What are futures and options?

Futures and options are stock derivatives that are traded in the share market and are a type of contract between two parties for trading a stock or index at a specific price or level at a future date. By specifying the price of the trade, these twin derivatives safeguard the investor against future fluctuations in the stock market.

Should you trade options or futures through a broker?

Even if you trade through a broker, there are some factors that must be kept in mind. Futures and options assets are heavily leveraged with futures usually seeing a harder sell than options. You are more likely to hear about the profit you can make in the future by fixing an advantageous price.

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.

Where can I trade in derivatives?

You can trade in derivatives at the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The NSE allows futures and options trade in over 100 securities and nine major indices. As the derivative that sees more leverage, futures tend to move faster than options. The maximum duration for a futures contract is three months.