FINANCIAL MARKETS AND

INSTITUTIONS
COURSE CODE:- 503
TOPIC:- DERIVATIVES: Option & Futures
PRESENTED TO:- Ms Trapti Ma’am
PRESENTED BY:- Anubhav Khandal
ENROLLMENT NO.:- 20MGT2BB050
BBA (FINANCE)
 Table of Content
Introduction of Derivatives
Uses of Derivatives
Option v/s Futures
Derivatives – Option
Derivatives – Futures
 INTRODUCTION
These are financial contracts that derive their value from
an underlying asset. These could be stocks, indices,
commodities, currencies, exchange rates, or the rate of
interest.
Derivatives can be traded privately (over-the-counter,
OTC) or on an exchange.
OTC derivatives constitute the greater proportion of
derivatives in existence and are unregulated, whereas
derivatives traded on exchanges are standardized.
OTC derivatives generally have greater risk for the
counterparty than do standardized derivatives. 
 USES OF DERIVATIVES
Primary use is to derive their value from an underlying
asset.
These contracts are traded on stock exchange and is
regulated by the Market Regulator Securities
&Exchange Board of India (SEBI).
These are treated as financial securities.
The markets for derivatives is different in terms of the
working system and risk.
 OPTION v/s FUTURES
Although, Future's and Options, both are referred to as
derivatives, but they are slightly different from each
other.
In Future contract, the buyer has the obligation to
buy/sell the assets.
In Option contract, customer have no obligation to
buy/sell the assets.
 DERIVATIVES - OPTIONS
An options contract is the right, and not the obligation, for its
buyer to buy or sell the underlying asset at a certain price on or
prior to a fixed date.
If the option buyer does not want to buy or sell the underlying
asset, they can decide not to do so.
There are two types of options:
Call Options: A Call Option gives buyer/holder the right but
not the obligation to buy specified quantity of an underlying
asset.

Put Options: A Put Option gives buyer/holder the right but not
the obligation to sell specified quantity of an underlying asset.
DERIVATIVES - FUTURES
Futures are contracts which have to be settled (paid
for) once you enter into it.
If you enter a futures contract, you are obligated to buy
or sell the underlying asset at a pre-specified price on
or prior to a certain date.
There are two types of futures:
Financial Futures: Stock futures, Currency futures,
Index futures, Interest rate futures and others.
Physical Futures: Commodity futures, Energy
Futures, Metal Futures and others.
THANK
YOU