An Introduction to Future & Options
Future and Options, shortened as F&O, are best described as derivative products that extract their values from shares, commodities and other underlying assets. These derivative contracts require two parties to agree for buying or selling the underlying assets at pre-set price on a fixed expiry date. The agreement allows for market risk hedging by keeping the asset prices locked for the future.
What is F&O Trading?
F&O trading is a process of purchasing or selling an underlying asset at a preset price, allowing traders to make a profit from price movements. If the price goes up, it benefits those who want to buy whereas if the price drops, it puts sellers in an advantageous position.
Traders engaged in futures tradition should keep a margin with the broker. This margin refers to a certain percentage of the future value. In contrast, purchasing an options contract requires paying a premium.
This dynamic interplay between market movements and contracts builds up the foundation of the trading strategies for Future and Options.
