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How To Identify A Good Stock For Share Trading In The F&O Segment?


Let us first begin with a caveat. Trading in the F&O segment is highly risky and should be done by individuals, who have significant experience or our able to bare huge colossal losses.


Generally, high networth individuals (HNI) and institutions trade in this segment to hedge their risk.

How To Identify A Good Stock For Share Trading In The F&O Segment?
In the F&O segment you have to trade in a significant volume, which is why the risk is high. Let us understand this with an example. Say you want to buy shares of Punjab National Bank in the cash market.

A small investor can buy even 1 share at Rs 137. Including brokerage the maximum cost would be Rs 150. He will not gain much even if PNB goes to Rs 200, because he has bought just one share.

In the F&O segment you have to buy 1 lot of PNB, which is a huge 2000 shares. So, even a Rs 5 gain in say 15 days would leave the investor with a profit of Rs 10,000. Similarly, a Rs 5 loss would mean a loss of Rs 10,000.

How to find a good share to trade in the F&O segment?


1) Wait for the first 30 minutes before trading?

To begin with do not rush and buy a stock as soon as the market opens. Wait for the first 30 minutes and identify stocks that are showing movement. If the market is going up and a particular stock is not moving at all, chances are with a slight fall in the market, this stock could fall even further. Such a stock would be a good shorting candidate for the day. Lately, stocks from the metal space have shown a tendency to fall, when the market is rising.

2) Don't buy stocks on rumors

Do not buy stocks on rumors. If you are on twitter and following other traders, just see how reliable their calls are, before blindly following them.

3) Avoid stocks that are either at the upper end or the lower end of the circuit filter

4) If you have a appetite for risk, trade in the high beta names, in which you can make more money or lose more money. Typically, these would include metals and PSU banks.

5) Study the F&O data

Look at the call and put option. For example, if Company "A" has a active call option at Rs 900 and an active put option at Rs 1000 and if the stock is trading at Rs 920, you might want to buy the same. The chances of the stock going-up is far higher from the data.

Also, study the open interest build-up in a stock.


No trader has had 100% success in trading and they will never have. Place a stop loss to avoid huge losses in the F&O segment.

Read more about: pnb futures
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