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Make Money in Futures and Options Trading Online

02 Mar 2023

Stock markets give investors a plethora of opportunities to trade in assets. Whether you are a short-term or long-term investor, you can find a range of ways to trade and invest to suit your personal financial goals. There are several ways to invest and instruments like mutual funds, IPOs, equity, bonds, NCDs and derivatives are the main instruments in which you can try your fortune with. Futures and options stocks contracts fall in the purview of derivatives. To trade and invest with futures and options, you have to grasp some fundamental concepts, and then you can execute trades online to make money. 

Futures & Options - A Brief Overview

Futures and options derive values from underlying assets that they represent. Therefore, you can have futures and options stocks contracts, futures and options commodities contracts, and so forth. Although futures and options deal with stocks, you do not need to open a demat account when executing such contracts. All you need is a good online brokerage account. As the management of risk is one of the major considerations while engaging in the securities markets, you should know that time is of the essence where risk is concerned. Time is seen as a risk as prices fluctuate with time. 

Futures and options are contracts through which investors agree to trade (purchase or sell) securities, at a fixed future date. A futures contract gives the investor the right to purchase or sell shares by a date of expiry of a contract. Here, whether prices fall or rise, the trade has to be executed. In an options contract, the investor has the right to execute a transaction by a certain date, but is under no obligation to carry out the trade (in case price fluctuations occur and investors wish to pull back, cutting losses). 

Futures & Options Online

The first thing you do if you want to trade in futures and options online is to note that these derivatives are not applicable to all securities. Hence, you can get futures and options contracts only in securities included on the futures and options stock list. On the F & O stock list, there are 175 securities listed and these are stipulated by SEBI - the Securities and Exchange Board of India. Are you considering ditching futures and options and going in for any upcoming IPO with all this new information to digest? Don’t make decisions before you know how you can make money online with F & O trading. 

Making Money With Futures and Options

Here are some hints as to how you can make money with futures and options stocks contracts online: 

  • Hedge with F & O - In futures trading, profits and losses can accumulate equally depending on fluctuating prices. If you use futures as a hedge, you stand to gain. For instance, if you hold shares of a company worth Rs. 1500, with the current price at Rs. 1700, you may sell futures at 1710, and lock in your profit at Rs. 210. Irrespective of how the price moves, your Rs. 210 profit is locked. 
  • Structure Your Trades - When you purchase or sell futures, you should check for any dividend payments, and get a grasp of whether holding on to a position is in your favour. Furthermore, make sure you choose an expiry date that has only advantages for you depending on the shares you are trading in, chosen from the futures and options stock list. 
  • Maintain a Stop Loss - You should have a stop loss on all trades, instead of opting for this later on. As exposure to the markets is high (as you pay less than the investment amount in futures trading), you need a stop loss. 

Trade, and Tread, Carefully

Futures and options trading is catching on in India, and saves you the hassle of having to open a demat account. Investors look for more fruitful ways to increase profits and F & O may be the key to that, with risk being minimised. Still, for diversification, you can look at any good upcoming IPO with a great track record to ensure future returns. 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account


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