Futures and options (F&O) stand out as derivative products, deriving their values from underlying assets such as shares or commodities. These derivative contracts involve two parties agreeing to buy or sell the underlying asset at a predetermined price on a fixed expiry date, allowing for the hedging of market risks by locking in the asset price for the future.
What is F&O trading?
F&O trading involves buying or selling an underlying asset at a predetermined price, with traders seeking to profit from price movements. A rise in price benefits those with a buy position, while a fall is advantageous for those with a sell position. Traders engaging in futures trading need to maintain a certain percentage of the future value as margin with the broker. In contrast, buying an options contract requires the payment of a premium. This dynamic interplay of contracts and market movements forms the foundation of F&O trading strategies.
