Futures and Options

Derivatives are financial contracts whose value is tied to an underlying asset, such as stocks, bonds, commodities, or market indices. The two main types of derivatives are futures and options. Both are primarily traded on stock exchanges like the NSE and BSE.

Traders and investors use futures and options contracts to lock in prices for future transactions, hedge risks against potential losses, and speculate on price movements to profit from market fluctuations. For example, if you’re interested in trading corn but don’t want to store physical corn in your factory, futures and options allow you to profit from price fluctuations without handling the crop itself.

The F&O market attracts retail investors, institutional traders, hedgers, and speculators, which boosts market liquidity, making buying and selling easier and reducing trading costs. By using these derivative instruments, market participants can reduce financial risks and contribute to market stability, especially during volatile periods.