Futures is a type of financial contract.Most of the Futures volume is traded on the National Stock Exchange and Nifty is the indicator of the National Stock Index. The Nifty index futures trading in the country started in the year 2000 in the NSE.There are three kinds of futures that can be traded. They are Index Futures, Stock Futures, and Currency Futures. Based on the Futures Contract, the two parties involved agree to make transactions on group financial agents for future delivery at a specific cost. The contracts have a specific date and price for delivery. No cash transactions occur when the contract is initiated.
The most common Futures contract traded in India are Nifty Futures.
A better understanding of Futures can be explained through an example.Saurab wants to buy a phone which costs Rs. 35,000, in a month’s time. However, he realizes that in one month, the price of the phone could decrease. He then enters into a contract with the computer manufacturer to buy it in a month.One month from today, another buyer called Raj will buy a computer for Rs. 2000. Raj, however, wants to be cautious and agrees to purchase the computer at the present price, but only 30 days from today.As defined above, this type of contract with a specified date and price for delivery is possible with no cash exchanged between the parties when the contract is initiated. Futures trading, therefore, is the buying and selling of these contracts. More specifically, Nifty Futures are a form of Index Futures. The underlying is the S&P CNX Nifty index.The allowed size of the lots in the Nifty Futures contracts is 50, and can only be done in multiples of 50.Nifty Futures Contracts the ‘near month, mid month, and far month’ dates of expiration. The expiration day for each contract is the last Thursday of every month.
What happens when a Nifty Futures Contract expires?
A new contract for three-months would be initiated on the next trading day. Investors can trade in Nifty futures by having a margin amount in their account. This margin is a percentage of the contract value. It is usually about 10-12 per cent.
• Bse index
• Nse index
• Long call strategy