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Futures Contract

(Payoff of Future)Payoff of future means, buying/selling futures contract. In this case the losses as well as profits are unlimited for the seller and buyers.
You can create different payoff strategy by using option and futures.

(Payoff for buyer of Futures) Buying futures called as Long futures.
The payoff of a person who buys nifty futures is same as buy and hold assets.

If you are buying 2 month Bank Nifty Futures contract, it means within this 2 months you will get profit in up-side move of bank nifty and will get loss in the down side move of bank nifty.

(Payoff for seller of Futures)Selling futures called as short futures.
Payoff of selling bank nifty is same as shorting nifty.

If you are doing short in bank nifty, in this case you will only get profit while nifty move to down side. But you will lose money in upside move of the market.

(Futures Contracts) Futures contract is a kind of virtual products. It is an underlying asset trader buy/sell in the securities market.

A futures contract is a legal agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

Futures contract have legally traded in India at the year of 2000. After this product came to market, It helps to trade down side of the market.
Futures products help people to create different strategy in the stock market.

Futures contract price is different as compare to normal share price. The difference between share price and future price is called as BASIS.

In future generally three types of contracts are available, Near, Next and Long.
Near Future contracts means current month contracts. Next means next month’s contracts and Far means  next 2 month’s contracts.

Futures contract expire on last Thursday of the month. If last Thursday is a holiday, then day before of this day.
Properties of Futures Contract:

  • It is a virtual product. The amount of shares available in futures contract i.e. not actual share amount in the company.
  • You will get discounted price. Like 5%, 10%, 15%… up to 95%.
  • Limited period of timing like 1 Month, 2 Months or 3 Months.
  • Unlimited periods of share available. But you can buy/sell in Lot size. (Lot size – Some amount of share decided by exchanges).
  • You can trade in both directions (Up and Down).
  • Buying future is called as Long future and Selling Future is called as Short Future.

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