Trade for stock options and futures contracts
What is the market lot for Stock Futures? Why are the market lots different for different stocks? What are the different contract months available for trading? What is spread trading on BSE? As an investor, how do I start trading in Stock Futures?
What securities can I submit to the broker as collateral? How does an investor, who has the underlying stock, use Stock Futures when he anticipates a short-term fall in stock price? The Chicago Board of Trade applied for registration as a national securities exchange shortly after, and received a license as such. But that license went unused for more than three decades as the market continued to trade non-standardized privately negotiated options contracts.
The Put and Call Brokers and Dealers Association was formed around this same time to better organize the over-the-counter markets. The resulting spun off entity, the Chicago Board Options Exchange, established open-outcry trading pits similar to those at its affiliated futures exchange and centralized options clearance and settlement.
In , not only did the CBOE open its doors, but two economists, Fischer Black and Myron Scholes, published an article putting forth a model for calculating the theoretical estimate of an options price over time.
At the same time, their colleague Robert Merton published an additional study and mathematical amplification of the Black-Scholes model. The Black-Scholes model so changed the landscape for the pricing of options that Myron Scholes and Robert Merton were awarded the Nobel Prize in Economics for their work years later, in The market flourished and was subject to regulatory oversight on par with U.
In , options trading at the CBOE was restricted to call options, which grant the right to buy shares, in just 16 stocks. More recently, the option products have expanded to include mini options tied to 10 shares of stock instead of the standard shares, and weekly options, which expire every Friday, instead of once a month.
In , the listed options market hit a milestone when more than , contracts were traded in a single day. Options popularity continued to increase with more than 3. From Ancient Greece to Wall Street: Risk-return profile is symmetric in case of single stock futures whereas in case of stock options payoff is asymmetric.
Also, the price of stock futures is affected mainly by the prices of the underlying stock whereas in case of stock options, volatility of the underlying stock affect the price along with the prices of the underlying stock. What are Stock Futures? How are Stock Futures priced? What are the opportunities offered by Stock Futures? How are Stock Futures settled? Can I square up my position?