Important: Futures and options trading requires a good understanding of the market and risks. Have a well-thought-out trading strategy beforehand.
| What is it? | Derivative contracts get their value from an underlying asset. Futures contracts make the buyer buy and the seller sells the asset at a set price and date. Options contracts give the buyer the choice to buy or sell the asset at a fixed price within a certain time. The transaction need not happen mandatorily. |
| Why use it? | You can hedge against price fluctuations or speculate on the future price movements of the underlying asset. |
| Example | You buy a futures contract for 100 shares at ₹50 per share, with an expiry date of one month. If their price rises to ₹60 by the expiry date, you can sell the futures contract at a profit. |