Futures & options

What is Derivatives (F&O)?

Also called: F&O, Futures and options

Hinglish mein padhein: Derivatives (F&O) kya hote hain?

Derivatives are contracts whose value depends on an underlying asset such as a stock or index. In India they are mainly futures and options (F&O).

They are used for hedging and speculation, and involve leverage. SEBI studies found that about 9 in 10 individual F&O traders lost money in recent years.

Index derivatives on the Nifty and Bank Nifty are among the most traded contracts in the world.

Related terms

FuturesA futures contract is an agreement to buy or sell an asset at a set price on a future date. Both sides are obliged to settle.
Options (call and put)An option gives the buyer the right, but not the obligation, to buy (call) or sell (put) at a strike price before expiry. The seller takes the obligation.
Lot size (F&O)F&O contracts trade in fixed lots. SEBI requires each contract's value to be at least ₹15 lakh at introduction.
LeverageLeverage lets you control a position larger than your own money. It multiplies both gains and losses.