Introduction

BSE is a major Indian stock exchange that provides a wide range of financial instruments to cater to the needs of investors and traders. Among these instruments, futures and options are derivative contracts designed for speculating on the future price movements of various assets like stocks, indices, commodities, and currencies.

Futures and options trading require specialised knowledge and a deep understanding of the stock markets. One must have a good grasp of fundamental analysis, technical analysis, and F&O strategies.

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In this blog, let us decode the intricacies of trading BSE futures and options.

The derivatives segment on the BSE operates independently from the cash equities segment, serving as a platform for participants to engage in hedging, speculation, and arbitrage activities. Futures contracts on the BSE represent agreements to either buy or sell an underlying asset at a predetermined price and date in the future. Options contracts grant the holder the right, but not the obligation, to buy or sell the underlying asset at a specified price (strike price) within a predefined time frame.

Now, regarding the lot sizes for BSE futures, the stock exchange has announced a reduction in the lot size for both Sensex and Bankex futures and options contracts. For Sensex contracts, the lot size has been decreased from 15 to 10, while for Bankex contracts, it has been changed from 20 to 15.

How to trade in BSE futures and options?

To begin trading in futures and options on either the BSE or NSE, you must first establish a trading account with brokers registered with SEBI. Ensure that the selected broker has received authorisation from the BSE to participate in trading within its derivatives segment. Motilal Oswal is a SEBI-registered broker who offers these services most seamlessly.

After setting up your trading account, you can search for BSE SENSEX or BANKEX futures or options, choose the specific future contract you wish to buy or sell, and then initiate the trade.

Currently, BSE Sensex and Bankex derivatives may exhibit lower trading volumes. As a result, there are restrictions on intraday orders in the BSE F&O segments.

Choosing Bankex and Sensex F&O over Bank Nifty and Nifty 50

Here are a few of the benefits that trading in BSE F & O provides:

• By taking advantage of Friday expiry, you can effectively use your capital for an extra day of trading, enabling you to capitalise on price movements occurring on the expiration day.
• BSE has recently decreased the lot size for Sensex and Bankex derivative contracts, reducing it from 15 to 10 for Sensex and 20 to 15 for Bankex. This adjustment allows traders to make smaller investments, mitigating their overall risk exposure.
• To incentivise trading, BSE has temporarily waived transaction charges for Sensex and Bankex derivatives contracts until March 2024. Margin requirements have also been lowered, granting traders increased leverage for their positions.

Features of futures and options contracts

While F&O trading may initially seem challenging for newcomers to the stock market, it's important to understand that trading in futures and options is not overly complex. Familiarity with key terms and strategies can significantly ease the process, making it more manageable and accessible for traders.

With BSE bringing their set of futures and options at negligible charges, it is a great way to incentivise and encourage trading in futures and options for newcomers.

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