F&O represent the future and option market of the derivative segment in the stock market. Derivatives are securities which derive their value from one or other underlying securities. The main purpose of the derivative market is to avoid or reduce the risk of price uncertainty through hedging and arbitraging. F&O trading is certainly not suitable for everyone. It’s a risky field and you can lose your shirt in the game.
How do they work?
Futures and options are contracts between two people. These contracts are not entered directly between the buyer and seller. They occur through the stock exchange mechanism. The stock exchange creates these derivatives. These are then made available to buyers and sellers through the exchange platform. This ensures that you are not bound to any individual to honor the contract.