Equity Derivatives: What They Are and How They Work in Indian Markets
When you hear equity derivatives, financial contracts whose value is based on the price of underlying stocks or stock indexes. Also known as stock derivatives, they let you bet on or protect against price changes in companies like Reliance or TCS—without actually buying the shares. This isn’t gambling. It’s a tool used by investors, traders, and even small savers to manage risk or make targeted moves in the market.
Two main types dominate the Indian market: futures, agreements to buy or sell a stock at a set price on a future date, and options, the right—but not the obligation—to buy or sell a stock at a set price before a deadline. You don’t need to own the stock to trade these. For example, if you think Infosys will jump next month, you can buy a call option instead of spending ₹5 lakh on 100 shares. If you’re wrong, you only lose the option premium. If you’re right, your return can be huge. That’s the power of leverage.
These tools aren’t just for pros. Many people use them to hedge against losses in their stock portfolio. If you own HDFC Bank shares but worry about a market dip, you can buy put options to lock in a minimum selling price. It’s like insurance. The derivatives market in India, run mostly through NSE and BSE, is one of the largest in the world by volume. That means liquidity is high, spreads are tight, and you can enter or exit trades quickly.
But it’s not all profit. These products move fast. A single wrong bet can wipe out your margin. That’s why understanding how they work—what affects price, how expiration dates matter, and how margins work—is critical. You don’t need to be a quant to use them, but you do need to know the basics before putting money on the table.
Below, you’ll find clear, real-world guides on how these instruments actually behave in India’s market. From how STT and stamp duty hit your returns, to how trading hours affect your strategy, these posts cut through the noise. You’ll see what works, what doesn’t, and how regular people use equity derivatives—not as casino chips, but as tools.
Understanding F&O in India: Futures and Options Basics for Equity Traders
Learn the basics of Futures and Options trading in India - how they work, key differences, common mistakes, and how to start safely without losing money. Perfect for equity traders new to derivatives.
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