(/ksweb/) Account Login (/ksweb/php/login.

php)

Trade Now (/ksweb/php/login.php) About Us Offerings Markets Research Help Get Quote

RESEARCH: Knowledge Bank

Meaningful Minutes (/ksweb/Research/Knowledge-Bank/Meaningful-Minutes)

Stock Trader App (/ksweb/Our-Offerings/Trading-Tools/Kotak-Stock-Trader-App)

Demat Account (/ksweb/Our-Offerings/Account-Types/Demat-Account)

Chapter 2.9: Difference Between Futures and Options

OPEN SHARE
Derivatives are instruments that derive their value from an underlying security like a share, debt instrument, currency or commodity. Futures TRADING
and options are the two type of derivatives commonly traded. Investing in futures and options with Kotak Securities can help make your
ACCOUNT
financial infrastructure secure.
NOW

FUTURES
Full Name
A futures contract (https://www.kotaksecurities.com/ksweb/Research/Investment-Knowledge-Bank/what-are-futures-contracts) is an
agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. 10 Digit Mobile No.

Such an agreement works for those who do not have the money to buy the contract now but can bring it in at a certain date. These
E-mail Address
contracts are mostly used for arbitrage by traders. It means traders buy a stock at a low price in the cash market and sell it at a higher price
in the futures market or vice versa. The idea is to play on the price difference between two markets for the same stock.
Mumbai
In case of futures contracts, the obligation is on both the buyer and the seller to execute the contract at a certain date. Futures contracts
are special types of forward contracts. They are standardized exchange-traded contracts like futures of the Nifty index.

SUBMIT

Note

WHY CAPITAL GAINS

REPORT?
Snapshot of profit/loss

Reflects performance of your

portfolio
Helps compute taxes

OPTIONS

An Option (/ksweb/Research/Investment-Knowledge-Bank/what-is-options-trading) gives the buyer the right but not the obligation. As a
buyer, you may choose to let the option to buy call or put option lapse. The seller has an obligation to comply with the contract. In the case
of a futures contract, there is an obligation on the part of both the buyer and the seller.

Options are of two types - Calls and Puts options:

'Calls' give the buyer the right, but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given
future date.

'Puts' give the buyer the right, but not the obligation to sell a given quantity of underlying asset at a given price on or before a given future
date.

If the buyer of options chooses to exercise the option to buy, the counter-party (seller) must comply. A futures contract, on the other hand, is
binding on both counter-parties as both parties have to settle on or before the expiry date.
Please note that all option contract available on NSE can be exercised on expiry date only

HOW FUTURES AND OPTIONS CONTRACTS DIFFER

If you are a buyer in the futures market, there is no limit on the profit that you make. At the same time, there is no limit on the loss that you
make. A futures contract carries unlimited profit and loss potential whereas the buyer of a Call or Put Option's loss is limited, but the profit
potential is unlimited. Read about derivatives
 (http://www.slideshare.net/KotakSecurities/understand-
derivatives)
Read More >
(http://www.slideshare.net/KotakSecurities/understand-
derivatives)

Menu Trade (/ksweb/php/login.php) Sensex : 32,547.28 32.34(0.10%) Get Quote

Purchasing a futures contract requires an up front margin and normally involves a larger outflow of cash than in the case of Options, which
require only the payment of premium.

Futures are a favourite with speculators and arbitrageurs whereas Options are widely used by hedgers.

While a buyer of an option pays the premium and buys the right to exercise his option, the writer of an option is the one who receives the
option premium and therefore is obliged to sell/buy the asset if the buyer exercises it on him. Presently, at NSE, futures and options are
traded on the Index and single stocks.

WHAT NEXT?

You have now studied all the important parts of the derivatives market what are derivatives contracts, different types, futures and options,
call and put contracts, and how to trade these. Congrats! Lets wrap this section and move on to the next mutual funds.
Click here (/ksweb/Research/Investment-knowledge-Bank/introduction-to-mutual-funds)

Previous Chapter (/ksweb/Research/Investment-Knowlegde-Bank/understanding-covered-and-naked-options)

Next Chapter (/ksweb/Research/Investment-knowledge-Bank/introduction-to-mutual-funds)

Trading Demos

Mobile Trading with Kotak Stock Trader (https://www.youtube.com/watch?v=akx0Btwsqa4)

View Demo (https://www.youtube.com/watch?v=akx0Btwsqa4)

Desktop Trading with KEAT ProX (https://www.youtube.com/watch?v=TfT58NB-Sj4 )

View Demo (https://www.youtube.com/watch?v=TfT58NB-Sj4 )

Stock Market Sectors : A (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/A) | B (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-

and-NSE/B) | C (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/C) | D (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/D)
| E (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/E) | F (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/F) | G
(https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/G) | H (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/H) | I
(https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/I) | J (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/J) | L
(https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/L) | M (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/M) | N
(https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/N) | O (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/O) | P
(https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/P) | R (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/R) | S
(https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/S) | T (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/T) | V
(https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/V) | W (https://www.kotaksecurities.com/ksweb/sectors-listed-in-BSE-and-NSE/W) |
About Us Asset Classes Trading Tools & Research Account Types & Value Added Equity Market
Reports Services
About Kotak Securities (/ksweb/About- Equity Trading (/ksweb/Our- Gainer
Us/Why-Choose-Us/About-Kotak- Offerings/Assest-Classes/Easy-Equity) KEAT PRO X (/ksweb/Our- Demat Account (/ksweb/Our- (/ksweb/HotMarketCuts/gainers)
Securities) offerings/Trading-Tools/Keat-Pro-X) Offerings/Account-Types/Demat-
Derivative Trading (/ksweb/Our- Loser (/ksweb/HotMarketCuts/losers)
Awards and Accolades (/ksweb/About-Offerings/Asset-Classes/Derivative) Kotak Stock Trader APP (/ksweb/Our- Account)
Most Active Stocks
Us/Why-Choose-Us/Awards-and- Offerings/Trading-Tools/Kotak-Stock- 2 in 1 Account (/ksweb/Our-
Mutual Fund Investment (/ksweb/Our- (/ksweb/HotMarketCuts/most_active_stocks)
Accolades) Trader-App) Offerings/Account-Types/Two-in-One-
Offerings/Asset-Classes/Easy-Mutual- Volume Buzzer
Fastlane (/ksweb/Our- Account)
About Kotak Group (/ksweb/About- Funds) (/ksweb/HotMarketCuts/volume_buzzer)
Us/Why-Choose-Us/About-Kotak- Offerings/Trading-Tools/Fastlane) Trinity Account (3-in-1 Account)
IPO (/ksweb/Our-Offerings/Asset-
Group) (/ksweb/Our-Offerings/Account-
Classes/Easy-Ipo)
 Technology (/ksweb/About-Us/Why- Gold Funds (/ksweb/Our- Xtralite (/ksweb/Our- Types/Trinity-Online-Trading-Account) 52Wk High
Choose-Us/Technology) Offerings/Asset-Classes/Gold-Funds) Offerings/Trading-Tools/Xtralite) Linked Account (/ksweb/Our- (/ksweb/HotMarketCuts/52highweek)

Strong Research (/ksweb/About- Currency Derivatives (/ksweb/Our- Dealer assisted trading (/ksweb/Our- Offerings/Account-Types/Linked- 52Wk Low
Us/Why-Choose-Us/Strong-Research) Offerings/Asset-Classes/Currency- Offerings/Trading-Tools/Dealer- Account) (/ksweb/HotMarketCuts/52lowweek)

Customer Support Chat
(/ksweb/Help/Chat)
Brokerage Charges (/ksweb/Our-
Offerings/Brokerage-
Options/Brokerage-Charges)
Derivatives Market
Derivatives)
Fixed Deposits & Tax Free Bonds
(/ksweb/Our-Offerings/Asset-
Classes/Tax-Saving-Fixed-Deposit-
Bonds)
Debentures (/ksweb/Our-
Offerings/Asset-Classes/non-
convertible-debentures)
Investment Knowledge Bank
Assisted-Trading)
Call and Trade (/ksweb/Our-
Offerings/Trading-Tools/Call-and-Trade) RGESS (/ksweb/Our-
Investors Research
(/ksweb/Research/Kotak-Research-
Center/Investors-Research)
Trader Research
(/ksweb/Research/Kotak-Research-
Center/Trader-Research)
NRI Account (/ksweb/nri- All Market News (/ksweb/News/ALL)
account/open-an-nri-account) Bullion News (/ksweb/News/BUL)
Economy General
Offerings/Account-Types/RGESS) (/ksweb/News/EGR)
PMS (/ksweb/Our-Offerings/Account- Corporate Actions (/ksweb/UpResults)
Types/Portfolio-Management-Service)
Other News (/ksweb/News/OTH)
Margin Trading (/ksweb/Our-
Offerings/Value-Added-
Features/Margin-Trading)

Most Active Contracts Share Market Basics Mutual Fund Research BNST (/ksweb/Our-Offerings/Value-
(/ksweb/PutCall/activecontracts) (/ksweb/Research/Investment- (/ksweb/Research/Kotak-Research- Added-Features/Buy-Now-Sell-

Gainers (/ksweb/PutCall/gainers) Knowledge-Bank/share-market-basics) Center/Mutual-Fund-Research) Tommrow)

Demat Account Basics Fundamental Analysis Reports TradeSmart Store (/ksweb/Our-

Losers (/ksweb/PutCall/losers)
Top Volume Traded
(/ksweb/PutCall/activecontracts/2/OS)
Top Value Traded
(/ksweb/PutCall/activecontracts/4/OS)
Most Active Put
(/ksweb/PutCall/mostactiveput)
Most Active Call
(/ksweb/PutCall/mostactivecall)
Open Interest
(/ksweb/Historic/OpenInterest)
(/ksweb/Research/Investment-
Knowledge-Bank/what-is-demat-
account)
What are Derivatives?
(/ksweb/Research/Investment-
Knowledge-Bank/what-is-derivative-
trading)
What are Futures?
(/ksweb/Research/Investment-
Knowledge-Bank/what-are-futures-
contracts)
(/ksweb/Research/Kotak-Research- Offerings/Value-Added-Features/Trade-
Reports/Fundamental-Reports)
Smart-Store-Intro)
Technical Analysis Reports SMS Alerts (/ksweb/Our-
(/ksweb/Research/Kotak-Research-
Offerings/Value-Added-Features/Stock-
Reports/Technical-Reports)
SMS-Alerts)
Derivative Reports AMO (/ksweb/Our-Offerings/Value-
(/ksweb/Research/Kotak-Research- Added-Features/After-Market-Orders)
Reports/Derivatives-Reports)
Currency Derivative Reports
(/ksweb/Research/Kotak-Research-
Reports/Currency-Derivatives-Reports)

Highest in Premium What are Options?

(/ksweb/Historic/HighPremium) (/ksweb/Research/Investment-

Put Call Ratio

Knowledge-Bank/what-is-options- CUSTOMER CARE TOLL FREE
trading)
(/ksweb/PutCall/putcallratio)
What are Mutual Funds?
1800 209 9191 / 1800 222 299 / 1800 209 9292
(/ksweb/Research/Investment- Alternate Number: 3030 5757
knowledge-Bank/introduction-to-mutual-
funds)
(8.00 AM TO 6.00PM) To dial from Mobile phone add city STD code
Existing customers can send in their grievances to service.securities@kotak.com
Basics of Financial Planning
(mailto:service.securities@kotak.com)
(/ksweb/Research/Investment-
Knowledge-Bank/financial-planning-
overview) CONNECT WITH US (https://www.facebook.com/kotaksecurities)
(https://twitter.com/kotaksecurities)
(https://www.youtube.com/user/KotakS
(http://kotaksecurities.blogspot.in/)
(http://www.slideshare.net/Kota
Calculators
(/ksweb/Research/Investment- No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign
Calculators) in the application form to authorise your bank to make payment in case of allotment. No worries for refund as
Videos (/ksweb/Research/Knowledge- the money remains in investor's account.
Bank/Videos) KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered
Meaningful Minutes intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you
(/ksweb/Research/Knowledge- approach another intermediary. Attention Investors Prevent Unauthorized Transactions in your demat / trading
Bank/Meaningful-Minutes) account --> Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive
information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on
your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors. Circular
No.: NSDL/POLICY/2014/0094, NSE/INSP/27436, BSE - 20140901-21
Kotak Securities Ltd. bearing licence no. CA0268 is a Corporate Agent of Kotak Mahindra Old Mutual Life Insurance Ltd. We have taken reasonable measures to protect security and
confidentiality of the Customer Information.

Charges for Other Services (http://www.kotaksecurities.com/pdf/ChargesOtherServices.pdf) | Disclaimer (/ksweb/disclaimer) | Sitemap (/ksweb/Sitemap) | Privacy & Security (/ksweb/terms-
and-condition/privacy-security) | 256 Bit Encryption (/ksweb/256-bit-encryption) | BSE (http://www.bseindia.com/) | NSE (http://www.nseindia.com/) | MSEI
(http://www.msei.in/index.aspx) | SEBI (http://www.sebi.gov.in/sebiweb/) | Anti Money Laundering Measures (/ksweb/Anti-Money-Laundering-Measures) | Important Policies
(/ksweb/Important-Policies) | Dos & Donts (/ksweb/Dos-and-donts) | National Pension System (http://www.kotak.com/nps/) | List of GST Registration Number
(http://www.kotaksecurities.com/pdf/GST.pdf)

(/ksweb) 2005 Kotak Securities Limited.

Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. Telephone No.: +22 43360000, Fax No.: +22 67132430.
Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825.
CIN: U99999MH1994PLC134051. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230,
MSEI INE 260808130/INB 260808135/INF 260808135, AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586.
NSDL/CDSL: IN-DP-NSDL-23-97