Question 1

What are Futures and Options Trading Contracts?

Accepted Answer

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.

Question 2

How are Futures and Options Trading Contracts different?

Accepted Answer

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.

Question 3

How can I trade in Futures and Options, and what do I need?

Accepted Answer

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. m.Stock 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.

Question 4

How to place an F&O trading order?

Accepted Answer

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.

Question 5

How are F&O Trading contracts settled?

Accepted Answer

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.

Question 6

How does futures trading differ from margin trading?

Accepted Answer

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.

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Put Option

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