Broking · F&O
Futures & Options: trading India’s equity derivatives
Futures and options (F&O) are exchange-traded contracts whose value is derived from an underlying — an index such as NIFTY 50 or an individual stock. Traders use them to hedge a portfolio or take a view on price moves with margin, on NSE and BSE.
The basics
What are futures and options?
Both are derivatives — standardised contracts traded on recognised exchanges, settled through a clearing corporation, with fixed lot sizes and expiry dates.
Futures
An obligation to buy or sell the underlying at a price agreed today, on a set expiry date. Gains and losses are settled daily (mark-to-market) until you exit or the contract expires.
Options
The right, but not the obligation, to buy (call) or sell (put) the underlying at a fixed strike price on or before expiry. The buyer pays a premium; the seller receives it and takes on the obligation.
Vocabulary
Key concepts in F&O trading
The case
Why traders use F&O
Hedging
Protect an equity portfolio against a fall — for example by buying index puts or selling index futures.
Capital efficiency
Take exposure to a full lot by depositing margin rather than the full contract value — which also magnifies losses.
Views in either direction
Position for a rise or a fall in the underlying, or for a change in volatility.
Liquid index contracts
Benchmark index derivatives are among the most actively traded contracts on Indian exchanges.
Defined-risk strategies
Option buying and spreads let you cap the maximum loss to the premium or spread paid.
Transparent pricing
Contracts trade on regulated exchanges with live quotes, standard specifications and central clearing.
Know the risks
Risks associated with F&O trading
SEBI’s studies of the equity F&O segment found that 9 out of 10 individual traders incurred net losses. Trade derivatives only with money you can afford to lose and a clear risk plan.
Leverage risk
Margin trading magnifies losses as much as gains; losses can exceed the margin you deposited.
Unlimited loss when selling options
An option seller’s potential loss is not capped by the premium received.
Time decay
Option premiums lose value as expiry approaches, working against option buyers.
Volatility & gaps
Sharp moves or overnight gaps can trigger large losses before you can exit.
Margin calls & MTM
Adverse moves require additional funds; positions may be squared off if margin falls short.
Physical settlement
In-the-money stock F&O positions held to expiry lead to delivery of shares and the funds to pay for them.
Your roadmap
How to get started with F&O trading
Learn the products
Understand contract specifications, lot sizes, expiries, margins and how options are priced.
Open a Demat & Trading account
Complete KYC with PAN, Aadhaar and bank details with a SEBI-registered broker.
Activate the derivatives segment
Submit the required proof of income or financial standing to enable F&O trading.
Add margin funds
Keep enough funds for the initial margin and for daily mark-to-market obligations.
Start small with defined risk
Begin with one lot and limited-loss positions such as option buying or spreads.
Manage every position
Use stop-losses, size positions to your capital and track open positions until expiry.
Ready to trade F&O?
Trade futures & options with a trusted partner
Open your Demat & Trading account with Absolute Broking, activate the derivatives segment and trade index and stock F&O on NSE and BSE.
Open Demat Account