A market much bigger than equities is the equity derivatives market in India. Derivatives basically consist of 2 key products in India viz Options and Futures. The difference between future and options is that while futures are linear, options are not linear. Derivatives mean that they do not have any value of their own but their value is derived from an underlying asset. For example, options and futures on Reliance Industries will be linked to the stock price of Reliance Industries and will derive their value from the same. Options and Futures trading constitutes an important part of the Indian equity markets. Let us understand the differences between Options and Futures and how equity futures and the options market form an integral part of the overall equity market.
A Future is a right and an obligation to buy or sell an underlying stock (or other assets) at a predetermined price and deliverable at a predetermined time. Options are a right without an obligation to buy or sell equity or index. A Call Option is a right to buy while a Put Option is a right to sell.