Derivatives Trading

Derivatives Meaning:

Derivatives are the financial securities whose value is derived from the underlying asset/ group of assets, i.e., stocks, bonds, currencies, or commodities.

In derivatives trading, contracts are traded but not the underlying asset. There are four types of Derivatives: Futures, Options, Forward, and Swap. 

Participants of Derivatives Trading in India

All types of investors: expert long-term investors or smart short-term investors, derivatives trading is for everyone. Derivatives can be used to hedge portfolios consisting of stocks, indices, or other investments. Derivatives trading in India is cost-effective by engaging in the categories such as Currency and equity to receive significant exposure to the investments. Derivative trading also benefits the sharp movement in prices.

Participants of derivatives trading in India can be categorized under three groups:

  • Hedgers: Here, the investor invests in financial markets to minimize the price volatility in exchange markets. This is to eliminate the risk of future price movements. Derivatives have become the most popular instruments in the hedging sector because derivatives effectively minimize risk with their fundamental assets.
  • Speculators: This is the most common market activity in which financial market participants actively participate. However, it is a risky activity in which investors get involved. In this category, participants purchase any financial instrument/asset for which investor/participant speculates to become valuable in the future. Speculation is driven by the motive of earning potentially lucrative returns in the future. 
  • Arbitrageurs: It is the profit-making activity in the finance market that comes into effect by taking a chance or profiting from the market's price volatility. Arbitrageurs participants earn profits from the price difference emerging in investment from the financial securities such as bonds, stocks, derivatives, etc. 

Note: We do not advise retail investors to write derivatives contracts since it is a high leverage product and hence very risky

Advantages/Benefits of Derivatives Trading in India

  • Low/Minimum transaction rates: Derivative contracts are known as a risk management tool. Thus, it helps to reduce market transaction costs.
  • Risk Management tool: The derivative contract value is directly proportional to the price of its underlying asset. Therefore, derivatives can be used to hedge the risks associated with the price fluctuation levels of the underlying asset. 
  • Determine the value of an underlying asset- Derivatives contracts are helpful to know the value of an underlying asset.
  • Transferable risk- Derivatives allow investors and others to transfer risk to the other parties.

To know more about how to do derivatives trading and to open a derivatives account, you can contact us on 022- 2858 4545 or write us at

Derivatives trading requires a piece of deep knowledge about the products and the group of experts. We at ACMIIL conduct a great amount of research regarding the products and the client investment portfolio. Our experts offer research services on a daily/weekly/monthly basis. ACMIIL is a registered research analyst. 


Markets are highly volatile; hence it is not safe to invest in derivatives unless you are constantly in touch with the price movements. Negligence in not tracking your positions can lead to huge losses.


This is the most liquid class of financial assets. The turnover in the derivatives market in India is almost 15 times + than the cash segment volumes. Hence most of the Derivatives contracts are highly liquid, and you can enter and exit at any point in time and have very competitive prices.


Returns from Derivatives trading are the same as those of equity markets. However, due to large volatility, you can make big money or lose also.

Frequently Answered Questions- Derivative Trading

The trader must open a derivative account with us. To open a Derivative trading account, Click here. For derivatives trading, you must have stable economic capability, and for this, it is essential to submit your financial soundness proof to the broker. This is because the equity derivatives market in India is known as a high-risk market. Before beginning the derivatives trading, you must take expert advice from our research department. We provide calls on the derivatives market, and these are considered high-risk calls.

Markets are volatile. Therefore there can be no safety assured in derivatives trading in India. Equity derivatives traders must watch the market price movements constantly. While engaging in derivatives trading, it is important to track the positions to avoid huge losses.

Profits earned on derivatives trading are categorized as business income. There are no long-term/ short-term gains, and every transaction is pronounced to market daily. Your application tax rate will be applicable.

The SEBI regulations regulate derivatives contracts. The margin regime is very strict. All three margins- SPAN Margin, Initial Margin, and Exposure Margin rates are fixed by SEBI. The penalty goes up to 5% per day for the non-payment of margins. Therefore, the investor should pay the appropriate fund upfront to the broker for dealing in derivatives.

Derivatives trading is highly risky if an investor doesn’t know how to get started. Those who want to engage in derivatives trading in India should have expert knowledge and experience in derivatives trading. If unable to do so, one must consult an expert and experienced financial broker into future and options trading. To trade derivatives, you can write us at or talk to our experienced expert on 022- 2858 4545. You can trade derivatives on NSE and BSE.

Derivatives had become popular in the Indian market when they were introduced in 2000 by the National Stock exchange (NSE). Following contracts are used in future and options trading on NSE:

  • Futures:Futures contract is the legal agreement to purchase stock, commodity, or currencies at a fixed rate on the futures date. E.g., if you purchase crude oil futures contract, you are obliged to buy or sell a fixed amount of crude oil at a pre-determined price on the future date.
  • Options: Options trading is famous under the derivatives segment. It can be used for other segments like bonds, commodities, etc., and can differ in complexity based on the trading methods.
    • Call- A call option gives the buyer the right to purchase an underlying asset at a fixed price while entering the contract.
    • Put- Put option gives the right to the holder but not the obligation to sell a specified amount of underlying security at a specific price during the specified time.
    • Strike Price- In a derivative contract, the strike price represents the future set price at which the derivative contract is to be traded.
  • Forwards: the forward contract is the agreement towards a buyer to buy an asset/ seller to sell the asset for the pre-determined price between the two parties at a future point in time.
  • Swaps: The swaps market in India is based on Over counter (OTC). This means no exchanges are involved in a swap transaction/trading. Swaps like OIS, MIFOR, LIBOR, basis spreads have average trading volume and transaction takes place between two parties, a broker acting as a third party in the agreement.

Click here to open a Derivative Trading Account. In the account opening process, you need to complete the KYC. After signup, please select the “NSE-BSE Derivatives” segment along with other desired segments. You will also have to submit a digital copy of identity proof, resident proof, and income proof. Please note that AADHAR Card and PAN card are mandatory documents to open a derivative account.

To access the derivative segment, please provide ANYONE from the following documents:

  • Copy of ITR Acknowledgment (Issued within last one year)
  • Copy of form 16 (Issued within last one year).
  • Net worth certificate (Issued within last one year)
  • Copy of annual accounts (Issued within last one year).
  • Salary Slip (Issued within last three months)
  • Bank a/c statement for last six months.
  • Latest DP holding statement