What are the Types of Futures and Options?

---

Before engaging in Futures and Option trading, it is important to know the different types of F&O available. 

TYPES OF FUTURES CONTRACTS 

The following are the types of Futures Contracts: 

• Index Futures: Index Futures are contracts whose value is based on the performance of a stock index. Investors trade these contracts to speculate on the future direction of the overall market. 
• Stock Futures: Stock Futures are agreements that enable the purchase or sale of a specific quantity of shares at a predetermined price on a specified date. Traders are obligated to adhere to the terms of the contract upon acquisition. 
• Currency Futures: Currency futures, also referred to as foreign exchange futures, provide a means to buy or sell a specific amount of currency at a designated price and time.  
• Commodity Futures: Commodity futures involve agreements for the delivery of a specified quantity of a commodity at a future date. 
• Interest Rate Futures: Interest rate futures are contracts centered around an underlying asset that carries an interest component. These agreements facilitate the exchange of an interest-bearing asset at a predetermined price in the future. 

 

TYPES OF OPTIONS CONTRACTS 

There are two types of Options Contracts: 

• Call Option: A Call Option gives traders the right to purchase the underlying financial security at a pre-determined price on the specified date. This provides an opportunity for investors to benefit from potential price appreciation. 
• Put Option: A Put Option provides the holder the ability to sell the underlying financial security at the pre-determined price on the specified date. Put options can be valuable in situations where an investor anticipates a decline in the value of the asset. 

Note: Options Contracts exist for Indices, Stocks, Currencies and Commodities.