1.Here we studied about basic of F&O market how agreement are done through contract basis.
2.studied about role of exchange in derivative market.
3. What is call/ put in options and important terms used in F&O.

  • : Cash /spot Market is a place where buyer and seller agrees a deal of shares and makes settlement at spot either by buying or selling and owns a ownership owner of that share. Eg: if 'A' buys a share from 'B' by giving cash payment and settlement between both A and B is done at spot, then 'A' becomes the owner of that share. It is also called equity market because all shares are sold at equal price.
  • : Role of exchange is to maintain the contract agreement done by both buyer and seller and makes MTM(Market to market) profit or loss settlement on daily basis to avoid long run risk.
  • : Margin: It is the amount borrowed by the investor from broker to invest to buy or sell securities. MTM: Market to market means cash settlement done on daily basis to avoid long run risk. Premium: It is the amount paid by the buyer to seller to sign contract. Strike price: It is the price where buyer buys a contract and have rights to buy but no obligations, whereas seller sells the contract and have rights to sell but no obligations. Expiry date: It is the date when the contract will end and settlement will be done . Lot size: In option trading shares are dealt in lot. Eg: If call buyer / put buyer want to buy shares in option from seller then he has to take minimum shares sold by seller. These minimum shares are call lot.
  • : 1.In options there is a call buyer and put buyer whereas in future there is no call or put 2. In options strike price is decided by seller at which strike price he want to sell his lot but in future there is no strike or lot size. 3.In option call buyer have rights to buy but no obligations and seller have rights to sell but no obligations whereas in future buyer have rights to buy and has obligation and seller have rights to sell and obligation and settlement done on expiry date.
  • : There are two options call option buyer and call option seller (call writer) and same goes to put option put option buyer and put option seller (put writer). The premium is decided by both buyer and seller. If a buyer thinks price is about to rally then he is called call option buyer who buys shares at some strike price and pays premium to seller (call writer) and same applies to put option buyer.
  • : In future contract buyer and seller agrees to buy and sell contract according to their price agreement and settlement done on expiry date. Here buyer has rights to buy and obligation but cannot be a share owner of that company only contract is signed and cash settlement is done on expiry day and same applies to seller where seller has rights to sell and obligation.
  • : So that with proper knowledge and logic applied in F&O he can make profit and knows how to minimise the loss i.e; risk and reward ratio.
  • : Yes it is possible to trade Nifty only through F&O not by owning a share because it an index which holds top 50 companies and it doesn't have any shares.
  • : In commodity market physical settlement is done where a buyer agrees to buy commodity and seller agrees to sell the commodity at agreed price between buyer and seller and in future market settlement is done through cash. Cash settlement also applies for commodity market too.
  • : If we do put selling then also do we need to pay some amount or any premium? How it is done
3 Comments
  1. Donson 3 years ago

    Hi,
    If we go for put as seller only buyer will pay a premium to seller,in case if price goes below the strike price at the time seller need to pay an amount to the buyer…

    • Author
      Rohit Kumar Patra 3 years ago

      Thnq for reply sir but I want to ask that for example if I have demat account in zerodha and I want to sell put or call option at strike price of 1500. So in demat account there are two option buy and sell . So if I want to buy tatamotors at lot size of 3k with price of RS 3 then I click buy and I will get my contract (3000*3= 9000/- ). So like wise if I want to sell instead of buying so do I have to also pay 9k to sell ? That’s what I want to know

  2. Naresh 3 years ago

    Hi,
    For selling a put option, margin is required, margin will be locked by the broker from your funds

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