Derivative financial contracts that derive value from an underlying asset, allowing leverage and hedging strategies.
Futures and Options (F&O) are derivative financial contracts whose values are derived from an underlying asset, such as individual stocks, indices (Nifty, Bank Nifty), or commodities. They allow traders to speculate on price directions or hedge existing portfolios.
A Future is a binding contract to buy or sell an asset at a predetermined price on a future date. An Option gives the buyer the right (but not the obligation) to buy (Call Option) or sell (Put Option) an asset at a set price within a specific timeframe, in exchange for a fee called 'premium'. F&O contracts are traded in standardized lot sizes.
F&O is highly popular among active traders because it offers leverage (you can trade large positions with a small margin deposit) and allows you to profit from falling markets by short-selling or buying Put options. However, due to leverage and contract expiration, F&O carries extremely high risk.
You believe Nifty (currently at 22,000) will go up this week. Instead of buying individual stocks, you buy a Nifty Call Option with a strike price of 22,100 for a premium of ₹100. Since the lot size is 50, you pay ₹5,000 premium. If Nifty rises to 22,300 before expiration, the premium value increases significantly, allowing you to sell the contract for a profit.
SEBI research shows that 9 out of 10 retail traders in the equity F&O segment incur losses, with average losses exceeding ₹50,000 per year. It requires advanced risk management.
Arthhwise focuses primarily on stock and index paper trading, helping you build the market directional skills needed before venturing into complex derivatives.
Practice trading stocks with live NSE/BSE market prices and ₹10,00,000 in virtual capital on Arthhwise.
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