Futures and Options (F&O) 101
What are futures and options? Futures and Options are types of derivatives. They are traded on the stock market. Note: Derivatives are financial instruments whose value is derived from an underlying asset . Eg. NIFY 50 Example: NSE contract breakdown In NIFTY 50 22500 CE May xx , NIFTY 50 is the underlying asset , 22500 is the strike price , CE is short form for call option and May xx is the expiry date of the contract. Definitions Future : A future is a contract where the holder (purchaser) of the contract is obliged to buy a specific quantity (aka. lot size) of the underlying asset on a specific day (aka. expiry date) Options : An option is a contract where the holder (purchaser) of the contract has the option but not the obligation to buy or sell (aka Call or Put Option) a specific quantity (aka. lot size) of the underlying asset at a specific price (aka. strike price) on/before a specific day (aka. expiry date) Note : 1) Whether or not an...