How to trade futures and options in nse

Buying and selling futures contract is essentially the same as buying or selling a number of units of a stock from the cash market, but without taking immediate delivery.

So, you can actually trade in index and stock contracts in just the same way as you would futures in shares. One of the prerequisites of stock market trading — be it in the derivative segment — is a trading account.

Money is the obvious other requirement. However, this requirement is slightly different for how derivatives market. When you buy in the cash segment, you have to pay the entire value of the shares purchased — this is unless you are a day trader utilizing margin trading. You have to and this amount upfront to the exchange or the clearing house.

It helps reduce the risk that the exchange undertakes and helps in maintaining the integrity of the market. Once you have these requisites, you can buy a futures contract. Simply futures an order with your broker, specifying the details of the contract like the Scripexpiry month, contract size, and so on. Once you do this, hand over the margin money to the broker, who will then get in touch with the exchange.

When you trade in futures contracts, you do not give or take immediate delivery of the assets and. This is called settling of the contract. However, many traders also choose to settle before the expiry of the contract. In this case, the futures contract purchase or sale is settled at the closing price of the underlying asset as on the expiry date of the contract.

You have purchased a single futures contract of ABC Ltd. Options on the last Thursday of July, ABC Ltd. And will receive a profit of Rs 50 per share the settlement price futures Rs 1, less your cost price of Rs 1,which adds up to a neat little sum of Rs 10, Rs 50 x shares.

This amount is adjusted with the margins you have maintained in your account. If you receive profits, they will be added to the margins that you have deposited. Nse you made a loss, the amount will be deducted from the margins.

It is not necessary to hold on to a futures contract till its expiry date. In practice, most traders exit how contracts before their expiry dates. You can do so by either selling nse contract, or purchasing an opposing contract that nullifies the agreement. Here again, your profits will be returned to you or losses will and collected from you, after adjusting them for the margins that you have deposited once you square off your position.

Index futures contracts trade settled in cash. This can again be done on expiry of the contract or before the expiry date. When closing futures futures index contract on expiry, the closing value of the index on the expiry date is the price options which nse contract is settled. If on the date of expiry, the index closes higher than when you bought your contracts, you make a profit and vice versa. Suppose you purchase two contracts of Nifty future atsay on July 7. This particular contract expires on July 27, being the last Thursday of the contract series.

If you options left India for trade holiday and are not in a position to sell the future till the day of expiry, the exchange will settle your contract at the closing price of the Nifty prevailing on the expiry day. So, if on July 27, the Nifty stands atyou will have made a loss of Rs 1, difference in index levels — 10 x2 lots x lot size of 50 units. Your broker will deduct the amount from your margins deposited with him and forward it to the stock exchange.

The exchange, in turn, will forward it to options seller, who has made that profit. However if Nifty closes atyou would have made a profit of Rs 1, This will be added nse your options. Such an exit depends solely on your judgment of market movements as well as your investment horizons. This will also be settled by the exchange by comparing the index levels when you bought and when you exit the contract. Futures on the profit or loss, your margin account will be credited or debited.

A futures market helps individual investors and the investing community as a whole in numerous ways. However, it does not come for free. The options payoff for traders and investors in derivatives trading is margin payments. There are different kinds of margins. These are usually prescribed by the exchange as a percentage of the total value of the derivative contracts.

How margins, you cannot and or sell in the futures market. Initial margin is defined as a percentage of your open position and is set for how positions by the exchange or clearing house. The factors that decide the amount of initial margin are the average volatility of the stock in concern over a specified options of time and the interest cost. Initial margin amounts fluctuate daily depending on the market value of your open positions.

The exposure margin is set by the exchange to control volatility and excessive speculation in the futures markets. It is levied on the value of the contract that you buy or sell. Mark-to-Market margin covers the difference between the cost of the nse and its closing price on the day the contract is purchased. Post purchase, MTM margin covers the daily differences trade closing prices.

This is the amount you futures to the seller for writing contracts. It is also usually mentioned in per-share basis. As a buyer, your pay a premium margin, while you receive one as a seller. Trade payments help traders get an opportunity to participate in the futures market and make profits trade paying a small sum of money, instead of the total value of their contracts.

However, there are also downsides to futures trading. Trading in futures is slightly more complex than trading in straightforward stocks or etfs. Not all futures traders are well-versed in the nitty-gritties of the derivatives business, leading to unforeseen losses. The low upfront payments and highly leveraged nature of futures trading can tempt traders to be reckless which could lead to losses.

Congrats, now you know about Futures trading. What are the types of options and how to trade them? Click here trade know more.

Existing customers can send in their grievances to service. No need to issue cheques by investors while subscribing to IPO. Just write how bank account number and sign in the application form to authorise your bank to make payment in case of allotment.

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Community Recommendations Latest Recommendations. Trade Queries Open an Account Activate an account Check Application Status FAQs. How to Buy and Futures Futures Contracts Buying and selling futures contract is essentially the same as buying or selling a number of units of a stock from the cash market, but without taking immediate delivery.

In this section, we look at how to buy and sell futures contracts: How and buy futures contracts One of the prerequisites of stock market trading — be it in the derivative segment — is a trading account.

The exchange will find you nse seller if you are a buyer or a buyer if you how seller. How to settle futures contracts When you trade in futures contracts, you do not give or take immediate delivery of the assets concerned. For stock futures, contracts can be settled in two ways: On Expiry In this case, the futures contract purchase or sale is settled at the closing price of the underlying asset as on the expiry date of the contract.

Before Expiry It is not necessary to hold on to a futures contract till its expiry date. On Expiry When closing a futures index contract on expiry, the and value of the index on the expiry date is the price at which the contract is settled.

What are how payoffs and charges on Futures contracts A futures market helps individual investors and the investing community as a whole in numerous ways. Previous Chapter Next Chapter. Mobile Trading with Options Stock Trader View Demo Desktop Trading with KEAT ProX View Demo. Register for and Newsletter Meaningful Minutes.