A standardized agreement to buy or sell an asset at a predetermined price on a specific future date. In India, stock and index futures expire on the last Thursday of each month.
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F
Futures Contract
Derivatives (F&O)
Related terms
Call Option
A derivative contract that gives the buyer the right (but not obligation) to buy an underlying asset at a specified strike price before or on the expiry date.
F&O
Futures & Options. Derivative instruments traded on NSE/BSE that derive their value from underlying assets like stocks or indices. Used for hedging and speculation.
Hedge
An investment strategy to reduce risk of adverse price movements. In India, traders commonly hedge equity positions using Nifty or stock futures and options.
Leverage
Using borrowed capital to increase the potential return of an investment. In F&O trading, leverage allows controlling larger positions with smaller margin amounts.
Lot Size
The fixed number of shares in one F&O contract. Each stock has a different lot size set by the exchange (e.g., Nifty lot size is 25, Bank Nifty is 15).
Margin
The collateral deposited with a broker to cover the risk of a trade. In F&O, initial margin and maintenance margin are required. In intraday, brokers offer margin funding for higher exposure.