Options & Futures Market

Topics: Futures contract, Derivative, Futures exchange Pages: 33 (11931 words) Published: December 7, 2012
Corporate Finance
Problems and prospects of future contracts and options.


While doing this assingment we were lucky to have some assisstance from different personnels. At first we wan to mention about our honorable course instr-uctor Md. Omar Faruque. He helped us by providing a proper guideline on how to prepare this assingment. He also encouraged us to prepared the assingment in a timely and efficient manner. Now we want to mention some other persons contribution. Mr. Atikur Rahman, a librarian of Bangladesh Bank. Irin Sultana , Senior advisor of DSE. Mr. Altaf Hossain,Senior vice president of the SME dept. in IBBL.Md. Amirul Islam President of D&J fashion in Adamjee EPZ.

In finance, a futures contract is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed today (the futures price or strike price) with delivery and payment occurring at a specified future date, the delivery date. The contracts are negotiated at a futures exchange, which acts as an intermediary between the two parties. An option contract is a type of contract that protects an offeree from an offeror's ability to revoke the contract. Consideration for the option contract is still required as it is still a form of contract. Typically, an offeree can provide consideration for the option contract by paying money for the contract or by providing value in some other form such as by rendering other performance or forbearance. See consideration for more information.

Objectives of the study:

1. To highlight the key elements of future contracts and options. 2. To give a proper description about the feature of future contracts and options. 3. To find out different sectors of future contracts and options. 4. To find out the future contracts and options impact.

5. To find out the important relationship between future contracts and options. 6. Comperative analysis of future contracts and options in case of Bangladdesh.

Methodology of the study:
To complete this assignment, the necessary information were mainly collected from secondary sources. Secondary data were taken from seversl books , internet etc. Our assignment also contains some data that we have collected from the primary field. We went to DSE and SEC. They gave us some important informations which I believe will be really handfull for our future. Not but the least we are very much grateteful to our honourable course instructor Md. Omar Faruque for giving us proper guidelines.

Executive Summary
An option on a future is the right, but not the obligation, to buy or sell a specified number of underlying futures contracts or a specified amount of a commodity, currency, index or financial instrument at an agreed upon price on or before a given future date. Options on futures are traded on the same exchanges that trade the underlying futures contracts and are standardized with respect to the quantity of the underlying futures contracts (by custom, one futures contract), expiration date, and exercise or strike price (the price at which the underlying futures contract can be bought or sold). The major difference between futures and options on futures arises from the different obligations of an option's buyer and seller. A futures contract obligates both buyer and seller to perform the contract, either by an offsetting transaction or by delivery, and both parties to a futures contract derive a profit or loss equal to the difference between the price when the contract was initiated and when it was terminated. In contrast, an option buyer is not obliged to fulfill the option contract. The option buyer's loss is limited to the premium paid, but in order for the buyer to make a profit, the price must increase above (call option) or decrease below (put option) the option's strike price by the amount of the premium paid. In turn, the option seller (writer or grantor),...
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