Commonly used Terms in Derivatives Market

Commonly used Terms in Derivatives Market Call Option: It is a financial contract that gives the owner the right but not the obligation to buy a specific amount of the underlying financial instrument at a par ular price with a specifi date of maturity. Forward Contracts: An over-the-counter obligation to buy or sell a financial instrument that is settled privately between the two counterparties. Futures Contracts: An exchange-traded obligation to buy or sell a financial instrument. Hedge: A transaction that offsets an exposure to fluctuations in financial prices of some other contract or business risk. Option: The right but not the obligation to buy (sell) some underlying cash instrument at a specific rate on a particular expiration date. Premium: The cost associated with a derivative contract, referring to the combination of intrinsic value and time value. Put Option: A put option is a financial contract giving the owner the right but not the obligation to sell a particular amount of the underlying financial instrument at a pre-set price. Spot: The price in the cash market for delivery using the standard market convention. Strike Price: The price at which the holder of a derivative contract exercises his right. WWW.FXREVIEWS.BEST