Understand F&O instruments for trading

4.2.4 · Stock-Market › What to Trade

F&O instruments kya hote hain?

Derivatives traders ke liye kyun matter karte hain

1. Leverage: Chhoti capital se badi positions control karo (margin ~10-20% of contract value)
2. Two-way profit: Dono rising (long) aur falling (short) markets mein paisa banao
3. Hedging: Apne portfolio ko adverse moves se protect karo
4. Liquidity: Index F&O (Nifty, Bank Nifty) mein high volumes hote hain

Futures contracts: Obligation wala contract

Futures kaise kaam karte hain: Step-by-step

Example 1: Nifty Futures kharidna

Tum Nifty par bullish ho (abhi 21,000 par hai). Tum Nifty futures ka 1 lot ₹21,000 par kharidते ho.

• Lot size: 50 (Nifty futures = 50 units)
• Contract value: 21,000 × 50 = ₹10,50,000
• Margin required: ~₹1,40,000 (typically 13-15%)

Scenario A: Expiry par Nifty 21,500 tak badhta hai $\text{Profit}=(21,500-21,000)\times 50=500\times 50=₹25,000$

Ye step kyun? Tumne 21,000 par kharidna lock kiya tha. Market 21,500 par settle hua. Tumhe ₹500 per unit × 50 units ka gain hua.

Scenario B: Nifty girkar 20,500 ho jata hai $\text{Loss}=(20,500-21,000)\times 50=-500\times 50=-₹25,000$

Ye step kyun? Tumhe 21,000 par kharidne ki obligation hai lekin market 20,500 par hai. Tumne ₹500 per unit zyada pay kiya.

Example 2: Stock Futures bechna (Shorting)

Tumhe lagta hai Reliance (₹2,500) girega. Tum Reliance futures ka 1 lot ₹2,500 par bechte ho.

• Lot size: 250
• Contract value: 2,500 × 250 = ₹6,25,000
• Margin: ~₹90,000

Expiry par, Reliance ₹2,400 par: $\text{Profit}=(2,500-2,400)\times 250=100\times 250=₹25,000$

Ye step kyun? Tumne 2,500 par becha (us price par deliver karne ki obligation hai). Market 2,400 par gir gayi. Tum 2,400 par khareedo aur 2,500 par deliver karo, ₹100/share pocket mein.

Futures ki key features

Options contracts: Obligation ke bina right

Options itne powerful kyun hain

Asymmetric risk-reward:

• Buyer: Risk sirf pay kiye gaye premium tak limited; profit potentially unlimited
• Seller: Profit sirf premium tak limited; risk potentially unlimited

Options terminology

Core terms:

• Strike Price (K): Wo price jis par tum buy (call) ya sell (put) kar sakte ho
• Spot Price (S): Underlying ki current market price
• Premium: Wo price jo tum option ke liye pay karte ho
• Lot Size: Ek contract mein units ki sankhya
• Expiry: Mahine ka aakhri Thursday (weekly options bhi available hain)

Moneyness:

• In-the-Money (ITM): Call jab S > K; Put jab S < K (intrinsic value hoti hai)
• At-the-Money (ATM): S ≈ K (sabse zyada liquid)
• Out-of-the-Money (OTM): Call jab S < K; Put jab S > K (zero intrinsic value, sirf time value)

Example 3: Ek Call Option kharidna

Nifty 21,000 par. Tum 21,200 Call kharidते ho jo 10 din mein expire hoti hai.

• Premium: ₹150 per unit
• Lot size: 50
• Total cost: 150 × 50 = ₹7,500 (ye tumhara maximum loss hai)

Scenario A: Expiry par Nifty 21,500 tak badhta hai

Intrinsic Value = 21,500 - 21,200 = ₹300

$\text{Profit}=(300-150)\times 50=150\times 50=₹7,500$

Ye step kyun? Tumhara option tumhe 21,200 par kharidne ka right deta hai. Market 21,500 par hai. Tumhe ₹300 per share milte hain. Pay kiya gaya ₹150 premium minus karo = ₹150 net profit per share.

Scenario B: Nifty 21,000 par hi rehta hai

Option worthless expire ho jaata hai (S < K).

$\text{Loss}=-150\times 50=-₹7,500$

Ye step kyun? Jab market 21,000 par ho tab 21,200 par kharidne ka right exercise karne ka koi matlab nahi. Tum sirf pay kiya gaya premium lose karte ho.

Example 4: Ek Put Option kharidna

Tumhe lagta hai Bank Nifty (48,000) girega. 47,500 Put ₹200 premium par kharidو.

• Lot size: 15
• Total cost: 200 × 15 = ₹3,000

Expiry par, Bank Nifty 46,800 par:

Intrinsic Value = 47,500 - 46,800 = ₹700

$\text{Profit}=(700-200)\times 15=500\times 15=₹7,500$

Ye step kyun? Tumhara put tumhe 47,500 par bechne ka right deta hai. Market 46,800 par hai. Tum market par kharidو aur strike par becho, ₹700 per share gain karo, minus ₹200 premium = ₹500 net.

Example 5: Ek Call Option bechna (Writing)

Advanced strategy. Tumhe lagta hai Nifty 21,500 cross nahi karega. Tum 21,500 Call ₹100 premium par bechte ho.

• Premium collected: 100 × 50 = ₹5,000 (tumhara maximum profit)
• Margin blocked: ~₹70,000 (exchange requirement)

Agar Nifty expiry par 21,300 par rahe:

Option worthless expire ho jaata hai. Tum ₹5,000 premium rakh lete ho.

Agar Nifty 22,000 tak badh jaaye:

Buyer exercise karta hai. Intrinsic Value = 22,000 - 21,500 = ₹500

$\text{Loss}=(500-100)\times 50=400\times 50=-₹20,000$

Ye step kyun? Tumhe 21,500 par bechne ki obligation hai jab market 22,000 par hai. Tum ₹500 per share lose karte ho minus wo ₹100 premium jo tumne collect kiya tha.

Futures vs Options: Kab kya use karein

Futures kab use karein:

• Tumhare paas strong directional view hai aur maximum leverage chahiye
• Tum portfolio ko exact opposite position se hedge kar rahe ho
• Tum weeks tak hold karna chahte ho bina time decay ki chinta ke

Options kab use karein:

• Limited risk capital (options kharidna)
• Volatility play (straddle/strangle)
• Tumhe asymmetric payoff chahiye (chhota loss, bada gain potential)
• Income generation (defined risk management ke saath options bechna)

Real trading example: F&O se hedging

Setup: Tumhare paas ₹10,00,000 worth ke Nifty stocks hain (diversified portfolio jo Nifty ke saath move karta hai). Market toppy lagti hai. Tumhe protection chahiye.

Strategy: Put options kharidna (portfolio insurance)

Nifty 21,000 par. 20,800 Put (1% OTM) ₹80 premium par kharido.

• Contracts needed: ₹10,00,000 ÷ (21,000 × 50) = ~1 lot
• Insurance cost: 80 × 50 = ₹4,000

Agar market crash karke 19,500 par aa jaaye:

• Portfolio loss: (19,500 - 21,000) ÷ 21,000 = -7.14% = -₹71,400
• Put profit: (20,800 - 19,500 - 80) × 50 = ₹61,000
• Net loss: -₹71,400 + ₹61,000 = -₹10,400

Ye step kyun? Put insurance ki tarah kaam karta hai. Ye loss completely khatam nahi karta lekin use drastically reduce kar deta hai. Tumne ₹4,000 pay karke wo protection li jo crash scenario mein ₹61,000 bachati hai.

Connections 4.1.01-Cash-market-vs-derivatives — Derivatives kyun exist karte hain, iska foundation

• 4.2.05-Lot-sizes-and-marginrequirements — Practical capital planning
• 4.3.01-Option-Greeks-delta-gamma-theta-vega — Options ka deeper math
• 5.1.02-Hedging-strategies-for-portfolio-protection — Real-world F&O application
• 4.2.06-Expiry-day-dynamicsand-settlement — Critical timing rules
• 3.4.03-Understanding-leverage-and-margin — F&O ke risk implications

#flashcards/stock-market

Futures contract kya hota hai? :: Ek standardized derivative contract jo buyer aur seller dono ko future date par predetermined price par transact karne ke liye obligate karta hai.

Concept Map