What is futures and options trading?

A contract between two parties that offers a buyer the right but not the obligation to purchase or sell the underlying at a future date and at a future price is known as an option. In futures and options trading, traders will get profits when they have to buy positions and prices of F&O are moving upwards.

Who can invest in futures and options?

Investors who have knowledge of futures and options in the stock market and an in-depth understanding of tracking the market can invest in futures and options. The F&O trading has an element of speculation based on predicting micro and macroeconomic factors of underlying financial instruments.

Are options more risky than futures?

Options may be risky, but futures are riskier for the individual investor. Futures contracts involve maximum liability to both the buyer and the seller. As the underlying stock price moves, either party to the agreement may have to deposit more money into their trading accounts to fulfill a daily obligation.

What is cost of carry in futures and options trading?

A price quoted in futures and options trading includes the current price and cost of carry, along with an underlying assumption that a strike price matches the contractual price. Any price difference arises from carrying the underlying security to the future date, known as the cost of carry.