What is F&O (Futures and Options)?

Futures and Options (F&O) are financial derivatives instruments which derive their value from underlying assets such as stocks, indices, commodities, or currencies. And futures contracts are agreements between two parties to buy or sell of an underlying asset at a future date and at a predetermined price. Where the buyer of a future contract agrees to buy the underlying asset at a specific price, while the seller agrees to sell the asset at the same price.

Futures contracts are often used as a tool to hedge against future price fluctuations in the underlying asset. On the other hand, Options contract gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date. The buyer of an options contract pays a premium to the seller for this right. Options contracts are also used for hedging and speculation purposes.

Futures and options are traded on organised exchanges, and the prices are determined by supply and demand. They are used by traders and investors for hedging, speculating, and managing risk of their portfolios. However, trading in F&O requires a good understanding of financial markets and it involves a high degree of risk.