Chapters in Derivatives & Options Flow
Chapter 1 of 5 · 6 min read
Futures and options basics
Contracts that derive their value from an underlying stock or index: lots, expiry, margin and leverage.
A derivative's price depends on an underlying asset. In India, NSE offers futures and options (F&O) on indices such as Nifty and Bank Nifty and on selected stocks.
Futures
A future is an obligation to buy or sell the underlying at a set price on expiry. You pay margin, not full value, so gains and losses are amplified and settled daily.
Options
A call gives the right to buy and a put the right to sell at the strike price before or at expiry. The buyer pays a premium and risk is limited to it; the seller receives the premium and takes on potentially large risk.
Key terms
- Lot size: contracts trade in fixed lots.
- Strike and expiry: the price level and the date.
- In/at/out of the money: where spot sits relative to strike.
- Time decay (theta): option value erodes as expiry approaches.
Key takeaways
- Leverage cuts both ways; most retail F&O traders lose money.
- Option buyers have limited risk; sellers do not.
- Time decay works against buyers every day.
Put it into practice
Open the live page on Market Intelligence and see this concept on real data.
Keep learning
- Open interest, PCR and positioning · Derivatives & Options Flow
- Reading an option chain and the Greeks · Derivatives & Options Flow
Education only, not investment advice. Updated 2026-10-09.