Future Trading

Futures trading involves buying or selling standardised contracts on NSE or BSE that obligate the parties to transact a specified quantity of an underlying asset — such as Nifty 50 index, individual stocks, currency pairs, or commodities — at a pre-agreed price on a future settlement date. Unlike options, futures contracts carry an obligation (not merely the right) for both parties — the buyer must receive delivery (or cash settlement) and the seller must deliver at the agreed price. In India, equity index futures (Nifty 50, Bank Nifty, FinNifty) and individual stock futures are the most actively traded futures contracts. Futures require an initial margin deposit — typically 8% to 15% of the contract value — providing significant leverage. This leverage amplifies both gains and losses, making risk management essential. Futures are used for hedging (by mutual funds and institutional investors to protect portfolio value), speculation (by traders seeking leveraged directional exposure), and arbitrage (between futures and cash market prices). All equity futures in India are cash-settled.