What is Futures & Options (F&O) trading in India?
At its core, F&O (Futures and Options) trading is about trading contracts rather than acquiring assets.
In the standard cash market, you purchase equity to become a partial owner of a company. In the F&O market, you are trading an agreement based on the future performance of that stock. You aren't looking to own the company; you are taking a calculated position on which direction its price will move.
Key distinctions include:
Strategic Flexibility: Unlike buying shares, where you generally need prices to rise to make a profit, F&O allows you to capitalize on market volatility in either direction—up or down.
Defined Timelines: Every contract has an expiration date. This makes time management and market analysis critical, as you cannot simply "hold and wait" indefinitely.
Leverage: Perhaps the biggest differentiator is capital efficiency. You can control a significant position with a relatively small amount of capital (margin). While this offers the potential for outsized returns, it equally amplifies your risk, making disciplined risk management essential.
