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Table of Contents
What Are Futures Contracts?
A futures contract is a standardized agreement to buy or sell an asset at a predetermined price on a specific future date. In India, futures are traded on NSE and BSE for equities, indices (Nifty, Bank Nifty), commodities (MCX), and currencies. They are derivative instruments, meaning their value is derived from the underlying asset.
Key characteristics of futures: they are standardized (fixed lot sizes and expiry dates), traded on exchanges (not over-the-counter), settled daily through mark-to-market, and require margin instead of full payment. This margin system allows leverage, meaning you can control a large position with relatively small capital.
In India, futures contracts expire on the last Thursday of each month. NSE offers three monthly expiry contracts at any time: current month, next month, and far month. For example, in March 2026, you can trade March, April, and May expiry futures.
NSE Futures Market Structure
| Contract | Lot Size | Approx Value | Margin (approx) | Expiry |
|---|---|---|---|---|
| Nifty Futures | 25 | Rs 6,12,500 | Rs 1,00,000 | Monthly (Thu) |
| Bank Nifty Futures | 15 | Rs 7,80,000 | Rs 1,20,000 | Monthly + Weekly |
| Reliance Futures | 250 | Rs 6,25,000 | Rs 1,10,000 | Monthly |
| TCS Futures | 125 | Rs 4,87,500 | Rs 85,000 | Monthly |
| HDFC Bank Futures | 550 | Rs 9,35,000 | Rs 1,50,000 | Monthly |
SEBI has mandated minimum contract sizes of approximately Rs 5-10 lakh to ensure only traders with adequate capital participate. The margin requirement is typically 12-20% of the contract value, set by the exchange based on volatility. Higher volatility means higher margin.
Stock futures are available on approximately 200+ NSE-listed stocks. Index futures (Nifty, Bank Nifty, Fin Nifty) are the most liquid and most traded. For beginners, starting with Nifty futures is recommended due to its high liquidity and lower manipulation risk compared to individual stock futures.
Understanding Margin in Futures Trading
Futures margin has two components: SPAN Margin (calculated by the exchange based on risk scenarios) and Exposure Margin (additional buffer, typically 3-5% of contract value). Together, they form the Initial Margin required to enter a position.
Initial Margin: The minimum amount required to open a futures position. For Nifty futures, this is approximately Rs 1,00,000 per lot.
Maintenance Margin: If your position moves against you and your account balance falls below the maintenance margin (typically 75% of initial margin), you get a margin call. You must add funds or your broker will close your position.
Mark-to-Market (MTM): Futures positions are settled daily. If Nifty closes 100 points above your buy price, Rs 2,500 (100 x 25 lot size) is credited to your account. If it closes 100 points below, Rs 2,500 is debited. This daily settlement means your profits and losses are realized every day, not just at expiry.
Effective leverage in Indian futures is approximately 5-8x for index futures and 4-6x for stock futures. While this amplifies profits, it also amplifies losses. A 2% move against your position translates to a 10-16% loss on your margin capital.
How to Trade Futures: Step-by-Step
Step 1: Enable F&O in your broker account. Zerodha, Groww, Angel One, and Upstox all offer F&O trading. You need to pass a brief income and experience assessment to activate F&O segment.
Step 2: Ensure adequate margin. Check the margin required for your chosen contract using your broker's margin calculator. Transfer funds from your bank to trading account via UPI or net banking.
Step 3: Analyze the underlying. Use technical analysis on the Nifty/stock chart to determine your directional bias. Check the option chain for support/resistance levels.
Step 4: Place your order. In your broker app, select the futures contract (e.g., NIFTY 26 MAR FUT), choose buy or sell, enter quantity in lots, and select order type (market/limit). Set a stop loss order immediately after execution.
Step 5: Monitor and manage. Check MTM daily. Trail your stop loss as the position moves in your favour. Close before expiry unless you want physical settlement (for stock futures, not index futures).
Basic Futures Trading Strategies
Trend Following: Buy Nifty futures when the 20 EMA crosses above the 50 EMA on the daily chart. Hold until the 20 EMA crosses below the 50 EMA. This captures major trends of 500-2000 points. Risk: choppy markets cause multiple false signals.
Support/Resistance Breakout: Buy when Nifty futures break above a multi-day resistance level with volume. Sell when they break below support. Use the 15-minute chart for entry timing. Stop loss 50-100 points from entry.
Calendar Spread: Buy the next month's futures contract and sell the current month's contract when the spread (difference) is narrower than historical average. Profit when the spread widens. Lower risk than directional trading.
Hedging: If you hold a portfolio of Nifty stocks, sell Nifty futures to hedge against a market decline. Calculate the hedge ratio based on your portfolio's beta. This protects your portfolio during corrections without selling your shares.
Risks and Costs of Futures Trading
| Cost/Risk | Amount | Notes |
|---|---|---|
| Brokerage | Rs 20/order | Both entry and exit |
| STT | 0.0125% on sell side | Significant on large positions |
| Exchange charges | 0.0019% (NSE) | Per trade |
| GST | 18% on brokerage | On brokerage + exchange charges |
| Daily MTM risk | Unlimited | Can exceed margin deposited |
| Rollover cost | 0.1-0.5% per month | When rolling to next expiry |
The biggest risk in futures trading is leverage. Unlike buying stocks where your maximum loss is 100% of investment, futures can lose more than your margin if the market gaps against you. Always use stop losses and position sizes appropriate for your account size.
Rollover costs are often overlooked. When you carry a futures position to the next month's contract, there is a cost of carry (typically 0.1-0.5%) plus slippage and brokerage on two trades. Over months, rollover costs can erode a significant portion of your returns.
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Open Free Exness AccountFrequently Asked Questions
What is the minimum capital for futures trading in India?
You need approximately Rs 1-1.5 lakh minimum margin for one lot of Nifty futures. For stock futures, margin ranges from Rs 50,000 to Rs 2 lakh per lot depending on the stock. We recommend having at least Rs 3-5 lakh total capital to trade futures safely with proper position sizing.
Is futures trading risky?
Yes, futures trading carries significant risk due to leverage. A 2% adverse move in Nifty translates to a 10-16% loss on your margin capital. Daily mark-to-market settlement means losses are debited immediately. SEBI data shows 89% of individual traders in the derivatives segment incur losses.
What is the difference between futures and options?
Futures have a linear payoff: you profit or lose proportionally to price movement. Options have an asymmetric payoff: option buyers have limited loss (premium paid) but unlimited profit potential. Futures require more margin but are simpler to understand. Options are more flexible but more complex.
Can I hold futures overnight?
Yes, you can hold futures positions for days, weeks, or until expiry. You need sufficient margin for overnight positions. Daily MTM settlement means your account balance changes every day. Be aware of overnight gap risk, especially around major events.
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