WHAT IS FUTURE MARKET
Derivatives are traded in the future market or futures market. Derivatives include stocks, index, metal, gold, crude, currency. For trading in future trading, one must have a derivative.The promise of traders to settle the deal by the due date in the future is called the futures market or derivative market.traders make deals on both sides on their analysis and understanding.Settlement of the deal is done on a fixed date in the futures market. This settlement happens on the last Thursday of every month. If that day is a national holiday the settlement is on 1 day before that i.e. on Wednesday.
The settlement date is called the expiry date. Now the weekly expiry of Nifty and Banknifty has also started. Settlement takes place every Thursday of the week. Contracts are bought or sold according to the dates falling on every Thursday of the week.he purchase of shares has to be done according to the number determined by the exchange (lot size). This means you cannot trade 10 -20 shares as per your choice.You have to buy at least 1 lot of it. Lot size is based on the value of the share. The value of 1 lot of any share usually ranges from Rs 5 to 6 lakhs.
ABOUT OF FUTURE MARKET
Trading in the stock market for a little money is possible through futures. Future is traded in index or stocks.When choosing a stock or index for the future you do not have to pay its full value, trading can only be done by depositing margin money (10 -15% of the total value).Trading can be done only after depositing margin money in the futures market. The index and the margin of each share are decided by the exchange. Future trading is for a month. This expiry takes place on the last Thursday of the month. In the future trade, every day the profit and loss is calculated. The trader has to compensate for the loss.Trade in the future is the job of experienced traders. one thing not trade in the future without experience. Many traders also use futures to hedge their portfolios
Why Index Future Is Popular
Index futures are easy to track. Larger trade is possible with less money. The margin in index futures is also low. The margin of Nifty futures is only 7-8 per cent.Bank Nippy Futures provide considerable volume. Due to high volume and high volatility the chances of making money in short time are increased if you trade very carefully. Experienced traders take full advantage of this.
How Future Market Works
A derivative contract is a promise that Buyer and Seller make to each other. In which he buys a Currency Commodity or Share at a predetermined price and quantity. Since it is a promise you do not have to give all the money in advance when the date arrives on which you have contracted to buy or sell the goods and have to pay for the delivery of the goods on that day.
It is absolutely not necessary that the promise that Buyer and Seller have made to each other should be fulfilled. When the expiry date of the contract draws near Buyer and Seller can also cancel the deal which is called Square off of the contract. If Buyer and Seller want then this contract can be taken even a month ahead which is called rollover.
History Of Future Market Trading
The first futures contract was drafted in 1851. The property was Mecca and signed to the Chicago Board of Trade (CBOT). It was the plan for the seller (a farmer) and the buyer (an industrial company) for future exchange of product for cash at a fixed price.Since then futures trading has attracted markets buyers and sellers.
Although the futures market began as one of the preferred scenarios of institutional traders it also gave rise to speculative figures. This benefits one from choosing the right direction in the future of a given market.But with the development of technology and computers many traders chose to trade futures markets through CFDs (or Contracts for Difference)
Future Trading Features
1. The price of a future contract depends on the price of the underlying asset: if the price of the underlying asset in the future increases the price of the future contract also increases in contrast.
2. Can be transferred and traded: Future contracts can be transferred with other traders and are therefore tradable.
3. If a party changes its mind during a contract it can be transferred to someone else and that party can go out.
4. Highly Regulated: Since Future Trading carries the risk of both parties not fulfilling their obligations the Future Market is highly regulated by regulatory authorities like SEBI in India.
5. SEBI Ignores the smooth functioning of the futures trading market and greatly reduces the possibility of default.
6. Standardized: Future contracts are always standardized and cannot be adapted to individual requirements and the situation is also non-negotiable.
7. Settlement: Future contracts are settled in cash, so physical movement of the underlying asset is not required. Only cash price differences are paid from one party to another.
What Is The Open Interest In Future Market
In the future market there is a buyer and seller and together they form a contract. OI (Open Intrest) is defined by the number of open contracts in the market. During the market or at the end of the day changes in open interest are recorded whether it is an increase or decrease in the number of contracts for each share. It is shown by positive or negative changes. you can view the open interest data at the end of the trading session on the NSE website.
Benefits Of Future Trading
1. Leverage due to the provision of margin trading: Using a margin trading account positions in the future market can be taken by paying only a fraction of the total contract value.If the market moves in the expected direction the return on investment is very high. However if the market does not move in the right direction there may be losses.
2. Liquidity: The number of future contracts traded every day is quite high so the future market is very liquid.It is easy to enter and exit the market at any point. This also has the effect that the market does not accelerate.
3. Lower brokerage costs and commissions: The brokerage and fees charged on future contracts are quite low so the investor does not have to pay a large amount in commissions.
4. Hedging: Future trading is a very important mechanism for hedging or diversification of portfolios and risks. particular in the foreign currency market and interest rate markets future trading helps a lot in reducing the risk due to price fluctuations. is.It is widely used by importers and exporters to hedge their risks due to foreign currency price differentials at the time of order and at the time of delivery.
5. Short selling: There are many restrictions on short selling of shares in person but short-selling of a future contract is legal and the investor is able to sell the future contract to get less exposure to the stock.
6. Fair and easy to understand: Future trading is simple and easy it is not as complicated as option trading.
What Is Index Future Trading
- Future trading in the index is highest in Nifty and Banknifty. Like stock futures here too lot sizes are at Nifty’s lot size at present 75 and Banknifty’s 25. The margin feature also resembles that of stock futures.
- The price of Nifty futures depends on the positive or negative change in the rate of 50 companies involved in Nifty. Major companies of Nifty are – Reliance, Wipro, Axis Bank, Infy etc.
- The major 12 banks of India have been included in Banknifty, the main ones are -ICICI Bank,HDFC Bank
- There is a difference in the rate of spot nifty or banknifty and the rate of their futures. This means that there is sometimes a premium or discount in the rate of futures.