Futures & Options - F&O Stock Trading in India | m.Stock (2024)

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In the investment world, futures and options are derivative instruments or contracts between buyers and sellers. Through these contracts, traders can invest in various types of market securities such as stocks, bonds, commodities, currencies, stock indexes, etc. The agreement essentially comprises the details of the investment, including investment amount, estimated buying/selling price, contract expiration date, and other significant facts based on which its value is derived.

Futures traders typically buy and sell an underlying asset at a fixed price (also called the strike price) on a predetermined future date. Such traders are obligated to honour the clauses of the trading contract, irrespective of the underlying asset's market value, on the contract expiration date. On the other hand, options traders have the right or option and not the obligation to sell their underlying asset at the fixed, predetermined price on the set future date. They may exit the contract in case of a loss-bearing investment. In such a case, the trader only loses the predetermined margin amount paid at the time of entering into the contract.

You can conduct Futures and Options Trading through Brokerage Firms, which are members of the BSE, NSE, commodity trading markets, currency markets, and so on. Mirae Asset is one such brokerage firm. You need to open a DEMAT and trading account on the Mirae Asset website to conduct your F&O trading. You must submit your PAN, ID, and address proof documents to complete the KYC process, after which you can trade through our online trading platforms or mobile application. Ensure that you maintain the required margin amount in your trading account and link your bank account to it, to facilitate fund transfers for seamless F&O trading.

Login to your DEMAT and trading account , look for the Futures and Options tab and follow the steps by filling the form. You can find the place order or similar tab where you must enter the stock code (available on the internet). You will find the different F&O trading contracts, and you can choose one by clicking the buy/sell link. You will be redirected to a new page where the basic contract details will be auto-populated, based on whether you choose Futures or Options Trading. You must decide the order type - market or limit order, order validity period or maturity date, limit price, and stop-loss trigger price. Once you enter these details, your order will be placed.

F&O Trading contracts are typically settled by the NSE, BSE, or exchanges on which the contract is traded. The contracts are settled on a daily basis in cash, on the contract expiration date. If options traders choose to exercise their option to exit a contract before the maturity period, they can do so anytime, and the contract is settled on the day of their choosing.

In the futures trading segment, traders can continue holding their buy/sell position till the contract expires and square it off any time during the contract life. In the case of margin trading, traders must square off their trades on the same day. Also, traders may convert their margin positions to delivery if they have the required trading limits in case of buy positions. They must also have the required number of shares in case of a sell position. Such a facility is not available for futures positions as all futures transactions are settled in cash as per the current SEBI regulations. As such, if you want to convert futures positions into delivery positions, you must first square off your transactions in the futures market and then take a cash position in the cash market.