Futures and options belong to the category of derivative instruments; that is, their value is determined by the value of some other underlying asset. Such underlying assets could be equity stocks, commodities, currencies, interest-bearing securities, etc. Derivatives help mitigate the risks of the trading market and generate adequate incomes for the investors. They are also used to speculate on assets or hedge against adverse price movements.
 

What are Futures?

Futures are contracts under which two parties agree to buy or sell an asset at a predetermined future date at a fixed price. Futures are traded at major exchanges in India.The exchange is the regulator for the transactions and safeguards against counterparty risk. Trading on exchanges also ensures the quality of the asset, such as crude oil, minerals etc., to the buyer.

As futures contracts have a fixed future price at which the transaction will be executed, they are used as a hedge by those in need of the asset of a fixed quantity at a future date. The terms of futures contracts depend on the exchange’s specifications, and usually, trading on a futures contract is allowed until a few days before its expiry date.
 

What are Options?
 

An option is a contract under which the option holder has the right but not the obligation to buy or sell the underlying asset covered by the option. You pay a premium to enter into an options contract, but you can either complete the contract at a future date or allow the contract to expire. The most common assets covered by options contracts in the Indian derivatives market are stocks and market indices.

There are two types of options: call option and put option. If you hold a call option, you have the right to buy the underlying asset at the agreed price on the future date. If you hold a put option, you have the right to sell the underlying asset at the agreed price on the agreed date.
 

How are Futures and Options Traded?

To be successful in trading in futures and options, you need to have sufficient knowledge of financial markets and the patience to overcome short-term volatility. You should open a Demat and trading account with a trusted brokerage firm with an easy trading platform and expertise in research. You should be aware of the terms and conditions of the contracts, such as futures margins, option premium, leverage, expiration date etc.

Futures and options effectively protect you from price volatility and earn income from price changes in the underlying assets such as stocks and commodities.

Thus, it is clear that futures and options effectively protect you from uncertainties that might derail your set course of action due to escalation in costs.

Similarly, life insurance is essential to protect your family from financial distress that may be caused due to your unexpected death.

What are the Benefits of Life Insurance Coverage?

Life insurance is an ideal way to ensure the financial well-being of your family in case of an emergency. To understand the benefits of life insurance coverage, it is important to know which type of life insurance policy you are availing of. With so many different types of life insurance, each type is designed to provide a specific set of benefits. Most importantly, they all come with a life insurance cover so that you and your family can enjoy comprehensive protection. But a life insurance policy is one of the less-risk insurance policies that combine the benefits of life insurance and long-term systematic savings.

Unlike many other investment options that may be market-linked, you can get assured returns from a guaranteed¹ savings plan. Thus, a savings policy provides an edge over a regular life insurance policy that provides a simple life cover since it also lets you build on your wealth plan for the future, enabling you to meet any important milestones or major expenses you may have planned.

When you choose a savings plan, it is important that you have the liberty to select how you receive the payout. The payout benefits should be in sync with your financial plans. In the case of Tata AIA savings policies, you can choose an income period, as mentioned above, and receive payouts for a period of 20-45 years. Thus, such a savings plan can also help you cover your retirement years when you need to have a regular income and also need to protect your family with life insurance coverage.
 

Conclusion
 

While it is important to always grow your wealth with different investments and explore various options for this purpose, you can always fall back on a life insurance savings plan for savings and the least amount of risk involved. A savings policy can give you assured returns with the least amount of effort while safeguarding your family from any future uncertainties.
 

L&C/Advt/2023/Jan/0290