Investing in Futures or Options among Derivatives, which one is better??



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Investing in Futures or Options among Derivatives, which one is better??

1 Answer(s)


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Both instruments are better depending on the investors requirements. Suppose you want to buy the shares of SBI as you are anticipating that the price of share will increase but don't have that much amount right now but expecting in future to purchase shares you can purchase future of that particular shares. On the same way you are anticipating that the shares of SBI will go down you can sell future and on later date you can square off the position.
Without owning shares entering into the Future is highly risky as it gives huge exposure. Here neither loss nor profit is limited, so profit and losses are unlimited.
Option is the instruments where we have option to buy/sell or wind off the position, here if we do not exercise the option we will loss the option premium. so one can take calculated risk. One know in advance the risk and profit is unlimited.
Thanks