Paytm Money is fostering a thriving community of Futures & Options (F&O) experts, facilitating open dialogues and insightful conversations with its live event, “F&O Pe Charcha,” a regular feature on its social media platforms. It hosts some of the most well-known names in India’s F&O space to share their experiences, strategies and beliefs around F&O. The aim is to create a space to get people talking and breathing the derivatives way of life and build a community that learns from and inspires each other.
Traders and investors often use F&O to hedge market risks. F&O helps protect against the risks that are posed by changing prices. A futures contract allows the buying or selling of an underlying stock or index at a preset price on a specific future date so that changing prices do not impact the transaction.
In contrast, an options contract gives an investor the right (but not the obligation) to buy or sell shares at a specific price at any point in time when the contract is in effect. An option is pretty much like an umbrella. It may or may not be valuable depending on the rain. You bought it and now it’s your call to use it or not. While a call option gives the buyer the right to purchase a stock at the strike price before the agreement expires, a put option is an offer to sell the stock at a specific price.
F&O has been there in the foreign markets for years but the National Stock Exchange (NSE) in India introduced trading in index derivatives on Nifty50 only in 2000. Since then it has grown and witnessed widespread acceptance. Currently, F&O are available on 160 individual securities stipulated by SEBI.
Indian Markets
Thanks to the increased government spending and fiscal stimulus, stock markets touched record highs this year. What also drove the markets to fresh highs was foreign investment. Foreign Portfolio Investments (FPIs) have been known to influence Dalal Street for years. As per a recent report, FPIs pumped as much as ₹2,74,034 crores in FY21. Record FPIs kept the equity and the F&O market flushed with liquidity for over a year.
The market correction during the pandemic re-opened an opportunity for new investors. Millennials have shown special interest in the markets making discount brokers see record additions to their customer base. Besides, a flurry of tech IPOs this year is a testament to investors focusing on adding tech stocks to their portfolios. The COVID-19 pandemic and the consequent shift to digital infrastructure has been a catalyst for this.
While the interest rates on fixed deposits and other debt instruments remain low, people will continue to find avenues where returns beat inflation. The F&O market thus presents a lucrative option for new entrants to maximise their returns or protect their investments.
According to a recent SBI report, 44.7 lakh retail investor accounts have been added during the two months of FY21. This has resulted in the share of individual investors in total turnover on the stock exchange rising to 45% in FY21 from 39% in FY20, as per reports. Meanwhile, the turnover of the F&O market almost doubled from Rs 34 lakh crore in 2019-20 to Rs 64 lakh crore in the pandemic hit 2020-21. The recently launched F&O trading on Paytm Money has also seen a widespread adoption from people across demographics within a really short span.
Hence, it would be safe to say that the unprecedented rally in equities and lack of alternative asset classes will usher in more investors into the stock market, especially F&O trading. Thus, if you are looking to enter the Futures and Options space or are already active and want to interact with others like you, this is where you need to be.
And where can you learn more about F&O, straight from the experts?
Follow Paytm Money to keep an eye for its live, regular feature “F&O Pe Charcha” across its social media platforms!
Tune in to the next “F&O Pe Charcha - Diary Of An Option Seller” on Twitter Spaces which will have one of the best option traders in India, Mitesh Patel on Saturday, July 31st at 6 pm.
Click here to register or set a reminder!
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