Trading in futures and options derivatives has become a popular choice among investors over the years. One of the primary reasons for this is the substantial profits one stands to make through these financial instruments. While it may seem lucrative at first, you must acquire some knowledge about futures and options trading before you take the plunge. 

What are Derivatives? 

Before we move on to futures and options, it is essential to have a clear understanding of the derivatives. In simple language, a derivative is a financial instrument that derives its value from an underlying asset. These assets could be commodities, bonds, stocks, market indices, etc. Listed below are the different types of derivatives.

You can make profits by estimating or making a calculated bet on the future price movement of an underlying asset from which a derivative derives its value. Most traders make profits through trading in futures and options derivatives. 

What are Futures and Options?

Futures and options are types of trading contracts between a buyer and seller for the trading of stocks at an agreed-upon price and date. Futures and options are the most commonly used equity derivatives. 


Futures is a type of derivatives contract between two parties to buy/sell the underlying assets at a set price. A futures contract is a legal financial agreement. As per the futures contract, both buyer and seller are obligated to buy/sell the predetermined quantity of an underlying asset at a specified price on the expiration date. A seller is liable to sell the underlying asset and a buyer must buy the underlying asset at a specified price no matter the current market value of the asset. 

Futures are considered advanced trading instruments that are primarily traded by seasoned traders and require a level of market awareness and proficiency. Futures are traded on exchanges in a similar manner as stocks. 


Options is a derivatives contract that gives the right to an investor to buy/sell the underlying asset at a pre-decided price while the contract is in effect. In an options contract, the investors are not obligated to buy/sell if they do not wish to and can choose to let the options expire. This type of derivative is based on the value of the underlying security of the stock. A buyer has to pay an amount to the seller which gives the buyer the right to an option contract, this amount is known as premium. The price at which the seller agrees to the options contract with the buyer is called the strike price. Just like futures, options are also traded on exchanges in a similar manner as stocks. 

Tips for Trading in Futures and Options

Futures and options can be a bit complex for beginners and are usually traded only by experienced traders. Before you get into futures and options trading daily, it is prudent to have adequate knowledge of the trading market. 


Trading in futures and options is not as complex as it is made out to be and can be done with the help of easy-to-use trading platforms such as the Dhanush app by the Ashika group. It is important to gain trading knowledge and experience before you start your futures and options trading journey.

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