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Greetings,
You might have heard the terms Futures and Options (F&O), especially if you're even slightly interested in the stock market or trading , but felt confused about what they actually are, don’t worry! I’m here to explain it in a simple way so that it’s easier to understand.
Futures -
Let’s start with futures. A futures contract is an agreement where you promise to buy or sell an asset (like stocks, gold, or currency) at a specific price on a set future date. Now, this might sound a bit complicated, but let me break it down for you. Imagine you sign a contract today to buy a stock at ₹100 per share, but the contract will expire next month. If, by then, the stock’s price rises to ₹120, you’ll benefit because you’ll still get it for ₹100. However, if the price drops to ₹80, you could face a loss.
With futures, you are obligated to complete the deal—meaning, whatever you agreed on in the contract must be fulfilled.
Options:
Now, let’s talk about options. Options are another type of contract, but they come with a special advantage—you get the "right" but not the "obligation" to buy or sell the asset. Simply put, if you buy an options contract, you have the choice to either go through with the deal or walk away. There are two main types of options:
Call Option: This gives you the right to buy an asset at a specific price. If the price of the asset goes up, you can buy it at the lower agreed price and make a profit.
Put Option: This gives you the right to sell an asset at a specific price. If the asset’s price falls, you can sell it at the higher agreed price and make a profit.
Futures vs Options:
Now, what’s the difference between the two? In futures, you must buy or sell the asset, while in options, you only have the right to do so—you can choose whether to proceed or not.
Why F&O Trading?
F&O trading allows you to take larger positions with a smaller investment. It’s a high-risk, high-reward type of trading. If you play it right, you can make significant profits, but the losses can also be big.
Before diving into F&O, it’s essential to understand the strategies and risks. It’s an exciting and advanced way of trading, but without proper knowledge, it can lead to losses.
In short, F&O lets you take advantage of price movements in an asset without owning it. If you time your trades well and predict the price movement correctly, you can make good profits.
Thank you
Cryptomother🙏🏻🇮🇳