Dos and don’ts of futures and options trading

Futures and options are types of derivatives contracts that allow you to trade without taking possession of the underlying assets. Whether you are trading in derivatives for the first time or you are an expert, you must know that trading in derivatives is different from the other instruments. Therefore, you must clearly understand how derivatives work before you start trading in them.

Here are a few simple Dos and Don'ts to help you avoid some of the challenges of trading in this investment option.

Do’s Don’ts
Always consider the possible impact of market fluctuations since they could have a high influence on the profitability when taking your position Do not trade in options strategies without understanding the product and its risks and the strategy which you are using
Do proper research before trading in  derivatives (leveraged products) Avoid Writing / Selling options based on unsolicited investment tips (via sources such as WhatsApp, Telegram, Facebook, YouTube, Instagram, etc.) as this could lead to unlimited financial losses
Keep a watch on your margin requirementsDon’t miss out on your contract expiry date to avoid auto-settlement 
Deal only with SEBI registered brokers to avoid trading based on unsolicited tips Don't blindly follow the research from any person/institute, due your due diligence before making decisions

For more on Futures & Options:

Call Writing – Writing Call Options

Put Writing Strategies

Physical Settlement: Futures & Options Contracts

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