It is necessary to deter investors in India from acting out of intuition. Share trading on options market is an alternative to cut down on losses in the share market. The concept of options and futures can be better understood with an example. If a deal has been signed between two parties, which specifies that a car will be sold at Rs.3 lakhs after one month and it is made mandatory on the part of both the parties to adhere to the deal then it is an example of future contract or interest rate futures.

The crux is that once a deal has been signed both the participating parties have to respect it. If the same deal had an option that allowed both the participating parties to alter the terms and conditions then it is an example of options market. In options market a small price has to be paid in the form of a deposit which is non refundable. This is called Option Premium.

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