5 risks in F&O trading investors should remember
Market risk: If the market moves against a trader’s position, additional margin is required to maintain the position. Failure to meet the margin call can result in closing the position at a loss.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} Leverage risk: A small market movement against the position can result in substantial losses, higher than the initial margin.
Liquidity risk: Some F&O contracts may have low liquidity, making it difficult to enter or exit positions at desired prices, leading to higher impact costs.
Physical settlement risk: This comes from taking delivery of underlying shares without sufficient funds and short delivery risks for stock futures and stock option positions that expire in the money (ITM).
Lack of understanding: F&O trading involves complex strategies and instruments. The traders who do not fully understand these can make poor decisions, leading to significant losse.
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This story originally appeared on: India Times - Author:Faqs of Insurances
