Future & Options (F&O) are the derivative products in the stock market. Future is a contract wherein you have an obligation to buy or sell the shares of the underlying security at a pre-determined price at a specific period. On the other hand, in Options, you have no obligation but a choice to buy or sell the shares of the underlying security at the strike price by the date of expiry of the contract.
Trading in the F&O segment requires a little more advanced skills than equity trading as derivatives do not have a value of their own; they are like an expectation of the underlying asset’s price, which could be a stock, commodity, or index. This is where F&O trading app come in handy, which help you trade in the particular segment with complete focus and help you learn its basics.
Difference Between Equity and F&O Trading
Online trading in equities refers to buying and selling companies’ stock through BSE or NSE. In contrast, trading in the F&O segment means trading futures and options, which are nothing but a derivate of the different underlying assets. The F&O market is also popularly called the hedging market.
Let’s dig deeper into the differences between these two types of trading –
|Basis of Difference||Equity Trading||Futures and Options (F&O) Trading|
|Meaning||Equity is buying and selling securities in the stock market||F&O trading refers to buying and selling of derivates of securities, namely Futures and Options.|
|Existence of Pre-defined Contract||In equity trading, you can only bid your buying or selling price. There is no contract mentioning the trade details.||The instruments of the derivative market, Future & Options, are agreements between the buyer and seller, mentioning the terms of trade.|
|Price||In equity trading, you can choose the price at which you wish to buy or sell the stock.||In Future and Options trading, the trade only happens at a predefined price.|
|Price Determination,||The value of a stock is affected by dynamic factors like market situations and the company’s past. performance, future plans, government policies, geopolitical and economic events, etc.||The price of Futures and Options depends directly on the price of the underlying asset, and nothing else.|
You can trade in either equity, or Futures and Options (F&O), or both, depending upon your financial goals, trading style, and risk profile. Trading in Futures and Options is undoubtedly a little complex but not rocket science. You can easily start trading in the F&O segment with basic knowledge. However, proper research is something that you need to stick with, be it equity trading or F&O trading. Learn every day from your experiences and skills. Be patient with your trades and execute all trades only with a calm mind to make sound online trading decisions.