If you are learning about the stock market, you may have heard the term F&O, which stands for Futures and Options. These are special types of financial contracts that allow you to trade in the market without actually owning the shares.

F&O trading can help you earn a profit by guessing the price movement of stocks, indices, or commodities. But it also comes with risks.

Let’s understand what Futures and Options really mean in simple words.

What is F&O in the Stock Market?

F&O means Futures and Options, which are part of derivatives trading. Derivatives are contracts whose value depends on the price of something else – like a stock, index (like Nifty), or commodity.

You don’t buy or sell the stock directly. You buy a contract that gives you the right (or obligation) to buy/sell the stock at a fixed price in the future.

1. What are Futures?

Futures are contracts where you agree to buy or sell a stock at a fixed price on a future date.

Example:

You buy a Futures contract for Infosys at ₹1,500 for expiry in 1 month.

• If Infosys' price goes to ₹1,550, you make a profit.

• If it drops to ₹1,450, you face a loss.

You must maintain a margin amount in your trading account. Futures trading can give big profits but also big losses.

Key Points:

• You can buy or sell futures.

• You must settle it before the expiry date.

• No delivery of shares; only profit/loss is settled.

2. What are Options?

Options are contracts that give you the right, but not the obligation, to buy or sell a stock at a set price.

There are two types:

• Call Option: Right to buy

• Put Option: Right to sell

Example:

You buy a Call Option for Reliance at ₹2,500. If the stock goes to ₹2,600, your option value increases, and you can sell it for a profit. If the stock stays below ₹2,500, your loss is limited to the premium you paid.

Key Points:

• You pay a small premium to buy an option.

• Risk is lower than futures because the loss is limited.

F&O vs Cash Market

Who Can Trade in F&O?

• People with good knowledge of the market

• Traders who want to hedge or earn from price moves

• You must have a demat and trading account with F&O enabled

Platforms like Motilal Oswal make F&O trading easy with research tools, expert advice, and margin calculators.

Futures and Options (F&O) are powerful tools to trade in the stock market. They can help you earn more with less capital but carry more risk. If you are new, learn step by step, and never trade blindly.

With the right knowledge and guidance from platforms like Motilal Oswal, you can understand and explore F&O confidently.

Start small, stay informed, and trade smart!

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