Showing posts with label Financial Derivatives. Show all posts
Showing posts with label Financial Derivatives. Show all posts

Difference between Put Option and Call Option


Options
          An options give the holder (firm) the right (not the obligation) to buy or sell an asset in the future at an agreed upon price today.

Difference between Forward Contract and Futures Contract


Forward Contract
      These are agreements where 1 party agrees to buy a commodity at a specific price on a specific future date  and the other party agrees to sell the product.
          Goods are actually delivered under forward contracts.
          Forward contract is a tailor made futures contract that is not traded on a organized exchange.
         Unless both parties are morally and financially strong, there is a danger that 1 party will default on the contract, especially if the price of the commodity changes markedly  after the agreement is reached.