F&O stands for Futures and Options — the derivatives segment on Rupeezy where you trade contracts based on an underlying stock or index instead of buying the shares themselves. A Futures contract obligates you to buy or sell the underlying at a set price on a future date; an Options contract gives you the right, but not the obligation, to do the same.
What is a Futures contract?
A Futures contract is an agreement to buy or sell a fixed quantity (lot size) of the underlying stock or index at a set price on a future expiry date. You don't have to hold it until expiry — you can square off your position any time before then by taking the opposite trade.
Example: Say NIFTY Futures (1 lot) is trading at 22,000 and you buy it, expecting the index to rise before expiry. If NIFTY rises to 22,200, your position gains 200 points; if it falls to 21,800, you lose 200 points. You can square off anytime before expiry to book that gain or loss — you don't have to wait until the contract expires.
What is an Options contract?
An Options contract gives you the right, not the obligation, to buy (Call) or sell (Put) the underlying at a fixed strike price on or before expiry. Buying an option costs you a premium; selling (writing) an option earns you the premium upfront, but obligates you to fulfil the contract if the buyer exercises it.
Example (Call): You buy a RELIANCE 2800 CE (Call option) for a premium of ₹20, expecting the stock to rise above 2,800. If Reliance closes at 2,850 on expiry, the option is worth ₹50 (2,850 − 2,800) — a profit of ₹30 per share after the premium. If Reliance stays below 2,800, the option can expire worthless and your loss is capped at the ₹20 premium.
Example (Put): You buy a RELIANCE 2800 PE (Put option) for a premium of ₹15, expecting the stock to fall below 2,800. If Reliance drops to 2,750, the option is worth ₹50 (2,800 − 2,750) — a profit of ₹35 per share after the premium. If Reliance stays above 2,800, the option can expire worthless and your loss is capped at the ₹15 premium.
How is F&O different from Equity trading?
In Equity, you buy or sell the actual shares and own (or give up) delivery. In F&O, you trade a contract whose value is derived from the underlying stock or index, without ever holding the shares. This lets you take a view on price direction using margin instead of the full contract value, hedge an existing position, or trade instruments like index derivatives that have no direct delivery equivalent.
Things to keep in mind
- F&O contracts expire on a fixed date. If you don't square off an open position before expiry, it gets settled automatically as per the contract's expiry rules.
- F&O trading uses margin, and losses on futures or on a sold (written) option can exceed what you put up as margin.
- Only stocks and indices on the exchange's approved derivatives list have F&O contracts — not every listed stock does.