What is F&O (Futures and Options)?
Futures and options are financial derivatives that allow traders to speculate on the price movements of an underlying asset without actually owning it. Futures contracts obligate the buyer to purchase an underlying asset, while the seller must deliver it at a predetermined price and date. In options contracts, the buyer has the right, but not the obligation, to buy or sell the underlying asset at a predetermined price and date, while the seller must honour the contract if the buyer chooses to exercise their option.
The trading of futures and options can be complex and involves significant risk. The value of these derivatives can be affected by a range of factors, including market volatility, changes in interest rates, and fluctuations in currency exchange rates. Traders may face substantial losses if their positions move against them.
The concepts related to derivatives are vast and have many nuances. The following modules on Varsity briefly explain F&O:
1) Futures (WEB).
2) Options (WEB).
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