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So what is a derivative, really?

A financial derivative is a contract whose worth is borrowed from something else: a share, an index, a commodity or a currency. Nothing changes hands today except a promise, and that promise rises or falls in value as the underlying asset moves.

• Forwards

  A private deal between two parties, settled on a future date.

• Futures

  Standardised forwards traded on the exchange, marked to market every day.

• Options

  The right, not the duty, to buy or sell at a fixed strike.

• Swaps

  Exchanging one stream of payments for another, mostly used by institutions.

Syllabus

Ten modules, one clear progression

Each module opens with the idea, moves to a worked example and finishes with a practice task. Tap any module to see what it covers.

1. 01Derivatives from the ground upWhy these contracts were invented, how India’s market for them is organised, and who sits on each side.

   • How derivatives evolved, from farm forwards to exchange contracts
   • Size and shape of the Indian F&O segment
   • Hedgers, speculators and arbitrageurs
   • Counterparty, liquidity and leverage risk
2. 02Indices behind the contractsMost F&O volume sits on indices, so we unpack how a benchmark is built.

   • Price-weighted versus free-float market-cap indices
   • Nifty 50, Bank Nifty, Sensex and sector benchmarks
   • Impact cost and index rebalancing
   • Index funds, ETFs and index-based hedging
3. 03Forwards and futuresLocking a price today for a deal settled later, and what makes futures trade above or below spot.

   • Forward agreements versus exchange futures
   • Cost-of-carry pricing for shares, indices and commodities
   • Basis, contango and backwardation
   • Rollover, open interest and expiry behaviour
4. 04Options and their pricingRights without obligations: calls, puts and the ingredients that set a premium.

   • Calls, puts, buyers and writers
   • In, at and out of the money
   • Intrinsic value versus time value
   • Black-Scholes intuition and the Greeks
5. 05Option strategiesCombining legs to express a view while capping what can go wrong.

   • Bull and bear spreads
   • Straddles and strangles for volatility
   • Protective puts and collars
   • Butterflies and iron condors
6. 06Trading systems and ordersWhat happens between clicking buy and seeing a fill.

   • How exchange platforms match orders
   • Limit, market and stop-loss orders
   • Reading contract specifications
   • Corporate actions and contract adjustments
7. 07Clearing, settlement and marginsThe plumbing that keeps every trade honoured, even when someone loses big.

   • Clearing members and the clearing corporation
   • Daily mark-to-market
   • SPAN and exposure margin
   • Cash versus physical settlement of stock F&O
8. 08Law and regulationThe rulebook every participant answers to.

   • SEBI’s role and powers
   • The Securities Contracts (Regulation) Act basics
   • Exchange bye-laws and position limits
   • How F&O rules change and why
9. 09Accounting and taxationRecording contracts correctly and understanding how gains are taxed.

   • F&O income as non-speculative business income
   • Turnover and when a tax audit applies
   • STT, stamp duty and exchange charges
   • Booking contracts in your accounts
10. 10Investor protection and fair sellingFor anyone who advises or deals with clients, and anyone who wants to know their rights.

    • Risk profiling and suitability
    • KYC requirements
    • Grievance routes, including SEBI SCORES
    • Ethical sales conduct

Module 7 preview

Where your margin actually goes

Every F&O trade is guaranteed by a chain of institutions. Knowing that chain explains why margin calls arrive, and why the exchange can close your position.