F&O stands for Futures and Options, which are derivative products in the stock market. They derive their values from an underlying asset, such as shares or commodities, and are used to speculate on the price movements of the underlying asset without actually owning it. In F&O trading, two parties sign a contract to trade an asset on a later date at a predetermined price.

Futures and options are different types of derivative products. A futures contract is an obligation to sell or buy an asset at a later date at an agreed-upon price, while an options contract gives the buyer the right but not the obligation to sell or buy a specified quantity of an underlying asset.

F&O trading is conducted based on leverage, where the complete cost of trading is not paid upfront. Instead, a broker can finance a stipulated portion of the entire contract, provided a minimum amount is maintained by an investor in the investor’s trading account.

Here are some key points to keep in mind when trading F&O:

• F&O trading involves buying or selling an underlying asset at a pre-determined price.
• F&O contracts are signed by two parties for trading an asset on a later date, at a predetermined price.
• Futures contracts are an obligation to sell or buy an asset at a later date at an agreed-upon price, while options contracts give the buyer the right but not the obligation to sell or buy a specified quantity of an underlying asset.
• F&O trading is conducted based on leverage, where the complete cost of trading is not paid upfront.
• Always trade F&O with stop losses and profit targets.
• Keep a constant eye on the costs that you are incurring in F&O.
• Ensure that your ratio of profits to transaction cost is better than 3:1.