Futures & Options Trading
Enhance your trading strategy with derivatives. Futures and options provide leverage, hedging capabilities, and trading opportunities in both rising and falling markets.
Nifty 50 Futures
+1.2%Understanding Futures & Options
Futures Contracts
A futures contract is an agreement to buy or sell an underlying asset at a predetermined price at a specified time in the future. Both the buyer and seller are obligated to fulfill the contract terms at expiration.
Key Features of Futures Trading
- Leverage: Control a large position with a relatively small amount of capital
- Obligation: Both parties must fulfill the contract at expiration
- Margin: Initial and maintenance margins are required
- Settlement: Can be cash-settled or physically delivered
- Expiry: Monthly or quarterly expiration cycles
Options Contracts
Options give the buyer the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a specified price (strike price) before or on the expiration date.
Call Options
Right to buy the underlying asset at the strike price. Profitable when prices rise above the strike price plus premium.
Put Options
Right to sell the underlying asset at the strike price. Profitable when prices fall below the strike price minus premium.
Key Options Concepts
- Premium: Price paid by the buyer to the seller for the option contract
- Strike Price: The price at which the underlying can be bought (call) or sold (put)
- Expiration: Date when the option contract expires
- In/Out of the Money: Relation between current market price and strike price
Benefits and Risks of F&O Trading
Advantages
Leverage
Control larger positions with less capital, amplifying potential returns.
Hedging
Protect existing portfolios against adverse price movements.
Market Opportunities
Profit from both rising and falling markets using different strategies.
Portfolio Diversification
Add a new dimension to your investment portfolio with derivative products.
Risks
Leverage Risk
While leverage can amplify gains, it can also magnify losses significantly.
Volatility
F&O markets can experience extreme price fluctuations in short periods.
Time Decay
Options lose value as they approach expiration, potentially affecting investments.
Complexity
Derivatives require understanding complex strategies and market mechanics.
Popular F&O Trading Strategies
Discover effective futures and options strategies used by traders to generate income, protect existing positions, or speculate on market movements.
Covered Call
Selling call options against stock you own to generate additional income while limiting upside potential.
Bull Call Spread
Buying a call option while selling another call with a higher strike price to reduce cost while maintaining upside exposure.
Protective Put
Buying put options to protect an existing long position against potential downside risk.
Iron Condor
Combining a bull put spread with a bear call spread to profit from a security trading within a specific range.
Calendar Spread
Selling a near-term option while buying a longer-term option at the same strike price to profit from time decay.
Straddle
Buying both a call and put option at the same strike price to profit from significant price movements in either direction.
Our F&O Trading Services
Comprehensive F&O Trading Solutions
- Ultra-low brokerage starting at just ₹20 per executed order
- Advanced options chain analysis tools
- Real-time premium calculators and payoff diagrams
- Expert F&O research and strategy recommendations
- Options Greeks visualization and analytics
- Automated position rolling facility
- Margin calculator for complex strategies
- Risk management tools with automated stop-losses
Frequently Asked Questions
What is the minimum capital required to start F&O trading?
For F&O trading, SEBI mandates a minimum margin requirement, which varies based on the specific contract and market conditions. At DSR Group, you can start with as low as ₹50,000 for index options and around ₹1,00,000 for futures trading, though higher capital is recommended to manage risks effectively.
What are the span and exposure margins in F&O trading?
SPAN (Standard Portfolio Analysis of Risk) margin is the minimum margin required to cover the largest potential loss in a portfolio under various market scenarios. Exposure margin is an additional margin collected to cover any mark-to-market losses. Together, they form the total initial margin requirement for F&O positions.
How does options expiry work in Indian markets?
In India, equity and index options typically expire on the last Thursday of each month. If that Thursday is a holiday, expiry occurs on the previous trading day. Weekly options for major indices are also available, expiring on designated Thursdays of each week.
Can I exit my F&O positions before expiry?
Yes, you can exit your F&O positions anytime before expiry by taking an offsetting position. For futures, you can square off by taking the opposite position. For options, you can sell options that you bought or buy back options that you sold, effectively closing your position.
What happens if I don't square off my futures position before expiry?
If you don't square off a futures position before expiry, it will be settled as per the exchange settlement process. For cash-settled futures like index futures, the difference between your entry price and the final settlement price will be credited or debited. For physically settled futures, you may need to take/give delivery of the underlying assets.
Ready to Elevate Your Trading?
Start trading futures and options with DSR Group today. Get access to professional tools, expert research, and ultra-low brokerage rates to maximize your trading potential.