A Definitive guide on Futures and Options Trading.
                     A DEFINITIVE GUIDE ON FUTURES 
AND OPTIONS TRADING
What are Futures and Options?
• Futures and options are the major types of stock derivatives traded in a share 
market. 
• These are contracts signed by two parties for trading a stock asset at a 
predetermined price on a later date. 
Source: groww.in
Futures and Options Trading 
• Futures and options trading is widely practised on leverage, wherein the entire cost 
of trading does not have to be paid upfront. 
• Instead, a brokerage firm finances a stipulated percentage of an entire contract, 
provided an investor keeps a minimum amount in his/her trading account. 
Source: groww.in
How to invest in F&O?
• These instruments are handy for investors, and traders, and learning how to trade 
in futures and options is very important. 
• It’s a pretty good idea to invest in the stock market since returns from equity have 
outperformed most other assets in the past few years.
Source: www.angelbroking.com
F&O trading basics
• Futures, and options are derivatives, whose value derives from the underlying 
asset. 
• There are many different kinds of assets on which derivatives are available. These 
include stocks, indices, and commodities like wheat, petroleum, gold, silver, cotton, 
and many more such items. 
Source: www.angelbroking.com
F&O trading purpose
• Futures, and options are used for two main purposes. One is to hedge against price 
risks; another is to profit from changes in prices or speculation. Most of the activity 
is speculative.
Source: www.angelbroking.com
What is margin/ premium?
• Margin is what you have to pay the broker to trade futures. It is a percentage of the 
transactions you can make, and is fixed at the maximum possible loss that you 
could incur. 
Source: www.angelbroking.com
What is leverage?
• Leverage is a trading mechanism investors can use to increase their exposure to the 
market by allowing them to pay less than the full amount of the investment.
• The high leverage makes it possible to make large amounts of transactions and thus 
increase your chances of making profits. 
Source: www.angelbroking.com
Which is better: stocks or futures?
• Certainly, there are advantages in futures trading. The biggest is that you don’t have 
to expend capital on acquiring the entire asset, or stock. 
• You only have to pay a margin to the broker, which is a percentage of the futures 
transactions you make. 
Source: www.angelbroking.com
Pros of F&O trading
• Certainly, there are many advantages to investing in F&O, like leverage. But F&O 
can be risky too. 
Source: www.angelbroking.com
Cons of F&O trading
• The high leverage enables you to take large positions, , and if the market does not 
go in your favour, the losses could be huge. 
• F&O is all about betting on future price movements and no one can say for certain 
in which way they will move.
Source: www.angelbroking.com