Can someone provide an in depth description of how F&O works and how it is done on Zerodha?
Hi Praveen,
To learn about futures and options, I highly recommend Varsity from Zerodha link below
To see how to trade on these you can follow the webinars that happen all trading days at 2:30 pm and 6.30 pm on zerodha.com/educate
Cheers,
Lindo
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stock future is a financial derivative product. where the underlying assets is an individual stock .It is also called equity future, This derivative product enables one to buy or sell the underlying stock on a future date at a price decided by the market forces today.
stock futures offer variety of usage to the investors some of the key usages are mentioned below:
Investor can take long- term view on the underlying stock using stock futures.
a) Stock futures offer high leverages. This means that one can take large position with less capital. For example, Paying 20% initial margin one can take position for 100%, i.e, 5 times the cash flow.
b) Futures may look over-priced or under-priced compared to the spot price and can offer opportunities to arbitrage and earn risk-less profit.
c) When used efficiently, single-stock futures can be effective risk management tool.For instance, an investor with position in cash segment can minimize either market risk or price risk of the underlying stock by taking reverse position in an appropriate future contract.
Options- An Option is a claim without any liability.It is a claim contingent upon the occurrence of certain conditions and, therefore, option is a contingent claim. More specifically, an option is a contract that gives the holder a right, without any obligation, to buy or sell an asset at an agreed price on or before a specified period of time.The option to buy an asset is known as a call option and the option to sell an asset is called put option. The price at which option can be exercised is called as exercised price or strike price. Based on exercising the option it can be classified into two categories: (i)European "Option (ii)American Option