Leading stock exchange BSE will introduce futures and options (F&O)contracts on Bharat-22 index from September 3. Bharat-22 index, comprising shares of 22 companies, is a blend of shares of key central public sector enterprises (CPSEs), public sector banks (PSBs) and blue chip private companies like Larsen & Toubro (L&T), Axis Bank and ITC.

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The other companies part of the index are -- ONGC, IOC, SBI, BPCL, Coal India, Nalco, Bharat Electronics, REC, Power Finance Corp, Engineers India, NBCC, NTPC, NHPC, SJVNL, GAIL, Power Grid Corporation, NLC India, Indian Bank and Bank of Baroda.

"The exchange shall introduce futures and options contracts on S&P BSE Bharat-22 Index in equity derivatives segment with effect from September 3, 2018," BSE said in a circular.

At present, there are over 200 securities available in the F&O segment for trade. Recently, several stocks have been added in the segment.

Derivative in financial markets typically refers to a forward, future, option or any other hybrid contract of pre-determined fixed duration, linked for the purpose of contract fulfilment to the value of a specified real or financial asset or to an index of securities.

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Broadly, there are two types of derivative contracts -- futures and options. A futures contract means a legally binding agreement to buy or sell the underlying security on a future date, while options contract gives the buyer or holder of the contract the right (but not the obligation) to buy or sell the underlying asset at a predetermined price within or at end of a specified period.