Secondary market essentially comprises of stock exchanges.
In Secondarty Market existing securities are bought and sold among investors through stock exchanges.
Stock exchanges which provide platform for purchase and sale ofsecurities by investors.
The strength of the economy of a country is gauged by the activities of the Stock Exchanges.
The following are the components of secondary market.
1. Spot Market
2. Futures Market
3. Options Market
In Spot Market securities are traded for immediate delivery and payment.
In futures market securities are traded for future delivery and payment.
In options market securities are traded for conditional future delivery.
There are two types of options are traded in the options market.
1. Put Option:- It permits theowner to sell a security to the writer of the option at a pre-determined price before a certain date.
2. Call Option:- It permits the buyer to purchase a security from the writer of the option at a particular price before
a certain date.