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What are futures and options?

What are futures?​​

Futures are the obligation to buy or sell an underlying asset at an agreed price at an agreed date. The agreed date is determined by the JSE. The price is agreed by the market.​

What is a futures contract?

If you think a share price is going to rise in the next month, you could buy a futures contract over that share. You will be required to pay only a margin deposit, as discussed in Derivatives: What are they? ​You can also shorten futures by buying or selling at the current price and, if the price falls, buying back at a lower price and making a profit. Basically, you would be selling what you do not own in the expectation it will fall in value and be cheaper for you to buy back again.

What are options​?

Options (in the case of the JSE, mostly traded via warrants) are the right, not the obligation, to buy or sell an underlying asset at an agreed date and price. Here the agreed date and price is set by the issuer. As it is a right, but not an obligation, you cannot lose more than your initial capital outlay.

The JSE offers a number of different products you can trade, such as indices, commodities, currencies, bonds and agricultural futures, all regulated by the JSE.

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