This is called Option Premium. To apply this understanding The North Face Outlet to the stock market, would mean that you can buy Reliance at a price which is fixed today and the date of purchase is also fixed today. If Cheap North Face Jackets you buy a Futures contract, it would mean that Reliance shares would be given to you on the appointed date at the pre determined price. You have to honour the contract irrespective of the prevailing market price. The risk here is a probable loss of the entire purchase consideration i.e. The price could go as low as 0 or a probable profit of unlimited Christian Louboutin Outlet amount since North Face Sale the price can go to any level. If you buy an Options contract, it would mean that Reliance shares would be given to you on the appointed date at the pre determined price. You have the option to honour the North Face Jacket contract only if the Reliance price has gone above your determined price. If the price has gone down you need not honour the contract. The risk here is the loss of premium that you paid North Face Outlet for the contract and probable profit of unlimited amount since the price can go to any level. If we compare the Options and Futures contract it is very clear that the probability of profit is unlimited in both the alternatives. However, the probability of loss is unlimited in a Futures contract and limited to extent of premium in an Options Contract. Investors who desire to speculate must understand these concepts clearly in order to avoid making huge losses while trading in Derivatives Market. Derivatives market can be effective used as a hedging tool also. If you have shares that have been purchased with a long term perspective in mind, and in the short run markets are likely to be depressed, the shares can be sold in the Options market by buying a put option and repurchased when the prices go down. If your judgment is wrong, your loss would be Cheap North Face the premium amount only and the profit would be the temporary fall in price. By using Options trading you can make profit in The North Face Sale the short run due to fall in price and North Face Jackets reduce your cost of holding. To operate in the share market it is necessary to take a view on the market and based on the view a strategy may be decided. If you expect the market to go up, a call option may be purchased. It is nothing but an option to buy. If you expect the market to go down, a put option may be purchased which is nothing but an option to sell at a future date. If you expect the market to be within