Introduction In the world of finance, derivatives play a critical role. They derive their value from an underlying asset, such as stocks, commodities, currencies, or interest rates. Among these derivatives, options and futures are two popular types often puzzling to beginners due to their complexity. Let's demystify these concepts! Options Options are contracts providing the buyer with the right (but not the obligation) to buy or sell an underlying asset at a predetermined price, on or before a specific date. There are two types: Call options and Put options. A Call option allows the holder to buy an asset. For instance, if you buy a Call option for Company A's stock at $50 (the predetermined price, also known as the strike price), and the stock price rises to $60, you can exercise your option to buy the stock at $50 and sell it at the current price of $60 for a profit. A Put option gives the holder the right to sell an asset. Let's say you own a Put option for Company B...