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Market Intelligence › Basic Terminologies
The difference between a small-looking premium and a large exposure
Published by The Retail Trader · AUG 10, 2026 · Derivatives (F&O)
In F&O you do not buy shares, you buy lots. The premium looks small, but what you are exposed to is the value of the entire lot — and that is the real position size.
Premium is what you paid. Contract value is lot size times the underlying price, and it is often many times larger than the premium.
Risk is calculated on contract value, not on premium — so the thinking of "only this much is at stake" hides the position size.
Before taking a position, write down these four numbers:
• What the contract value of one lot is.
• What percent of your total capital it is.
• How many rupees the position changes by when the underlying moves one percent.
• How large that number can get on the worst day.
The exchange revises lot size from time to time, and after a revision the same one lot can be much bigger or smaller than before. Checking the current lot size before taking a position in a new contract is a small habit that prevents a big sizing mistake.
This article is for education only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics change from time to time with the exchange, SEBI and RBI, so verify every number yourself with your broker or an official source.