Economics Options And Futures Questions
Options and futures are financial derivatives that allow individuals or entities to speculate or hedge against future price movements of underlying assets such as stocks, commodities, or currencies.
Options give the holder the right, but not the obligation, to buy or sell the underlying asset at a predetermined price (strike price) within a specified time period. There are two types of options: call options, which give the holder the right to buy the asset, and put options, which give the holder the right to sell the asset.
Futures, on the other hand, are contracts that obligate the buyer to purchase or the seller to sell the underlying asset at a predetermined price and date in the future. Unlike options, futures contracts are binding and must be fulfilled by both parties.
Both options and futures are commonly used for speculation, hedging against price fluctuations, and managing risk in financial markets. They provide opportunities for investors to profit from price movements without owning the underlying asset.