book is its ingenious content. It teaches the trader one of the best strategies based on selling and buying volatility. By the way, a famous scientific editor, Mikhail Chekulaev, worked on the publication of this book. Over the years of his working career, he managed to write several high-quality books and interesting articles on options trading, which are given in our list. By the way, the strategy described in the book is more suitable for trading masters. But it also contains a lot of useful information for novice traders who are just starting their journey. The main advantage of the book is the simplest language possible and the absence of complex formulas.

conclusions

Books on options trading are not in short supply today. All that remains is to choose the appropriate literature and devote some time to gaining basic knowledge or improving your skills.

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The new edition includes new chapter on securitization and the 2007 credit crisis, discussion of central clearing, liquidity risk and indexed overnight swaps, more detailed description energy and other commodity derivatives, an alternative derivation of the Black-Scholes-Merton formula using binomial trees, an appendix on the cost of capital model, examples demonstrating the calculation of value at risk from real data, new material about endowment notes, open-ended and closed-ended options, jump processes and applications of models...

Read completely

The book focuses on derivatives markets and risk management. Its exceptional coverage and thoughtful writing style have made it a reference book for traders and the most popular textbook for colleges. The balanced combination of rigor and accessibility does not require the reader to have any a priori knowledge of options, futures contracts, swaps and other derivatives.
The new edition includes a new chapter on securitization and the 2007 credit crisis, a discussion of central clearing, liquidity risk and indexed overnight swaps, a more detailed discussion of energy and other commodity derivatives, an alternative derivation of the Black-Scholes-Merton formula using binomial trees, an appendix on cost of capital models, examples demonstrating the calculation of value at risk from real data, new material on equity-protected notes, discontinuous and closed-ended options, jump processes, and applications of the Vasicek and CIR interest rate models.
To successfully master the course, students only need basic knowledge of finance, probability theory and mathematical statistics. The book will be useful to teachers, students, researchers, stock analysts, financiers and all those who work in the financial market.
Explore financial derivatives in the book that has become a reference for practitioners and the most popular textbook for students.
The eighth edition introduced a number of innovations.
A new chapter on securitization and the 2007 credit crisis.
Discussion of central clearing, liquidity risk and indexed overnight swaps
A more detailed description of energy and other commodity derivatives
Alternative derivation of the Black-Scholes-Merton formula using binomial trees
Appendix on the Cost of Capital Model
Examples demonstrating the calculation of value at risk using real data
New material on equity-protected notes, gapping and closed-ended options, jump processes, and applications of the Vasicek and CIR interest rate models
The book comes with version 2.01 of the widely recognized DerivaGem program, which can be downloaded from the author's website. It contains many improvements. The program is significantly simplified, since *.dll files are excluded from it. It now covers credit derivatives. Access to the source code of the functions is open. In addition, the functions can now be used in combination with the Open Office program for users operating systems Mac and Linux.
about the author
John C. Hull - Professor of Derivatives and Risk Management financial group Maple (Joseph L. Rothman School of Management) at the University of Toronto.
8th edition.

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Hello! When it comes to the possibility of GOOD EARNINGS, it seems to me that there are no uninteresting topics... Today I want to tell you about futures and options.

Why should those who are planning to engage or are already engaged in BO trading know about this? Yes, because without this the work will not be successful!

The options and futures market is more diverse than the foreign exchange market. Therefore, you can get more earning opportunities there. Here, as elsewhere, appropriate knowledge and professionalism are required to make a profit.

It is necessary to gradually gain experience, learn special strategies, which can later turn out to be very useful.

It is important to understand what are futures and options, to operate successfully in this market.

They are derivatives, derivatives of financial instruments. This is a written agreement that specifies information about some actions regarding key assets.

Its key difference from traditional types of contracts is the fact that it can be the subject of purchase and acquisition in itself. There is no actual movement of assets during trading.

You don't have to be Einstein to understand this topic.

What I'm talking about today:

Features of the modern options and futures market

Let's take a look at what this market is.

It initially arose due to the trade in various raw materials belonging to the category Agriculture. It was purchased by processing enterprises.

Both parties managed to establish relations for quite a long period, during which some price fluctuations in different directions could occur.

The need for cooperation was very important for each party, which is why it was necessary to agree on a stable price, which was clearly stated in the contracts created. They acted as a kind of prototype for the modern market.

The main market at one time was the price at the time of acquisition or sale. The development of this market gradually pushed the availability of physical goods into the background.

Currently, a variety of goods can act as assets in this market, and not just agricultural market products. For example, it could be oil, precious metals, currency pairs, various securities And so on.

Trades are of a rather abstract nature, which is why they are carried out in the appropriate mode.

During them, approximate prices for specific goods are established. Thanks to this, you can understand how much one gram of gold or, for example, an oil barrel costs.

Futures can also act as an underlying asset among a variety of securities. The owner of this option is able to sell or purchase the corresponding contract, from which certain obligations and rights arise.

In this market, the main players are hedgers and speculators. The latter are mainly interested in reselling securities, receiving a certain profit from these actions.

For hedgers, the main nuance is the delivery of assets directly.

Futures and options trading

Do you know why this type of trading is in great demand today? Need to master key rules stock market games to succeed in this process.

Traders must learn to anticipate major changes in asset prices, which can be the basis for their bottom line.

A wide variety of means can be used for this, including:

• Statistical data.
• Analytical information.
• Experience.
• Intuition, etc.

Do you want to succeed? Then remember what you NEED:

• You need to have a clear idea when entering the market where you can make money on more lively trading. For example, the cost of oil at a particular point in time can be very stable, but the cost of grain constantly fluctuates in different directions.
• We must learn to wisely select assets that have good prospects for making a profit. You also need to master the process of choosing high-quality trading strategies, which can change when taking into account the nuances of the current market.

There are two main types of trading, which have their own unique features and nuances:

• FOR PROMOTION. IN in this case We must count on rising prices. When an active period of price growth comes, you can get a good level of profit. The risk here is that contracts have a specific duration. Therefore, it is not always possible to wait for the required price increase within a specific time frame.
• TO DECREASE. This option can also be very profitable. It assumes the need for a price drop, which the user must predict in advance. There are also certain risks, which include the possibility that prices will not have time to fall. There are a lot of nuances that you need to be able to recognize, evaluate and clearly understand.

Option and futures: differences

From all that has been said, a completely logical question follows: what are the differences between an option and a future?

The main fundamental difference between them is the fact that in futures, sales and purchases are mandatory, while an option gives the right to these actions, but not obligations.

In addition to differences, they have some common features, among which are:

• The short-term nature of both contract options. In rare cases, the validity period may be more than one year.
• The assets that are used for trading in both cases are actually no different.
• They are concluded on exchanges.

There are several basic differences between them that are very important to clearly understand.

But which difference is the most important? Most modern traders prefer options, because they can significantly reduce risks.

Trader reviews on futures and options trading

To work in the futures market, a trader is required to make a special guarantee fee. If prices start to go in a different direction than planned, you will have to invest additional amounts to maintain the contract so as not to lose your position.

Due to rapid movements in the market, virtually all deposits may collapse, which will certainly cause certain losses.

With options, the investor is relatively safe. Here you may only need to issue a certain bonus. If the movement is predicted correctly, it is theoretically possible to obtain significant profit figures.

The second difference is the ability to remain in the market. If a futures user finds himself in a situation where he needs to liquidate a position, trouble could arise.

But with options in this case everything is much simpler. The option holder does not have to liquidate anything because he has no corresponding obligations.

Forward, futures, option

I'll tell you about such a cool thing as a forward contract!

In the case of forwards and futures, the contract stipulates the conditions for the acquisition of an asset in the future. Such financial instruments are currently quite popular.

A forward contract has the main purpose of fixing the value of an asset at a specific level. This is necessary for its purchase in the future at a price that will be agreed upon in advance.

Buying futures has its own unique nuances, just like buying options.

Forward contract is a common financial instrument when two persons enter into a specific agreement. In it, both parties have specific responsibilities and rights.

For example, one party must deliver something, and the other must purchase it. A forward is not an exchange contract unlike futures. It can be concluded for almost any period.

Also, mutual agreement underlies the regulation of supply volumes. Often forwards are used between various banking institutions.

Most often, the subjects for signing such contracts are interest rate or some specific currency.

In some cases, actual delivery of the selected assets may not occur with forwards. Such a contract is not easy to close through a reverse transaction because the agents on the opposite side can be very diverse.

This type of contract for trading with oil resources is also very popular.

Options, futures and other derivatives

Why do you think I decided to write an article on this topic?

Currently, it has become very relevant and popular in all respects. A corresponding book was even written. It can be extremely useful for developing skills, moving to the next level in the implementation of such financial work.

Many professionals will also appreciate this information because it can be invaluable for developing their own knowledge, level of analysis, etc.

A derivative financial instrument is a specific contract that must be exercised under certain conditions. At the same time, the parties who enter into it receive certain obligations and rights.

Each party can ultimately get both positive and negative results in financially after implementation. These instruments are based on special assets.

These often include securities, currency pairs, raw materials and much more. Domestic legislation classifies the following in this category:

• Forwards.
• Options.
• Futures.
• Swaps.

All of the above tools may have unique features. A swap, for example, is an agreement between two parties to exchange payments.

If you look into the details, these are several forward-type contracts, when the occurrence of obligations is characterized by periodicity.

To work with such instruments, various strategies can be used, including hedging and speculation.

The second option is the execution of certain transactions, the final goal of which is to profit from changes in the price of instruments. With the help of speculators, the general level of market liquidity is ensured.

Investing in such instruments can be profitable under certain circumstances, including the presence of certain capital, good knowledge and other similar nuances.

Hedging is also considered a popular strategy. It involves reducing potential risks from losses that may arise due to changes in the cost of goods of an unfavorable nature.

Forward and futures contract: option

What is it about?

In accordance with such contracts, a specific asset is purchased. A futures contract is characterized by certain terms and conditions, while forward contracts can be created without them.

Futures contracts have some main features, among which are:

• The document records the moment in time that passes between the conclusion and execution of the transaction.
• The subject most often is a standard volume of assets.
• When relations are settled, there is no need to sign additional protocols, various agreements and the like.
• The presence of a condition regarding a possible change of side. For this, the second person’s prior consent will not be required. Thus, contracts can simply be sold.

Forward contracts are classified as non-exchange contracts. They suggest a conclusion for real sale, purchasing certain goods. The contract clearly agrees on the main points between all parties.

Most often, this type of contract is used to conduct currency transactions.

Futures belong to the category of exchange-traded ones. There, special conditions are developed for various goods. Quantity, quality and all other important nuances of contracts are determined in advance.

Futures and options market

Now this market is developing very actively. Binary options are gradually becoming very common due to the many benefits they provide to users.

Futures are also quite in demand. The market is becoming larger, and a variety of transactions are being concluded there. There are many interesting assets offered for this purpose.

THE MAIN THING is to master the main features of a particular market and develop clear strategies in order to be able to make a profit. There are good conditions for this in the modern market.

And if you want to earn a lot and achieve success, remember: options and futures can be a profitable tool in the right hands.

When starting to work with real financial instruments (currencies, stocks, bonds), every novice investor or trader counting on quick profits from speculation or “long-term” income from dividends sooner or later stumbles upon magic words“futures”, “options” and other unclear terms that entice billions in profits. What it is? What are derivatives used for? What should the initial capital be? Is it worth it for a novice investor to enter this sector and what pitfalls will inevitably drown a beginner? Let's try to look at the market for secondary financial instruments (derivatives) from an amateur's point of view.

What are derivatives

Let's start with the basics. In the world of finance, there are two types of financial products that you can deal with: underlying products and derivatives (derivatives of underlying instruments). Basic products (assets) can, roughly speaking, be touched - these are real shares of companies, state and municipal bonds, real goods and services of organizations, as well as government-backed currency. Derivatives represent confirmed promises to buy or sell an underlying product, to pay the difference between the purchase and sale, and so on. Hence the term - “derivative products”, in English “derivative” - without real finance at their core, they do not make sense.

The essence of derivative financial instruments

Let's study the main types of derivative instruments in more detail. If basic products are produced (such as oil, gasoline, grain, tractors, brooms, slippers) or issued (shares of an oil producing company, bonds of a state slipper corporation, state currency) by a specific organization, then derivatives are simple contracts between any two companies. The cost of these contracts, of course, depends on the cost of the underlying product, but the main feature of derivatives is that settlements under these free bilateral contracts are carried into the future. Moreover, these contracts themselves with settlements in the future are securities in the modern legislative field - that is, they can be bought and sold without restrictions. Standardized contracts can even be traded on specialized exchanges. And now that you are completely confused, let's move on to a simple and understandable description of the main types of derivatives - using sausage as an example.

Forward contract

Imagine a small workshop for the production of smoked sausage. Production has a certain working period - they buy meat today, and the finished sausage can be shipped to the buyer (store) only after 3 months. They buy meat at fixed price, to make a profit you need to sell sausage for 100 rubles (conditionally). However, the market is unstable, in a month everything can change, and the sausage can then be sold for 120 rubles (which is very good) or for 80 rubles (which is very bad).

The sausage maker finds a store, the owner of which, naturally, also does not know what the exchange price of the sausage will be in 3 months. If in the future the purchase price of sausage is 80 rubles, the store owner is happy, resells the product at a large profit and gives his wife a new Bentley. If the purchase price of the sausage is 120 rubles, the merchant will go bankrupt, take away his wife’s last Zhiguli to cover the debt, and will never be online again.

For both the sausage maker and the store, the most profitable option there will be a forward contract. Back in March they agreed that in June sausage shop will supply sausage to the store for exactly 100 rubles, regardless of the current price. Naturally, if the price is different, the profit of the sausage maker or the profit of the store owner in a direct transaction could be greater - however, when concluding a contract three months in advance, they guarantee each other both profit and sales.

Features of forwards (futures). How to earn money

Naturally, a person who invests his funds in secondary market instruments is absolutely indifferent to the nuances of the relationship between the sausage maker and the store. However, the fact is that forward contracts can be not only real, delivery (when the sausage shop and the store really minimize their risks, and in the end real smoked sausage is actually delivered to the store in exchange for real money). There are non-deliverable, or settlement, forwards that serve exclusively as instruments of speculation on the stock exchange - no sausage goes anywhere and serves only as collateral for the transaction.

The word “futures” (from the English future, “future”) serves only to designate a standardized (officially executed according to accepted standards) forward contract that can be sold and resold on the exchange. No deliveries real product or no currency occurs. Futures are resold, and upon expiration, the final parties to the transaction pay each other in strict accordance with the current value of the commodity, based on primary conditions contract. Today, futures contracts are registered for energy resources, agricultural products, precious metals, currencies and other real financial instruments.

Option

Let's return to our sausages. If the sausage maker is not interested in strictly fixing the price at the minimum profitable level, counting on price increases in the future, he can enter into an option contract with the store owner. This means that after three months, the owner of the workshop, having produced a sufficient amount of sausage, has the right, at his discretion, to sell the goods to the store owner at an agreed price (100 rubles) - or not to sell if market price grew and there was another buyer for this sausage, willing to pay 120 rubles. Unlike a forward contract, an option implies the right, but not the obligation, to enter into a transaction under pre-fixed conditions. To compensate for possible losses, the sausage maker, when concluding a contract, pays the store a so-called option premium (its size is determined by many conditions, in this case the normal size of the premium is 20 rubles).

Features of options. Is it really possible to make money on options?

As an exchange-traded instrument, options are a type of futures and are traded just like any other exchange-traded contract. You can try to make money on the difference in rates (“bought cheaper - sold more expensive”) or, with some experience, exercise the option right by demanding execution of the contract. There are two options available. An “American” contract can be exercised on any day before its expiration date; a “European” option can be redeemed strictly on a certain day and not earlier. Forex options are very often used in the international foreign exchange market by exporters or importers of goods. To hedge the risks of sudden changes in exchange rates, they purchase options for the right to buy/sell currency at a certain rate, the volume of the transaction strictly corresponds to the cost of the exported or imported product. Even if the settlement currency sharply rises or falls in price, with the help of the option exercise, all possible damage is reduced to the size of the option premium - and this, you see, is quite a bit, especially if foreign economic transactions are concluded for millions of dollars.

Swap contract

Even more interesting story from the world of sausage production. It’s sad for a sausage maker to sell sausage sometimes for 120 rubles, sometimes for 80, sometimes for 140, and sometimes for 60 rubles. He lacks stability - to ship a batch of goods for 100 rubles every month. On the other hand, there is a store owner who is also not interested in constantly purchasing sausages at different prices. He sells this sausage at a fixed price, and stability would not hurt him either. Such stability-seeking businessmen are united by swap contracts, usually issued by intermediary investment banks. Thus, the sausage maker’s floating income (from 60 to 140 rubles) turns into a fixed 100 rubles, thanks to balancing with the store’s floating expenses, which are also fixed, regardless of the current price of sausage on the market. The swap intermediary, of course, takes his percentage, but that's another story.

Features of swap contracts

In practice, swap contracts are often used to obtain Money secured by existing securities or, conversely, the acquisition of securities for certain exchange transactions (repo transactions). The essence of such a swap is that simultaneously with the acquisition of shares, bonds, currency (with immediate delivery to the buyer), a counter-transaction is concluded, according to which the seller of the currency or securities is obliged to buy the underlying asset back through certain time By fixed cost. This minimizes the risk of damage due to changes in exchange rates. From the point of view of speculative trading, instead of opening a position on a rising/falling underlying asset, it is more profitable for a trader to enter into a swap contract that fixes the price of a currency or stock.

CFD (Contract for Difference)

One of the most popular derivative instruments in the modern derivatives market. A contract for difference is a futures contract - most often for the purchase of a currency, shares or other securities. Parties entering into a CFD agree to the conditional purchase and sale of an underlying asset after a specified period of time. However, there is no real transfer of rights to the underlying asset (currency, shares) - after the maturity date, one of the counterparties pays the other the difference in the value of the asset. If the asset has increased in price, the buyer receives money from the seller exactly in the amount by which the asset has risen in price. If shares or currency have fallen in price, on the contrary, the buyer pays the seller the difference. This is a completely speculative trading of real underlying assets, which allows you to enter the market with minimal investment. To trade huge volumes of currencies or shares, there is no need to have their entire value on hand - it is enough to operate with relatively small amounts by which the asset can rise or fall in price.

Hedging risks using derivatives

Derivative financial instruments are used to achieve two different goals: making a profit (through speculative trading) and reducing financial risks (hedging) when making complex operations in real markets of underlying assets. Hedging in a general sense is the insurance of a transaction in one market by opening an opposite transaction in another market. For example, you purchase shares of a certain company, but you are afraid that their value will fall. To hedge this risk, you buy a futures contract or put option (to sell) on shares of the same company. This way, you slightly reduce the likely profit from a transaction on the real stock market, but minimize the risks of losing everything during sudden price movements. The same applies not only to the stock market, but also to currency transactions and trading on commodity exchanges. By using derivatives of the same assets, you reduce the risk of transactions with real underlying assets.

Newcomers to the derivatives markets

Derivatives markets are attractive both for investors who hedge their transactions on real markets, and for traders who have the opportunity to speculatively trade with huge leverage. In fact, many derivatives transactions are “credit trading”: traders make profits by handling huge volumes of currencies or stocks without actually owning them. It is this – the opportunity to trade with minimal investment – ​​that attracts newcomers to the options, futures and swaps markets.

However, this should also scare them away: few people who do not have experience in trading real underlying assets will climb into this hell. Unrealistically complex rules for dealing with derivatives, various rules for exchange and over-the-counter (direct) transfer of assets, the need to constantly monitor several interrelated instruments and monitor asset markets - and this is just the beginning. It is enough to imagine that there are derivative instruments from the derivative instruments themselves - options on futures, for example, a beautiful financial doll in a doll.

Fortunately, most beginners are reliably protected from working with derivatives. To trade exchange-traded (standardized) derivatives (for example, on the derivatives market of the Moscow Exchange), a trader or professional investor license is required. There are also not too many opportunities to take advantage of over-the-counter derivatives trading schemes, and the barrier to entry is much higher.

Currently, futures and options are the most important and liquid financial instruments in the futures market. In many ways they are similar, but at the same time they also have fundamental differences.

Let's talk in more detail about options and futures. In this case we will use in simple language, which will be understandable even to novice investors.

Futures are contracts (agreements) for the purchase and sale of a certain amount of a selected asset, which must take place strictly on a certain date in the future and occur at a price agreed upon at the time of their conclusion.

The two parties in such transactions are buyers and sellers. In this case, the buyer has an obligation to purchase a certain amount of the asset. In contrast, the seller becomes obligated to sell it accordingly on the agreed date. Thus, both parties to the futures transaction are limited by mutual obligations.

Each futures has predetermined information about the type of asset, size, timing of the agreement and price.
The etymology or origin of the term itself has obvious reference to English language. Future in English means future.

At the same time, it is important to understand important feature futures agreement. Until the specified period has expired, the party to the contract has the right to cancel the obligations assumed. This can happen in two ways. Firstly, it can sell this future if it was previously purchased. Secondly, she can buy it in the case where it was originally sold.

Futures trading is a type of investment process in which there are real opportunities to speculate on the constantly changing dynamics of quotes or the value of the underlying asset.

The assets under a futures contract can be: different kinds goods. For example, it could be:

• about wood;
• gold;
• oil;
• cotton;
• grain;
• become;
• currency;
• and much more.

Every day traders from different countries conclude millions of thousands of purchase and sale transactions for all of the above goods. Moreover, such trading in the vast majority of cases is purely speculative in nature. Simply put, every trader tries to buy a product at a low price and sell it at a higher price. The situation in which traders, purchasing futures, are going to receive or provide the asset specified in it is extremely rare.

What is meant by options?

Options are contracts (agreements) under which their buyers have rights to buy or sell a certain financial asset at an agreed price on a specific day in the future or earlier than this date.

An option differs from a future in that the former gives rise to the right to dispose of the underlying asset, and the latter the obligation to complete a purchase and sale transaction.

Futures can act as option assets. Call options give rise to the right to purchase them, and Put options, accordingly, to sell them. That is, futures and options are interrelated instruments.

Buyers, or as they are also called, option holders, at their own discretion, can exercise the right to exercise the contract at any time. In such a situation, a futures purchase and sale transaction is fixed at a cost that is equal to the option exercise price. In other words, the option is exchangeable for a futures contract.

When a Call option is exercised, the holder becomes the buyer of the futures contract, and the seller becomes the seller of the futures contract. When a Put option is exercised, the holder becomes the seller of the futures contract, and the seller becomes the buyer of the futures contract.

Each of the parties to the option, as in the case of a futures contract, can close its own position by performing a reverse transaction.

Each option has two different prices. The difference between them should not be a mystery to the investor. We are talking about strike and bonus.

Strike is the exercise price of an option contract. This is the price at which the option holder can purchase or exercise the futures contract. This selling price is standard. It is set by the exchange for each type of option contracts.

The premium is the direct cost of the option. When an option contract is concluded, the premium must be paid by the buyer to the seller. In fact she is monetary reward the last one. Such option prices become the result of trading on the exchange.

In other words, options involve choosing the two above prices. The exchange player first of all selects options that suit him in terms of the strike value. Only after this, during exchange trading, their premiums will be determined.

Forwards, swaps and warrants

Futures and options are essentially derivatives. This is how derivative financial instruments are commonly called in stock trading. However, the list of derivatives is not limited to them only. Let's take a quick look at forwards, swaps and warrants.

The etymology of the term forward has an obvious reference to the English language. Forward in English means forward. Futures and forward are very similar concepts. The whole difference between them lies in the place of their circulation and some parameters. If the former are traded on the stock exchange and have standardized terms and delivery times, then the latter are traded on the interbank market and the specified parameters in their case are arbitrary.

A warrant is a security that gives its holder the right to purchase a specified number of shares on a specified date at a specified price. As a rule, warrants are used for a new issue of shares. They are traded as securities. The size of their value is determined by the price of the shares that underlie it.

A swap is a derivative that allows one financial obligation to be exchanged for another. An example of a swap is the exchange of a present financial obligation for a future one.