How Futures & Options Trading Works

F&O trading is used by a variety of market participants, including:

• Hedgers: Hedgers use F&O contracts to reduce their risk of exposure to price movements in the underlying asset. For example, a farmer may sell futures contracts on their crop to lock in a price for their harvest, regardless of whether prices go up or down.

• Speculators: Speculators use F&O contracts to profit from price movements in the underlying asset. For example, a trader may buy futures contracts on oil if they believe that oil prices are going to rise in the future.

• Flexibility: Intraday traders can trade any time during the trading day, which gives them a lot of flexibility.

• Arbitrageurs: Arbitrageurs use F&O contracts to exploit price discrepancies between different markets. For example, an arbitrageur may buy a futures contract on a stock on one exchange and sell a futures contract on the same stock on another exchange if there is a price difference between the two exchanges.

F&O trading can be a complex and risky activity, but it can also be a rewarding one. Traders who have a good understanding of the markets and the risks involved can use F&O contracts to generate significant profits.