What Is F&O Trading, And How Is It Different from Equity Trading?

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 DifferenceEquity TradingFutures and Options (F&O) Trading
MeaningEquity is buying and selling securities in the stock marketF&O trading refers to buying and selling of derivates of securities, namely Futures and Options.
Existence of Pre-defined ContractIn 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.
PriceIn 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.

Conclusion

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.