Why to learn Futures and Options as a Long Term Investor?

Updated: Apr 8, 2021

Welcome to the mastery article on the future and option. In the first article of this series, we had discussed the outline of our article. We had discussed the various aspects of the article and also about the future and options in brief.

So the first article is why to learn about the future and options as a long-term investor.

So, the future and options, these are the words most of the retail people are scared of dealing with. Maybe the reason for this is because there is a lot of misinformation online about these two tools. If you will understand these two tools, your journey in the stock market will be better. These two tools are for hedge and not to speculate. Most of the retail people do speculations.


I am going to give you the reason why you should as a long-term investor learn about the future and options. Because most of the time, it is told to us if you are a long-term investor just buy a stock and forgot for 10 years, you will get a good return.


It’s true that if you will hold these stocks, you may get good returns. But what is the probability of that? There is no assurance for that. 10 years is a very long period and very difficult to wait also and most of the time what happens, if the market goes sideways, it will be difficult for the investor to hold it. Investors lose hope and they exit from that position. Sometimes some stocks which have very good fundamentals and are showing a very good return to its investor may not be good for always also. It may give the worst performance also.


In every 3 to 4 years, something going to happen and the price of their portfolio will be at the same level as it was in the initial phase of the investment. Future and options will help you to keep you motivated for the long term because you can be good in the position if you have shared and you want some regular income every month while you are holding your shares in your Demat account so that you can get some long term returns and some short term returns also.


Now one question arises. How much will be the return? So, it depends upon your risk-taking capabilities. But you can easily receive about 1 -2 % per month and your appreciation in long term will be as usual as 15 – 20%. So in a nutshell, you are going to earn 20 – 25 % every year. This can be only possible when you will learn about the future and options.

So first thing, if you want to improve your returns, you have to learn about the future and options. The second important part is that if you want to save yourself from losses, again you have to rely on the future and option. Because we had talked that the main purpose of F & O is hedging. Hedging means saving your portfolio from losses when the market is volatile and something is going in the market like up and down in a very volatile manner.


Generally, retail investors do not have the access to this F & O that’s why when the market crashes, these are the people like you and us who suffer the most losses because we had bought those shares at higher prices and now the shares are at the lower level.


Suppose you want to buy some shares so either you have to buy at the current price or you have to keep checking the price of that stock every day. But in F & O, a term called Covered Call. By using the strategy, you can buy any share you like at your price without waiting for that. This thing is possible with F & O.


Another important part, long term investor earns only at when the market goes up. But with F & O, you can earn whatever the market situation is either market goes up, down, or sideways. One most important thing is that with F & O, you get a lot of options. See, if you are dealing with only plain vanilla stocks, there are not a lot of options. But in F & O, you can set your target and losses. If you are a working professional who cannot watch the market all the time and cannot sit in front of the screen, then it will be very difficult to judge the market for them and have less chance to increase their returns.


What you will learn in the coming articles is about the Fire and Forgot strategy. By using these strategies, you do not have to manage your portfolio every day. Just look at it once or twice a week. If you buy a stock and stock goes down to 30 %, then it is not under your control. Even the profits and losses are not in your control. But in F & O, you can get better control of your risk, returns, and investment.


There are four key benefits options may give a financial investor:

  • They may give increased cost productivity

  • They might be safer than values

  • They can convey higher rate returns

  • They offer various key other options

With benefits like these, you can perceive how the individuals who have been utilizing options for some time would be confused to clarify choices' absence of popularity. We should look at these benefits individually.


Futures and Options make the significant piece of the securities exchange. The two Futures and Options are the result of the Derivative segments. F & O came into place for protecting the risk of stock market investors that were able to enter the market exclusively by minimizing the risk emerging out of fluctuation in the price.

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So if F & O are so beneficial, then you should learn about the tricks and strategies that how to use F & O. If you do only buying the stocks then you will learn only about how to buy but cannot learn how to protect your losses. So definitely, you should learn about the F & O.

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