The world of Futures and Options (F&O) in India is a high-reward, high-risk segment regulated by SEBI and primarily traded on the NSE and BSE.
1. The Core Concept: Derivatives
F&O are “derivatives,” meaning they derive their value from an underlying asset (like the Nifty 50 index or Reliance stock).
You aren’t buying the stock itself; you are trading a contract about its future price.
Futures
A legal agreement to buy or sell an asset at a predetermined price on a specific date.
Obligation: Both the buyer and seller must honor the contract.
Outcome: If you buy a Nifty Future at ₹24,000 and it goes to ₹24,100, you profit. If it drops, you lose.
Options
A contract that gives you the right, but not the obligation, to buy or sell.
Call Option (CE): You buy this if you expect the market to go UP.
Put Option (PE): You buy this if you expect the market to go DOWN.
Premium: As a buyer, you pay a non-refundable fee (premium) to the seller.
Your maximum loss is limited to this premium, but your profit potential is theoretically unlimited.
2. Key Terms in the Indian Context
Expiry: All contracts have an end date. In India, index options are European style (marked as CE/PE), meaning they can only be exercised on the expiry date (though you can sell/square off your position anytime before that).
Strike Price: The price at which you agree to buy or sell the underlying asset.
MTM (Mark-to-Market): For Futures, your profit or loss is calculated at the end of every trading day and adjusted in your account immediately.
3. Margin: The “Entry Fee”
To trade F&O, you don’t need the full contract value, but you do need a Margin.
For Option Buyers: You only need the Premium (e.g., ₹100 premium × 65 lot size = ₹6,500).
For Option Sellers & Future Traders: You need a much higher amount (SPAN + Exposure margin), often exceeding ₹1.2 Lakhs per lot for Nifty, because your risk is much higher.
4. Contract Expiration Cycles
Near Month (Current Month): This is the contract expiring in the current month. Since we are in April 2026, the April contracts are the “Near Month” contracts. These have the highest liquidity and trading volume.
Next Month (Mid Month): This is the contract expiring in the following month—May 2026. Traders who want to hold a position for slightly longer than a few weeks often look here.
Far Month: This is the contract expiring the month after next—June 2026. These typically have very low liquidity and are used by long-term institutional hedgers.
What is a “Rollover”?
When the Near Month (April) is about to expire, but you want to keep your position open, you perform a Rollover.
The Action: You close your position in the April contract and simultaneously open the same position in the Next Month (May) contract.
The Shift: On the day after the April expiry, the May contract becomes the new “Near Month,” June becomes the “Next Month,” and a new contract for July is introduced as the “Far Month.”