Connect with us

Economy

Mastering Futures and Options: A Guide to Starting Your Trading Journey

Published

on

futures and options

Introduction

Trading in futures and options (F&O) has become a popular way to diversify investments and hedge risks in the financial markets. With the right knowledge and strategy, anyone can start trading and leverage F&O to maximize returns. This guide will walk you through the fundamentals of business with futures and options, how to start trading, and essential strategies for success.

Understanding Futures and Options

What Are Futures?

A futures contract is a financial agreement to buy or sell an asset (stocks, commodities, or indices) at a predetermined price on a future date and to start future and option trading futures and options. Futures are standardized contracts traded on exchanges like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).

Key Features of Futures Contracts:

  • Obligatory Execution: Buyers and sellers must fulfill the contract on the expiry date.
  • Margin Trading: Traders only pay a fraction of the total contract value as a margin.
  • Leverage: Investors can take large positions with limited capital.

What Are Options?

Options give traders the right (but not the obligation) to buy or sell an asset at a specific price before or on the contract expiry date.

Types of Options:
  1. Call Options – Gives the right to buy an asset at a fixed price.
  2. Put Options – Gives the right to sell an asset at a fixed price.

Why Trade Futures and Options?

  1. Hedging Against Market Risks: Investors use F&O to hedge risks in volatile markets.
  2. High Leverage: Traders can control large positions with minimal capital.
  3. Profit in Bull and Bear Markets: Options trading allows earning from both rising and falling markets.
  4. Portfolio Diversification: F&O trading provides exposure to various asset classes.

How to Start Trading in Futures and Options

1. Open a Trading and Demat Account

To trade in F&O and how to start trading you need a Demat and trading account with a registered stockbroker.

Steps to Open an Account:

  • Choose a SEBI-registered stockbroker (e.g., Zerodha, Upstox, Angel Broking).
  • Submit KYC documents (PAN, Aadhaar, bank details, income proof).
  • Complete account verification and receive login credentials.

2. Understand Market Fundamentals

Before trading, gain knowledge about:

  • Stock Market Trends: Track nifty 50, sensex today, and India vix to understand volatility.
  • Fundamental and Technical Analysis: Learn to analyze financial reports and price charts.
  • Option Greeks (Delta, Gamma, Theta, Vega): These help in assessing option price movements.

3. Learn About Margin Requirements

Trading in F&O requires margin money, which varies based on contract size and market conditions. Stockbrokers provide margin calculators to help traders plan their positions.

4. Choose the Right Trading Strategy

Popular Futures Trading Strategies:
  1. Trend Following Strategy – Buy futures in an uptrend, sell in a downtrend.
  2. Spread Trading – Buy and sell futures contracts simultaneously to minimize risk.
  3. Scalping – Profit from small price movements by making multiple trades.
Popular Options Trading Strategies:
  1. Covered Call Strategy – Holding a stock while selling call options to earn premiums.
  2. Straddle Strategy – Buying both a call and put option to profit from high volatility.
  3. Iron Condor Strategy – Combining multiple options contracts to limit risk and enhance returns.

5. Start Trading with a Demo Account

Most stockbrokers provide paper trading accounts where beginners can practice trading without real money. This helps in understanding price movements, placing orders, and managing risk.

6. Monitor and Manage Risks

  • Stop-Loss Orders: Protect against significant losses by setting stop-loss levels.
  • Position Sizing: Avoid investing all capital in a single trade.
  • News & Events: Track financial news, RBI policies, and corporate earnings reports.

Essential Tips for Successful F&O Trading

  1. Start Small: Begin with a few contracts and increase exposure gradually.
  2. Stay Updated: Follow market news, economic indicators, and stock trends.
  3. Avoid Overtrading: Excessive trading can lead to high brokerage fees and losses.
  4. Maintain a Trading Journal: Keep records of trades to analyze mistakes and improve strategies.
  5. Use Hedging Techniques: Reduce risk by using protective puts and call options.

Conclusion

Trading in futures and options is a powerful way to maximize investment opportunities and manage risks. By understanding market trends, choosing the right strategies, and practicing risk management, traders can build a profitable trading career. If you’re new to F&O trading, start with a Demat account, practice with demo trades, and gradually scale up as you gain confidence.

With the right approach, trading in futures and options can be a lucrative business venture and a strong financial tool for long-term success.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

Economy

Newrest Asl, Two Others Lift NASD OTC Bourse by 0.21%

Published

on

Newrest ASL Nigeria

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange rose by 0.21 per cent on Tuesday, April 15, helped by three stocks on the trading platform.

During the session, the NASD Unlisted Security Index (NSI) jumped by 6.73 points to 3,271.02 points from the previous session’s 3,264.29 points and the market capitalisation increased by N3.94 billion to close at N1.915 trillion versus the N1.911 trillion it ended on Monday.

Trading data showed that there was a 68.7 per cent rise in the volume of securities transacted in the session as 736,215 units were quoted compared to the 436,357 units traded in the previous trading day, the value of transactions jumped by 20.5 per cent to N12.2 million from N10.1 million, while the number of deals fell by 49 per cent to 26 deals from 51 deals.

Yesterday, Newrest Asl Plc gained N3.45 to close at N37.97 per share compared with the preceding day’s N34.52 per share, FrieslandCampina Wamco Nigeria Plc went up by N1.82 to close at N37.45 per unit versus Monday’s price of N35.63 per unit, and Mass Telecom Innovation Plc expanded by 1 Kobo to trade at 41 Kobo per share against the 40 Kobo per share it ended a day earlier.

However, Central Securities Clearing System (CSCS) Plc lost 20 Kobo to finish at N20.70 per unit compared with the previous closing value of N20.90 per unit, and Geo-Fluids Plc dropped 20 Kobo to settle at N1.80 per share versus the previous day’s N2.00 per share.

Impresit Bakolori Plc remained the most active stock by volume (year-to-date) with 533.9 million units worth N520.9 million, followed by Okitipupa Plc with 153.6 million units sold for N4.9 billion, and Industrial and General Insurance (IGI) Plc with 71.2 million units worth N24.2 million.

Okitipupa Plc remained the most active stock by value (year-to-date) with 153.6 million sold for N4.9 billion, trailed by FrieslandCampina Wamco Nigeria Plc with 14.7 million units valued at N568.1 million, and Impresit Bakolori Plc with 533.9 million units worth N520.9 million.

Continue Reading

Economy

Naira Appreciates to N1,601/$1 at Official Market, Remains N1,615/$1 at Black Market

Published

on

currency in circulation eNaira

By Adedapo Adesanya

The Naira appreciated against the US Dollar by 0.24 per cent or N3.85 at the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Tuesday, April 15, closing at N1,601.40/$1 compared with the previous day’s N1,605.25/$1.

However, according to data from the Central Bank of Nigeria (CBN), the Naira depreciated against the Pound Sterling in the official market yesterday by N59.23 to sell for N2,115.26/£1 compared with Monday’s closing price of N2,056.03/£1 and tumbled against the Euro by N38.75 to trade at N1,808.89/€1, in contrast to the previous session’s N1,770.14/€1.

As for the black market, the Nigerian Naira maintained stability against the Dollar during the trading session at N1,615/$1.

The Nigerian currency closed mixed on Tuesday as Nigeria’s inflation data edged up to 24.23 per cent in March, according to the National Bureau of Statistics (NBS) on Tuesday.

It was the first time the Consumer Price Index (CPI) has risen since it was rebased in January. The new rate indicates an upward movement of 1.05 per cent from the 23.18 per cent reported in February 2025, signalling a return to levels (24.48 per cent) recorded in the beginning of the year after the CPI rebasing.

In the cryptocurrency market, there were major negative outcome as Nvidia, which plays a crucial role in mining cryptocurrencies, received a US ban restricting its H20 chip sales to China.

This adds to fears triggered by President Donald Trump’s trade war with China and other trading partners, leading to profit-taking.

Cardano (ADA) lost 5.5 per cent to trade at $0.6055, Solana (SOL) slumped by 4.2 per cent to $125.44, Ethereum (ETH) slid by 4.0 per cent to $1,570.96, and Ripple (XRP) dropped 3.9 per cent to $2.05.

In addition, Dogecoin (DOGE) depreciated by 3.8 per cent to $0.1535, Litecoin (LTC) went down by 2.7 per cent to $75.72, Bitcoin (BTC) fell by 2.4 per cent to $83,405.30, and Binance Coin (BNB) shrank by 1.3 per cent to $580.40, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) were flat at $1.00 each.

Continue Reading

Economy

NGX Index Chalks up 0.03% Despite Weak Investor Sentiment

Published

on

NGX All-Share Index

By Dipo Olowookere

The Nigerian Exchange (NGX) Limited bounced back to the green territory on Tuesday with a 0.03 per cent growth amid a bearish market sentiment.

Data showed that the bourse finished with 24 price gainers and 29 price losers, representing a negative market breadth index and weak investor sentiment.

This was due to the persistent cautious trading by the market participants because of the global trade war between the United States and China.

Business Post reports that the banking space was down yesterday by 0.11 per cent as a result of profit-taking activities by investors, though this did not affect the general outcome of Customs Street because of the gains recorded by the others.

The consumer goods index appreciated by 0.72 per cent, and the insurance counter improved by 0.15 per cent, while the energy, industrial goods and commodity sectors closed flat.

At the close of business, the All-Share Index (ASI) chalked up 30.40 points to settle at 104,560.02 points compared with the previous day’s 104,529.62 points and the market capitalisation grew by N19 billion to N65.704 trillion from N65.685 trillion.

Abbey Mortgage Bank gained 9.94 per cent to sell for N7.41, Unilever Nigeria appreciated by 9.65 per cent to N38.05, Learn Africa jumped by 8.33 per cent to N3.25, Secure Electronic Technology surged by 7.41 per cent to 58 Kobo, and Consolidated Hallmark advanced by 7.27 per cent to N2.95.

On the flip side, Northern Nigeria Flour Mills declined by 9.97 per cent to N79.00, The Initiates fell by 9.57 per cent to N4.25, Caverton descended by 9.06 per cent to N2.31, Guinea Insurance depreciated by 8.70 per cent to 63 Kobo, and NGX Group lost 8.56 per cent to quote at N31.50.

The activity log was mixed yesterday as the trading value went up by 3.81 per cent, while the trading volume and the number of deals went down by 13.87 per cent and 9.29 per cent apiece.

A total of 368.8 million shares valued at N10.9 billion were traded in 13,228 deals during the session versus the 428.2 million shares worth N10.5 billion transacted in 14,583 deals on Monday.

Fidelity Bank was the most active stock of the day with a turnover of 47.4 million units worth N867.0 million, Access Holdings traded 28.1 million units for N592.2 million, Zenith Bank sold 23.1 million units valued at N1.2 billion, UBA exchanged 22.0 million units worth N690.5 million, and FCMB transacted 20.8 million units valued at N185.1 million.

Continue Reading

Trending