A futures and options trading account is a type of trading account that allows you to trade in the equity derivatives market. The derivatives market is a special stock market segment where you can trade contracts instead of stocks. These are called F&O contracts, or futures and options contracts.
The account is specifically for trading in futures and options contracts. While you are opening an investment account, they will use the amount only for futures and options trading, not for investing directly in stocks or other assets. This type of account is opened with a broker. As with regular stock accounts, there are two types: full-service and discount brokers. The choice depends on how much support your broker needs versus how much control over the assets you want to retain (and at what cost). The stock brokerage fee also varies depending on which broker you choose to open this type of account with.
The futures and options trading agreement is a contract between you and your broker that sets forth the obligations of both parties. The important contractual details are as follows:
Once your account gets activated, you can start trading in futures & options. To do this, you need to place buy and sell orders for specific contracts traded on the exchange. You also need to monitor price movements and take a call on whether you want to hold or square off the trades based on market movements. You may also use the margin trading facility provided by your broker to increase the amount of money available for trading.
Permanent Account Number (PAN) is a unique, ten-character alphanumeric identifier issued in the form of a laminated card by the Income Tax Department to any "person" who applies for it or to whom the department allots the number without an application.
To open your trading account and trade in stocks, derivatives and currency segments, you must furnish your PAN Card details. As per the Securities and Exchange Board of India (SEBI), all investors must furnish their Permanent Account Number before opening a new demat account.
The truth is that you can trade in derivatives at any time. The decision to do so is your own, and you are the only person who will know when it's best.
No, you can place orders with one login ID on both cash and F&O segments. You do not need a separate login ID for your F&O account.
You need to follow the simple steps: you will be required to log in to your trading account, click on the 'Funds' tab and then click on the 'Transfer funds' option. You will then be asked to enter your bank details, such as your bank name and account number. You are done!
While trading shares of a stock, or an ETF, is relatively straightforward and inexpensive, trading options are not. However, if you understand the various charges associated with options trading, you can manage the costs much better. With that in mind, here are five key charges associated with options trading:
Exercise and assignment fee
Margin interest rate
Minimum balance fee