This guide compares the two on the same Nifty view with exact numbers: what each costs to enter, what each makes or loses for moves of different sizes, how time decay and volatility affect options but not futures, margin, charges and STT, expiry and settlement, tax, and which suits which kind of trade.
Futures vs options at a glance
| Futures | Bought option | Sold option | |
|---|---|---|---|
| What you hold | An obligation to buy or sell at a set price | A right to buy (call) or sell (put) | An obligation if the buyer exercises |
| Money to enter | Margin, about 10% to 15% of contract value for Nifty | The premium | Margin |
| Gain per point | Equal to the move, from the first point | Only beyond the break-even, by delta before expiry | Capped at the premium |
| Most you can lose | No fixed limit | The premium | No fixed limit unless hedged |
| Time decay | None | Works against you | Works for you |
| Implied volatility | No direct effect | A rise helps | A rise hurts |
| Daily settlement | Profit and loss in cash every day | Premium changes, no daily cash settlement | Margin and premium change daily |
| STT | 0.05% of the sell value | 0.15% of the sell premium | 0.15% of the sell premium |
Key takeaways
- Futures are linear: a 1% move in Nifty is about ₹16,250 a lot either way.
- A bought option is asymmetric: limited loss, but the move must first pay back the premium.
- Futures need margin of more than ₹1.5 lakh a Nifty lot; a bought option needs only its premium.
- Options lose value with time and change with implied volatility; futures do not.
- Charges and STT on futures are charged on the full contract value, so a futures round trip costs far more in rupees than an option round trip.
- For a large, fast move, futures make more; for an uncertain move, a bought option limits the damage.
How futures work
A futures contract fixes a price today for a trade on the expiry date. You pay neither the full value nor a premium: you deposit margin, and each evening your account is credited or debited with the day's profit or loss, called mark-to-market. Before expiry most traders close the position; index futures that are held to expiry settle in cash, and stock futures by delivery of shares.
A Nifty futures lot of 65 at 25,000 is a ₹16,25,000 position. Every point is ₹65. The futures price usually sits a little above the index, by the cost of carry, and the gap closes by expiry. The futures basics guide covers contract details and rollover.
How options work
A call gives the right to buy at the strike price and a put the right to sell. The buyer pays a premium and can lose no more. The seller receives the premium and takes on the obligation, with margin to cover it. Index options are European-style and cash-settled: they can be exercised only at expiry, against the index's closing value. The full mechanics are in options trading.
The same view, three ways
You expect Nifty, now at 25,000, to rise over the next 12 days. Three ways to act on it, with one lot of 65 each:
| Trade | Money needed | Break-even at expiry |
|---|---|---|
| Buy Nifty futures at 25,000 | About ₹1,78,750 of margin | 25,000, plus charges |
| Buy the 25,000 call at ₹280.50 | ₹18,232.50 of premium | 25,280.50 |
| Buy the 25,000 call, sell the 25,300 call, for ₹130.40 | ₹8,476 | 25,130.40 |
Profit and loss at expiry for different outcomes, before charges:
| Nifty at expiry | Futures | Bought call | Bull call spread |
|---|---|---|---|
| 24,500 | −₹32,500 | −₹18,232.50 | −₹8,476 |
| 24,750 | −₹16,250 | −₹18,232.50 | −₹8,476 |
| 25,000 | ₹0 | −₹18,232.50 | −₹8,476 |
| 25,250 | +₹16,250 | −₹1,982.50 | +₹7,774 |
| 25,500 | +₹32,500 | +₹14,267.50 | +₹11,024 |
| 25,750 | +₹48,750 | +₹30,517.50 | +₹11,024 |
The futures position makes the most on a large rise and loses the most on a fall. The bought call loses its premium if the index goes nowhere, so a correct view that takes too long can still lose. The spread costs least, makes money from 25,130 and is capped at 25,300. The option profit calculator draws all three.
Cost and capital
| One lot | Futures | Bought 25,000 call |
|---|---|---|
| Money blocked or paid | About ₹1,78,750 of margin | ₹18,232.50 of premium |
| Value of a 1% move at expiry | ₹16,250 | Depends on where the index ends |
| Loss if Nifty falls 2% | ₹32,500, settled in cash as it happens | ₹18,232.50 at most |
| Capital to keep spare | Funds above margin for daily losses | None beyond the premium |
Futures need about ten times the money of an at-the-money option to enter, and more on top to absorb daily losses. The margin on futures depends on volatility and is set by the exchange; the F&O margin calculator estimates it.
Time decay
A futures contract does not decay. An option does. If Nifty is still at 25,000 after five days, the futures position is flat, but the 25,000 call has fallen from ₹280.50 to about ₹209.20 (from the model, with 7 days left), a loss of about ₹4,635 a lot. A buyer of options pays for time; a futures trader pays only the cost of carry, which is already in the futures price.
This is why options suit views with a deadline, such as a move expected before an event, and futures suit views where the timing is open.
Volatility
Implied volatility changes an option's price even when the index stands still. The 25,000 call is worth ₹244.50 at 12% IV and ₹316.50 at 16% IV. A futures contract does not depend on implied volatility; only realised moves matter to it. Before an event, options become more expensive as IV rises, and after it they often fall sharply as IV drops. Futures carry no such effect, which makes them simpler to trade around news, though not less risky.
Charges and STT
| One round trip, one lot, at ₹20 per order | Futures, 25,000 to 25,050 | Option, ₹100 to ₹110 |
|---|---|---|
| Brokerage | ₹40.00 | ₹40.00 |
| STT | ₹814.13 | ₹10.73 |
| Total charges | ₹967.91 | ₹63.86 |
| Move needed to cover charges | 14.89 points | ₹0.98 of premium |
STT on futures is charged on the full sell value, so it dominates their cost: ₹814.13 of the ₹967.91 total. Option charges are small in rupees but large against a small premium. The brokerage calculator works out both for any trade.
Margin on sold options and on futures
A sold option needs margin like a future. At typical rates, one sold at-the-money Nifty option needs about ₹1,46,250 and one lot of futures about ₹1,78,750. The sold option earns its premium if Nifty stays put, while the futures position makes nothing; but the sold option's gain is capped at the premium, while its loss is not. Selling options is a different trade from buying futures, not a cheaper version of it; see option buying vs selling.
Expiry and settlement
| Index futures | Index options | Stock futures | Stock options | |
|---|---|---|---|---|
| Expiry | Monthly, last Tuesday on NSE | Nifty weekly on Tuesday; others monthly | Monthly, last Tuesday | Monthly, last Tuesday |
| Settlement | Cash | Cash, at the index close | Delivery of shares | Delivery of shares if in the money |
| Rollover | Close and reopen in the next month | Usually closed or left to expire | As futures | Close before expiry to avoid delivery |
Tax
Profits from both futures and options are non-speculative business income, taxed at your slab rate, with charges including STT deductible as expenses. Turnover for a tax audit is counted the same way for both: the total of absolute profits and losses on each trade.
Synthetic futures from options
Buying a call and selling a put at the same strike gives a position that behaves like a futures contract: it gains and loses point for point. A synthetic long at 25,000 costs ₹53.40 net (₹280.50 − ₹227.10), and the sold put needs margin. Traders use it when the futures price is out of line with the options, or to pick a strike other than the futures price.
Futures vs options on Bank Nifty
Bank Nifty's lot is 30 and its options expire monthly. At 56,000, a futures lot is a ₹16,80,000 position, about ₹1,68,000 of margin at typical rates, and every point is ₹30. An at-the-money call with 15 days left at 16% IV costs about ₹800.78, or ₹24,023 a lot. A 1% rise, 560 points, is worth ₹16,800 on the futures lot; the call needs a rise of more than 800 points by expiry just to break even. Bank Nifty moves more in percentage terms than Nifty, so both its futures swings and its option premiums are larger.
Stock futures vs stock options
| Stock futures | Stock options | |
|---|---|---|
| Margin or cost | Often 15% to 25% of contract value, or more for volatile stocks | Premium for buyers; margin for sellers |
| Liquidity | Good in large stocks | Good near the money in large stocks; thin elsewhere |
| Settlement at expiry | Delivery of shares | Delivery of shares if in the money |
| F&O ban | No new positions while the stock is in the ban | Same |
| Results days | Gaps hit the full position | Bought options cap the loss; IV falls after results |
Physical settlement is the main difference from index contracts. A stock future or an in-the-money stock option held to expiry turns into a delivery of shares, so you need the money or the shares. Brokers often close such positions before expiry.
Hedging a portfolio: futures or puts
Take a portfolio of shares worth ₹16,25,000 that moves with Nifty. Two ways to protect it for 12 days:
| Hedge | Cost | Portfolio and hedge if Nifty falls 5% | If Nifty is flat | If Nifty rises 5% |
|---|---|---|---|---|
| None | ₹0 | −₹81,250 | ₹0 | +₹81,250 |
| Sell 1 lot of Nifty futures | Margin, about ₹1,78,750 | About ₹0 | About ₹0 | About ₹0 |
| Buy 1 lot of the 24,700 put at ₹113.40 | ₹7,371 | −₹26,871 | −₹7,371 | +₹73,879 |
The futures hedge removes both the loss and the gain. The put costs a premium but keeps the upside, and limits the loss to the distance to the strike plus the premium. Investors who want protection without giving up gains use puts.
Futures vs options for intraday trading
For intraday trades, cost per trade and cost per point differ. A Nifty futures round trip costs about ₹968, which a move of about 15 points covers. A round trip in an at-the-money option costs about ₹64 at a ₹100 premium, and with a delta near 0.54 the option gains about ₹35 a lot for each Nifty point, so about two Nifty points cover it. Options therefore cost less per trade, but you also earn only about half the move. Futures suit larger intraday positions and trades held for many points; options suit smaller accounts and defined-risk entries. Intraday traders of both should set a daily loss limit.
Rollover and holding periods
A futures position held beyond its expiry has to be rolled: close the current month and open the next, paying charges on both and the price gap between them. An option has no rollover in the same sense; holding a view longer means buying a longer-dated option, which costs more but decays more slowly. For a view of several months, futures with monthly rollovers or a longer-dated option spread are the usual choices. For views of days, weekly options or the current futures month work.
Common mistakes
- Comparing a futures lot with one option lot as if they were the same size. A futures lot carries the full ₹16.25 lakh; an at-the-money option moves about half as much.
- Buying options for a slow view. Time decay can eat the premium before the move comes.
- Holding futures without a stop because the margin looks small. The loss is not limited to the margin.
- Forgetting physical settlement on stock futures and stock options.
- Ignoring STT on futures. At 0.05% of the sell value, it is the largest cost of a futures trade.
- Selling options as a cheaper alternative to futures. The risk profile is different: capped gain, open loss.
A decision checklist
- What move do you expect, and by when?
- How much can you lose on this trade, in rupees?
- Does the capital needed fit your account with room for daily losses?
- Is implied volatility high or low, if you are considering options?
- What will the charges be as a share of the expected gain?
- Will you exit before expiry, or does settlement matter?
Leverage and position size
A futures lot of Nifty is a ₹16,25,000 position on about ₹1,78,750 of margin, leverage of about 9.1 times. Size it by the stop, not by the margin. With a ₹5,00,000 account risking 1% a trade, a 60-point stop risks ₹3,900 a lot, so one lot fits; two would risk ₹7,800. A bought 25,000 call with a stop at 25% of its premium risks about ₹4,558 a lot, so one lot also fits. The position size calculator works out lots for both.
Mark-to-market in practice
Futures losses are paid in cash each day. Over three days in which Nifty falls 150 points, rises 100 and falls 200, one futures lot is debited ₹9,750, credited ₹6,500 and debited ₹13,000. The account must hold the margin and these debits. A bought option has no daily cash settlement: its value changes with the market, and the loss is realised only when you sell or it expires. This makes futures demand more spare cash, even when the final result is the same.
Trends and ranges
| Market | Futures, long | Bought call | Sold option with a hedge |
|---|---|---|---|
| Strong rise | Large gain | Large gain, less than futures | Capped gain or a loss, by structure |
| Slow rise | Gain | Small gain or a loss, as time decays | Often a gain |
| Range | Little change, minus charges | Loss of time value | Gain |
| Sharp fall | Large loss | Loss capped at the premium | Gain or a capped loss, by structure |
Liquidity
Near-month Nifty futures and at-the-money Nifty options are among the most traded contracts in the world, with tight spreads. Liquidity thins in later futures months, in far out-of-the-money options and in many stock options, where the spread can cost more than the charges. Use limit orders for options, and check the spread before trading a contract you do not trade often.
How professional traders use each
- Arbitrage. Traders buy shares and sell futures, or the reverse, when the futures price is far from fair value.
- Delta hedging. Option sellers and market makers use futures to keep their positions neutral to small moves.
- Covered calls. Holders of shares or futures sell calls above the market to earn premium in exchange for a capped gain.
- Protection. Portfolio managers buy index puts or sell index futures before events.
Terms used on this page
| Term | Meaning |
|---|---|
| Basis | The futures price minus the index |
| Cost of carry | The interest and other costs that put the futures price above the index |
| Mark-to-market | Daily settlement of futures profits and losses in cash |
| Premium | The price of an option |
| Break-even | The expiry level at which an option trade neither gains nor loses |
| Delta | How much an option moves for a 1-point move in the index |
Futures and options for hedgers and investors
Investors who hold shares use the index derivatives differently from traders. Selling index futures against a portfolio removes most of its market risk for a period without selling the shares, which avoids capital gains tax and the costs of selling and buying back. Buying index puts protects the portfolio while keeping its upside, at the cost of the premium. Selling calls against shares held earns premium in exchange for capping the gain, the covered call. Each of these needs the portfolio to move broadly with the index; a portfolio of a few stocks may not, and the hedge then protects less than it seems.
Futures and options on commodities
The same choice applies on MCX. Commodity futures are the main contracts, with margin set by the exchange and daily mark-to-market. MCX options mostly devolve into futures at expiry, so an in-the-money option held to expiry becomes a futures position that needs full margin. Commodity transaction tax on futures is 0.01% of the sell value, lower than the 0.05% STT on equity futures.
Two example plans
A futures trend plan. Buy one lot of Nifty futures when the index closes above its 20-day high, with a stop 1.5 times the average daily range below the entry and a trailing exit at the 10-day low. Risk per trade is set at 1% of the account, so the stop distance decides whether one lot fits. Hold through expiry by rolling to the next month, and stop trading for the month after three losing trades.
An option event plan. Before a scheduled event, buy a bull call spread one week out instead of a bought call, so a fall in IV after the event costs less. Risk the full debit, about ₹8,476 for the 25,000 and 25,300 strikes, and exit the day after the event whatever the result, or at 80% of the maximum profit if it comes sooner.
Both plans fix the size, the exit and the time limit before the trade, which matters more than the choice of contract.
Costs over a month
Charges grow with activity, and the gap between the two instruments grows with them. Ten Nifty futures round trips a month at about ₹968 each cost about ₹9,680; ten option round trips at about ₹64 cost about ₹640. Per point of Nifty move captured, the comparison narrows, because a futures lot gains the full move and an at-the-money option about half. Count both measures before you decide which suits your style, and include them in every backtest.
Expiry week behaviour
Futures behave the same through the expiry week, apart from the basis shrinking to zero. Options change sharply: time value falls fastest, gamma rises, and the extra expiry-day margin applies to short index options. A bought option that is not yet in the money with two days left often loses most of its value, while a futures position keeps its full exposure. Traders who hold options into expiry week need a plan for that decay; futures traders need a plan for rollover if they want to stay in the position.
When neither is the right tool
Some views are better served by neither. If you want exposure to a few stocks for months without leverage, buying the shares costs less in charges and carries no expiry. If you expect a slow drift with no deadline, futures rollover costs and option decay both work against a small edge. And if the move you expect is smaller than the round-trip charges plus the bid-ask spread, no derivative will make it pay.
Which to learn first
Most traders learn options and futures side by side, but the order matters for risk. Starting with bought options or spreads teaches strikes, expiries, time decay and volatility with a known worst case and little capital. Futures add leverage and daily cash settlement, which need a firm stop and spare funds. Selling naked options, which combines unlimited loss with high margin, usually comes last.
Which suits which trade
| Your view or situation | Better fit |
|---|---|
| A strong view on direction, open timing, enough capital | Futures, with a stop |
| A large move expected before a date | A bought option |
| A moderate move to a target | A debit spread |
| A small account | Options or spreads; one futures lot needs about ₹1.8 lakh |
| You want to know the worst case | A bought option or a spread |
| Hedging a portfolio of shares | Index futures, or puts for protection with upside kept |
| Range-bound market | Sold options with a hedge, not futures |
| Frequent intraday trading | Futures have lower costs per point; options cost more per point but less per trade |
Using both together
Futures and options are often used in one position. A futures position can be protected with a bought put, which caps the loss below the strike; a futures long with a sold call above it collects premium in exchange for a capped gain. Options strategies are adjusted with futures when the index moves, to bring delta back to neutral. QuantPower's option strategy builder builds positions with futures and options legs.
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Frequently asked questions
Which is riskier, futures or options?
Futures and sold options have no fixed limit on loss. A bought option's loss is capped at the premium. On one lot, futures usually swing more in rupees than a bought option.
Do futures lose value over time like options?
No. Futures have no time decay. The gap between the futures price and the index shrinks to zero by expiry, but that is already in the price you trade at.
Why do futures need so much more money than options?
A futures lot carries the full value of the contract, ₹16.25 lakh for Nifty at 25,000, and the exchange asks for margin against its daily risk. A bought option costs only its premium.
Is STT higher on futures or options?
In rupees, on futures, because it is charged on the full sell value at 0.05%. On options it is 0.15% of the sell premium, which is small in rupees.
Can I lose more than my margin in futures?
Yes. A move against you can exceed the margin, and you must pay the difference. The margin is a deposit, not a limit.
Are futures or options better for beginners?
Bought options and spreads cap the loss and need little capital, so many beginners start there. Futures suit traders with enough capital and a firm stop.
Can I hold index futures or options to expiry?
Yes. Both settle in cash at expiry against the index close. Stock futures and in-the-money stock options settle by delivery of shares.
Related guides
- Futures basics: contract details, margin and rollover
- Options trading: calls, puts and contracts explained
- Option buying vs selling: the two sides of an option
- Synthetic futures strategy: futures built from options
- F&O margin calculator: margin for futures and sold options
- Options vs intraday trading: options compared with intraday trading in shares
Sources
- NSE: equity derivatives contract specifications and lot sizes from the January 2026 series
- Finance Act, 2026: STT on futures and options from 1 April 2026
- Model prices: Black-Scholes, Nifty 25,000, 12 days, IV 14%, interest rate 6.5%; charges from the QuantPower brokerage calculator at ₹20 per order on NSE