Futures and Options (F&O) trading is a type of derivative trading in the stock market. Derivatives are financial products that derive their values from an underlying asset, such as shares or commodities. In F&O trading, two parties enter into a derivative contract where they agree to buy or sell the underlying asset at an agreed price on a fixed date, which is called the expiry date. The reason for entering such a contract is to hedge market risks by locking the price of an asset for a future date. One party expects the prices to rise, while the other expects the opposite. As a result, one counterpart stands to profit, and the other party bears the loss.

Futures and options are different types of derivative products. In futures trading, a trader has to keep a certain percentage of the future value with the broker as a margin to take the buy/sell position. In options trading, the buyer has to pay a premium to buy an option contract.

Key terms associated with F&O trading include:

• Call Option: A call option gives the buyer/holder the right but not the obligation to buy a specified quantity of an underlying asset at a predetermined price during the liquid life of the contract.
• Put Option: A put option gives the buyer/holder the right but not the obligation to sell a specified quantity of an underlying asset at a predetermined price during the liquid life of the contract.
• Margin: In futures trading, a trader has to keep a certain percentage of the future value with the broker as a margin to take the buy/sell position.
• Premium: In options trading, the buyer has to pay a premium to buy an option contract.
• Expiry Date: The fixed date on which the derivative contract expires.

F&O trading involves risk and requires a proper understanding of the market. It is important to trade with stop losses and profit targets and keep a constant eye on the costs incurred. To trade in the F&O segment, one needs a margin-approved trading account with a broker[[6]](https://www....