ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Bonds, stocks, mutual funds and exchange-traded funds, or ETFs, are four basic types of investment options.

Detailed explanation-2: -There are four basic options positions: buying a call option, selling a call option, buying a put option, and selling a put option. With call options, the buyer is betting that the market price of an underlying asset will exceed a predetermined price, called the strike price, while the seller is betting it won’t.

Detailed explanation-3: -Futures Trading Example: For example, if someone wants to buy a September crude oil futures contract. So they make a futures contract that they will buy 200 barrels of oil from the agreed price as of September expiration whatever the market price at that time.

Detailed explanation-4: -For example, corn farmers can use futures to lock in a specific price for selling their corn crop. By doing so, they reduce their risk and guarantee they will receive the fixed price. If the price of corn decreased, the farmer would have a gain on the hedge to offset losses from selling the corn at the market.