Futures and options represent two of the most common form of "Derivatives". Derivatives are financial instruments that derive their value from an 'underlying'. The underlying can be a stock issued by a company, a currency, Gold etc., The derivative instrument can be traded independently of the underlying asset.
In this regard, what are the different types of derivatives?
Types of Derivative Instruments: Derivative contracts are of several types. The most common types are forwards, futures, options and swap. A forward contract is an agreement between two parties – a buyer and a seller to purchase or sell something at a later date at a price agreed upon today.
How do options work?
Option buyers have the right, but not the obligation, to buy (call) or sell (put) the underlying stock (or futures contract) at a specified price until the 3rd Friday of their expiration month. There are two kinds of options: calls and puts. Put options give you the right to sell the underlying asset.
What are the types of options?
There are many different types of options that can be traded and these can be categorized in a number of ways. In a very broad sense, there are two main types: calls and puts. Calls give the buyer the right to buy the underlying asset, while puts give the buyer the right to sell the underlying asset.