When it comes to futures the logic is quite simple. If you expect the stock price to go up then you buy futures on the stock and if you expect the stock price to go down you sell futures on the stock or the index. Futures are a lot more linear and therefore a lot plainer vanilla in context. Options will have 4 possibilities. Let us understand them with a futures and options trading example. Let us assume that Infosys is currently quoting at Rs.1000. Let us understand how different traders will use different kinds of options based on their outlook.

Investor A expects Infosys to go up to Rs.1150 over the next 2 months. The best strategy for him will be buying a call option on Infosys of 1050 strike. He will get to participate in the upside by paying a much lower premium.

Investor B expects Infosys to go down to Rs.900 over the next 1 month. The best approach for him will be to buy put options on Infosys of 980 strikes. He can easily participate in the downside movement and make profits after his premium cost is covered.

Investor C is not sure of the downside in Infosys. However, he is certain that with the pressure on the stock from global markets, Infosys will not cross 1080. He can sell Infosys 1100 call option and take home the entire premium.

Investor D is not sure of the upside potential of Infosys. However, he is certain that considering its recent management changes, the stock should not dip below Rs.920. A good strategy for him will be too sell the 900 put option and take the entire premium.

That is how you decided whether you need to buy or sell futures and whether you need to buy or sell call and put options.