Although stock , commodity and derivative market investment is subject to the market risk but it doesn’t mean that any one can not invest in capital market by considering your risk appetite any individual can receive future monetary benefit of market.
As risk is an integral part of investment any individual can not avoid this but can opt different strategies to minimize the risk for which different invetment tools have different purpose of investment.
Like stock market any individual can buy share according to his investment as well according to his risk taking capacity, if you maintain a stop loss that could minimize or strict the loss , is an strategy to trade safely.
There are so many investor and trader some of them focus on intraday trading while some focus on positional trading.
An individual who is comfortable with positional trading have set his mind that when inverse conditions are there to bear the losses, or may be he is greedy to earn profit from the market.
while the another person who opt intraday trading have mind set to earn small profit while considering his individual risk capacity,
In market there are so many financial instrument whose purpose is different to know more visit my blog “ The Art of Cutting Your Losses”
Like derivative is the best example of reducing risk from the market According to the purpose of investment or trading there is not such huge difference between future option and derivative. as the derivative are the financial instrument whose value is derived from underlying asset. also future and option are the types of derivative.
And the main purpose of future, option of derivative is to reduce risk or risk future price uncertainty through hedging , arbitraging and speculation
But there is a difference between in future and option on the basis of working mechanism of both that may be understood as follow
In future and option a fixed quantity are traded that is lot size both are one month expiry contract
In future both buyer and seller have to margin while in option seller have to margin not buyer.
In future investment is high while in option investment is less
in option there is chances of unlimited profit and limited loss because buyer just have to pay premium amount only.