How is Nifty traded?

The Nifty can be traded in two ways: Options and Futures

Nifty Options: In NIFTY options, the buyer and seller enter into a contract to buy and sell the NIFTY option contract at an agreed price on a future date. Buyers have the right, but not the obligation, to buy or sell the contract.

Nifty futures: In NIFTY futures, the buyer and seller enter into a contract to buy and sell the NIFTY futures contract at an agreed price on a future date. In contrast to the NIFTY option, the buyer and seller are obliged to exercise the contract at the end of the expiry date.

Nifty is traded in the same way as any other option. Nifty is an index option. An index is a collection of stocks like Nifty 50, NSE Bank Nifty, or NSE Nifty Midcap 50. A Nifty option is derived from the underlying Nifty. So there are options on Nifty 50, NSE Bank Nifty or NSE Nifty Midcap 50, etc. Each option has its strike price, premiums, lot sizes, and expiry dates.