Options and futures are derivatives from "summary" of Loose Leaf Finance with Connect Access Card by Troy Adair,Marcia Millon Cornett,John Nofsinger
Options and futures are financial instruments known as derivatives. These instruments derive their value from an underlying asset, such as stocks, bonds, commodities, or currencies. Derivatives like options and futures are widely used in financial markets for hedging, speculation, and arbitrage purposes. Options give the holder the right, but not the obligation, to buy or sell an asset at a specific price within a specified period. There are two types of options: call options and put options. A call option gives the holder the right to buy an asset at a predetermined price, while a put option gives the holder the right to sell an asset at a predetermined price. Futures, on the other hand, are contracts that obligate the buyer to purchase an asset or the seller to sell an asset at a specified price on a specified future date. Fu...
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