There are numerous traders who still don’t understand how to exchange Futures, maybe either they aren’t interested or repeat the risk is larger in Futures. Whatever to achieve understanding about Future is not a danger. so lets observe how Futures work?
The initial step is to find an agreement : –
When one buy shares, the amount of share count might be anything, it can also be only one share. In Futures, one purchase a contract with a specific lot size that will depend around the stock. Your house you want to purchase HCL Futures contract. This can include 200 shares.This is equivalent to numerous 1300 shares. In Futures, one purchase a lot. Nevertheless the lot dimensions are looking for each futures contract and it will is different from stock to stock.
Next Thing is Margin payment :-
When one purchase a Futures contract, the individual donesn’t have to pay for the whole worth of anything but simply the margin.Observe that this margin amount is going to be as prescribed through the exchange. Your house one purchase a HDFC Futures contract and also the cost of every HDFC share is Rs 511. This can add up to Rs 3,32,150 (i.e Rs 511 x 650 shares). One don’t have to pay the whole amount i.e Rs 3,32,150. One just pay 15% to twentyPercent of the quantity which is what known as because the margin amount. The margin will depends upon exactly what the exchange sets during the day. Based upon certain parameters, the margin for every stock is asserted. Now the margin for HCL will be different from HDFC. Your house the margin for that HDFC Futures is 20%. So one finish up just by payingRs 66,430 (not Rs 3,32,150).
The next thing is How can i make or generate losses :-
Suppose one obtained a HDFC Futures contract and also the underlying cost tag is
511 Rs for every share. Suppose, it moves to Rs 512 in the morning . The main difference is going to be Rs 1 per share (i.e 512 – 511) So you’ll obtain a credit Rs 650 (i.e Rs 1 per share x 650 shares). Then think that at the time following it , the HDFC share dips to Rs 510. Therefore the difference is going to be Rs 2 per share (i.e 512 – 510) Because the cost has gown lower, Rs 1,300 (i.e Rs 2 per share x 650 shares) is going to be debited from your bank account. Which procedure continues untill you sell the Futures contract or it will get expires. So, you are able to say that you can either maker or generate losses every day .
The Big question arises is the reason why Futures are popular ?
The initial reason isn’t any delivery i.e there’s no delivery. One more reason is gloomier brokerage within the futures.Even the best advantage is you do not have tp spend the money for lot , you pay the margin and not the whole amount. For more information on Nse India,Stock exchange India check out our website.