Money Forum World

Jared Chang · Joined: 08 Nov 2007 Posts: 2086

Please explain in layman terms the meaning of Future and Options in trading of stocks / equities.?
I have recently started investing in company stocks and know a little about the technical part of Future and Options in trading. but, I havnt understood what it really means, why there are different prices for the same stock, how we make money, etc.

Ofelia M · Joined: 08 Nov 2007 Posts: 2094

There is no fast and easy way to learn about alternatives and futures. surely, there's no fast and easy way to explain it either. People pay thousands of dollars in weekend seminar just to learn about what choice trading is. but, you may be able to learn everything about alternatives from my free web site at optiontradingpedia.com

Aisha Rush · Joined: 08 Nov 2007 Posts: 2158

It means, literally, purchasing stocks at some point.

Say you think oil is going to be $88 a barrel in two weeks. You look for someone selling oil, and make a contract to purchase X number of barrels at $80 a barrel on a particular date.

When that day comes, if you were right, he's to sell them to you at $80, and you may be able to turn around and re sell them at market price of $88. Conversely, if you're wrong and the price is $78, you must purchase them at $80, and now have to sell them at a loss.

Nadia Ochoa · Joined: 08 Nov 2007 Posts: 2140

options are contracts to purchase or sell some stock for some price for a particular time period. If you really want to know the logistics call any stock broker or google trading options or go to optionetics.com which holds seminars on alternatives. Futures are goods.

Angela Skinner · Joined: 08 Nov 2007 Posts: 2152

As youve already seen, futures were used with goods like oil, natural gas, and metals. Many businesses also use futures to Hedge. Quite literally to hedge their bets. They do this for price protection from market fluctuations.

Options are frequently offered to employees of a company. They give an individual the choice to buy a stock for a particular price at a particular time. The individual may also decide not to exercise their option in lieu of some other reimbursement.