Future and option contract as not settled immediately like spot market. Rather its gets settled on future date at agreed price. Future contract gives rights to buy to buyer and rights to sell to seller. Option contract gives rights to buy to buyer but no obligation to buy. In option contract, seller do not have any rights. Instead seller gets non-refundable premium from buyer. F&O is cash settlement segment. Exchange plays important role to deal between buyer and seller. It uses MTM strategy in future contracts. Option trading gives leverage to traders, its it need only premium money to execute contract. Buyer can minimize loss equivalent to premium amount, whereas gain is unlimited as price difference between contract price and strike price.
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