Glossary
What is F&O (Futures and Options)? Meaning, Example & Why It Matters
The derivatives segment where traders buy and sell futures and options contracts based on stocks or indices.
F&O stands for futures and options, the two main types of derivative contracts traded on Indian exchanges. A derivative gets its value from an underlying asset, such as a stock or an index like the Nifty 50. Instead of buying the shares directly, you trade contracts that track their price movement, in fixed lot sizes and with set expiry dates.
Why F&O matters to you
F&O allows leverage, meaning you can control a large position with a smaller amount of margin. That cuts both ways: small price moves can create large profits or large losses. SEBI studies have repeatedly found that the vast majority of individual F&O traders lose money, and the regulator has introduced measures to curb excessive retail speculation.
Costs in F&O include brokerage, STT, exchange transaction charges, SEBI fees, stamp duty and GST. For options, many charges are calculated on premium, while for futures they are based on contract value. Rates in this segment have changed several times, so do not rely on older figures.
Practical tip: before trading F&O, understand exactly how much you can lose on a position and how margin calls work. Paper trade or start very small, and treat it as a high-risk activity rather than a way to grow savings quickly.
See it in rupees: every charge and tax on a real trade, at every broker. Open the brokerage calculator
Related terms
- GlossaryFutures
A contract to buy or sell an asset at a fixed price on a future date, traded in standard lot sizes.
- GlossaryOptions
A contract giving the buyer the right, but not the obligation, to buy or sell an asset at a set price before expiry.
- GlossaryLot Size
The fixed number of units of the underlying asset in one futures or options contract, set by the exchange.
- GlossaryMargin
The money or collateral you must keep with your broker to take and hold leveraged positions.
Frequently asked questions
Do I need special permission to trade F&O?
Brokers usually require you to activate the F&O segment separately, often with proof of income and acknowledgement of risk disclosures.
Can I lose more than I invest in F&O?
In futures and when selling options, losses can exceed the margin you put up. When buying options, the maximum loss is the premium paid.
Are F&O charges higher than equity charges?
Charges are structured differently, and statutory charges like STT vary by segment. Check the latest exchange circular and your broker's tariff.