Explained in a nutshell: options and futures
So the Witches’ Sabbath is all about options and futures. But what is that actually? futures are unconditional forward transactions and options conditional forward transactions. In the case of futures, this means that two contracting parties (counterparties) agree to trade a certain quantity of a trading object at a certain price at a certain point in time.
Options are a bit more complicated. Of the The buyer of an option has the right but not the obligationa certain amount of a certain trading object at a certain price at the so-called writer (often called draftsman) to buy or sell. This right can be claimed at one time, on several specific dates, or by a specific date – or it can simply be dropped. For granting this right, the option writer gets one option premium.
In the case of index options and futures, the value is not measured in terms of a specific commodity or security, but in terms of the current price of the relevant index compared to the underlying value at a specific option or futures exercise price. Or to put it simply: If the price of an index rises, the value of an associated call option or futures also rises or falls in the case of put options and futures. Of course, the same applies vice versa when an index is going down. At maturity, the difference between the current price and the base value is paid out.
You can find further information on trading in options and futures in our guide to Eurex trading.