Question

Please answer questions 6 - 10. Thank you.

6. What are the three major market indexes?

7. What is the difference between options and future contracts?

8. What determines the option price?

9. What is the difference between primary and secondary market for security sales?

10. What are market order, limit order, and stop order? Explain each one.

Answer 1

6. 3 main market indices are Dow Jones Industrial Average, Standard and Poor 500, NASDAQ.

7. Options will be providing with the the rights and not the obligation where as future contracts are obligatory in nature.

Option contracts are highly volatile and they will be having lower transaction cost, whereas future contracts are having higher transaction cost.

8. Option price is determined by the movement in the underlying share price and the volatility.option prices are continuously derived by the market participants after determination of their underlying stock price

9. Primary market for issuance of the security for first time where is secondary markets are for trading of the securities.

Primary markets are offering with issues like initial public offering and further public offering whereas in secondary market already issued shares are traded.

10. Market order is an order which will be executed at the underlying market bid and ask price and it will not be Accounting in for any specific price.

limit order is generally placed in order to execute an order at a given specific price and that order is only executed at that price or else not executed

Stop order are generally placed in order to prevent from losses and determining level up to which investor can face loss.