Derivatives
Futures contract
A futures contract is an exchange-traded agreement to buy or sell an asset at an agreed price on a set future date, settled daily via margin.
A futures contract is a standardised agreement, traded on an exchange, to buy or sell an underlying at an agreed price on a future date. In India you get index futures on Nifty and Bank Nifty, stock futures on NSE F&O stocks, commodity futures on MCX and currency futures such as USDINR. The exchange's clearing corporation stands between buyer and seller.
You do not pay the full contract value. You deposit a margin, and the position is marked to market every day: profit is credited and loss is debited at each day's settlement price. Both buyer and seller are obligated, unlike in options. Gains and losses are calculated on the full contract value, so a small percentage move in the underlying is a large percentage of your margin.
Each contract has an expiry, and several expiry months trade at once, with the near month usually the most liquid. To hold beyond expiry you roll over: close the near contract and open the next. Index futures are cash-settled. Stock futures on NSE, and some MCX contracts, carry delivery obligations if held to expiry, which is one more reason short-term traders exit earlier.
The common mistake is looking at margin and not at contract value. A position that needs a modest margin can still control several lakh rupees of stock, and a 2 per cent adverse move on that is the real risk. A second trap is low-volume stock futures: wide bid-ask spreads make entries and stop-loss exits slip by more than the chart suggests.
Worked example
Profit and loss on one futures lot
Illustrative numbers with a made-up lot. SBIN futures trade at ₹850 and a hypothetical lot is 700 shares, so contract value is 850 x 700 = ₹5,95,000. You buy one lot with the stop-loss at ₹842 and T1 at ₹858. A stop-loss hit loses 8 x 700 = ₹5,600. T1 gains the same. A 1 per cent move, ₹8.50, changes your account by ₹5,950. Check the current NSE circular for the real lot size and margin.
In WizeBuySell
WizeBuySell covers stock and index futures on NSE, MCX commodity futures and currency futures among its 1,240 symbols. On a futures chart each signal gives entry, T1, T2, T3 and a trailing stop-loss in futures prices. The software does not calculate margin, track expiry or roll over positions, and it does not place orders. In thinly traded stock futures, expect your actual fills to differ from the plotted levels.