Now trading has become more affordable even for a common person because of the availability of a Stock market app. Using the Stock market app, one can invest in assets, not just stocks or mutual funds. In India, Futures and Options (F&Os) have become more common over the past few years. Futures and Options (F&Os) are the most commonly used Stock market derivatives. This derivative is a contract where two parties enter to buy or sell an underlying asset such as Currency, Gold, or Stocks at a predetermined price at a predetermined future date. The value of derivatives varies with the value of the underlying assets. There are mainly four types of derivative contracts, futures, forwards, options & swaps. However, the most preferred derivative instrument is Future & Options.
A Futures refers to a derivative contract for buying and selling the underlying asset for a specific price at a predefined time. Options are also similar to Futures. An Option contract does give investors the right but not the obligation to buy or sell an underlying asset at a specific price on a specified date. Futures and Options(F&O) contracts can be of various types, including shares, indices, currencies, and commodities. Buying options involve less risk than futures, but the returns will be limited. This trading may not be everyone’s cup of tea. The different types of investors who invest in F&O are Hedgers, Speculators, and Arbitrageurs.
Commodities derivatives
Typically, investors invest in Equities and Commodities because of the low volatility. One can also invest in Commodities through Futures contracts. Traders can trade without paying the full price in future contracts since they don’t have to pay any upfront fee.
Currency derivatives
A Currency derivative is a Futures and Options (F&Os) contract where you can invest/trade a currency pair on a predetermined date, which can be EUR-USD, GBP-USD, or USD-JPY. Such contracts derive their values from the underlying assets, which are currency pairs. Traders can trade in F&O derivatives using a brokerage firm’s stock market app registered with BSE and NSE.
The main advantage of using the Stock market app is that traders can trade instantly according to their convenience.
Conclusion
Futures & Options (F&Os) are widely used trading options in India. One needs to understand and keep track of every movement in the market. Almost all stock brokers support trading and investing in F&Os. You can trade in the Derivatives segment by submitting the F&O Activation in the Trading account form. The Stock market app “IIFL Markets app” by IIFL Securities offers to trade in F&O. IIFL Securities is a leading stockbroker in India providing financial products and services for more than a decade now.
