How-To-Trade-In-Futures and Options


Futures and Options are contract-based trading instruments that do not create ownership. These instruments are called futures because the contract is based on a price that the asset will be valued at a time in the future and the buyer will have to buy the asset that is being traded at a value that has been agreed upon in the contract as soon as the contract matures.

While previously, F&O were only associated with indices in the Indian stock market, they are now a major part of the Indian stock exchange with almost all individual stocks having a futures component.

F&O can be traded in all kinds of assets including stocks, shares, equities, gold, securities, exchanges, as well as commodities like wheat, pulses, coarse grains, cotton, coffee, etc.

What are Futures and Options and why to trade in them?

Futures and options are nothing else but a contract derivative of an asset that can be traded in the stock market. This instrument is named so because the contract that guides trading in both is set in the future.

That is the buyer promises to buy the traded asset from the seller at a future date based on a certain fixed price. This rate would still hold good until the maturity period of the contract even if the market price of the traded commodity rises.

If the price of the commodity in the market rises, the buyer can still buy the commodity from the seller at the fixed price and then sell the commodity to someone else at the higher market price.

That is in this scenario, the buyer makes a profit, and the seller suffers a loss. If the price of the said commodity goes down in the market, the seller makes a profit, and the buyer suffers a loss.

The return on investment for F&O can be very high and that is why they have emerged as a popular investment option among traders and investors.

How to start trading in futures and options?

Unlike stocks and equity shares, F&O do not create ownership and hence, SEBI does not require traders to have a Demat account linked to their trading account to trade in both.

This implies that if you have a derivative trading account opened in your name with a stock brokerage firm registered with SEBI, you can go about trading in F&Os in the stock market.

You could start with trading in indices like NIFTY or go for Future contracts in commodities. The stock exchange now lists several futures and options for individual shares and stocks as well.

However, before you start trading in futures, you should be fully aware of the risks involved and the market trend for the last few trading sessions.

Intraday trading is considered to be more risk-averse and is a great option if you want to trade in F&Os within a single trade window.

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It is, therefore, important to learn both the pros and cons of intraday trading to get a better idea of how this market works and how exactly you can grow your money. In this post, we will walk you through a few advantages and disadvantages of intraday trading. So, keep reading to learn more.

• Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.
• Ensure that pay-out of funds/securities is received in your account within 1 working day from the date of pay-out.
• Be careful while executing the PoA (Power of Attorney) – specify all the rights that the stock broker can exercise and timeframe for which PoA is valid. It may be noted that PoA is not a mandatory requirement as per SEBI / Exchanges.
• Register for online applications viz Speed-e and Easiest provided by Depositories for online delivery of securities as an alternative to PoA.

• Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

• Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: NSE, MCX

• Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

• Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

• Don’t ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

• Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

• Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

• Do not deal with unregistered intermediaries (who are not registered with SEBI/Exchanges).

Names and contact details of all Key Managerial Personnel including Compliance Officer

Sr. No.Name of the IndividualDesignationContact NumbersEmail Id
1 Charanpreet GillCEO/
2 Charanpreet GillWhole Time
3 Charanpreet GillCompliance
4Manpriya GillDesignated
5Kewal GillDesignated

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