In the last chapter, we learnt various concepts related to the futures market. Remember, the motivation for any trader entering into a futures agreement is to benefit financially, and for which the trader needs to have a directional view on the price of the underlying asset.

Perhaps it is time we take up a practical example of a futures trade to demonstrate how this is done. Also, I guess we should move away from the Gold example and look into an example related to the stocks. Today 15 th Dec the management of Tata Consultancy Services TCS , a leading Indian Software Company had an investors meet, wherein the TCS management announced that they are cautious about the revenue growth for the December Quarter. In the snapshot below, the price per share is highlighted in blue.

Ignore the red highlight, we will discuss about it shortly. Here is my rational — If you follow TCS or any Indian IT sector company in general, you will know that December is usually a lackluster month for the Indian IT companies.

December is the financial year end in the US the biggest market for the Indian IT companies , and also the holiday season, hence the business moves quite slowly for such companies. This furlough has a significant impact on the IT sector revenues. This information is already known and factored in by the market. Hence, I believe the stock sinking by 3. I also feel this could be an opportunity to buy TCS, as I believe the stock price will eventually go up.

Hence I would be a buyer in TCS after such an announcement. From my analysis, I believe the TCS underlying asset stock price will increase in due course of time. In other words, I am bullish about TCS at the current market price. Now, instead of buying TCS shares in the spot market, I decide to buy the TCS Futures for reasons I will discuss in the next chapter.

Having decided to buy futures, all I need to see is price at which the TCS Futures is trading at. In fact, the link to get details for a TCS futures contract is available on the spot market quote. I have highlighted the same in red in the image above.

Recall, the futures price should always mimic the spot price, meaning if the spot price has gone down, the futures price should also go down. As expected, the futures price has mimicked the spot price and therefore the TCS Futures is also down by 3. You may have two questions at this point —. But the most important point to note at this stage is that, the futures price has moved in line with the spot price, and both of them are down for the day.

Now, before we proceed any further let us relook at the futures contract and inspect a few key elements. Allow me to repost the futures contract with a few important features highlighted.

Lastly the black box highlights two important parameters — the underlying value and the market lot. We can now calculate the contract value for TCS futures as follows—. Now going back to the TCS futures trade, the idea is to buy a futures contract as I expect the TCS stock price to go up.

The price at which I would buy TCS Futures is Rs. Remember the minimum number of shares that I need to buy is Well, this is quite simple we can call our broker and ask him to buy 1 lot of TCS futures at Rs. I prefer to place trades myself through the trading terminal. If you are new to the trading terminal, I would suggest you read through the chapter on the Trading terminal.

Once TCS Futures is loaded on my market watch, all I need to do is just press F1 and buy the contract. The moment I press the F1 key expressing my interest to buy TCS futures on my trading terminal, a couple of things happen in the background.

With the completion of these 4 steps, I now own 1 lot of TCS Futures Contract. You may be surprised to know, in the real markets, all the above mentioned steps happen sequentially in a matter of a few seconds! Well, it simply means by purchasing TCS futures on 15 th Dec , I have digitally entered into an agreement with a certain counterparty agreeing to buy TCS shares from me counterparty at Rs. This futures agreement between me and the counterparty expires on 24 th Dec After entering into the agreement, there are 3 possible scenarios that can pan out by 24 th Dec We know what these scenarios are we studied them in chapter 1 — the price of TCS can go up, the price of TCS can come down, or the price of TCS could stay the same.

Let us just arbitrarily take up a few possible price situations and see what would be the impact of the price on both the parties involved. This is a case where my directional view on TCS shares has come true, therefore I stand to benefit. Assume on 24 th Dec , the stock price of TCS has gone up from Rs. This means as per the agreement, I am entitled to buy the TCS shares at Rs. My profit will be Rs. Since the deal is for shares, my overall profit will be Rs.

The seller obviously incurs a loss, as he is forced to sell TCS shares at Rs. This is a case where my directional view on TCS shares has gone wrong, therefore I would stand to lose. Assume on 24 th Dec , the stock price of TCS goes down from Rs.

This means as per the agreement, I am obligated to buy the TCS shares at Rs. My loss will be Rs. Since the deal is for shares my overall loss will be Rs. Under such a situation, neither the buyer nor the seller benefit, hence there is no financial impact on either party. So here is a situation — after buying the TCS futures on 15 th Dec at Rs.

It is now trading at Rs. What do I do? Clearly with the price increase, I stand to benefit significantly. To be precise, at the time of taking the snapshot, I am sitting at a profit of Rs. Suppose I am happy with the money that I have made overnight, can I close out the agreement?

Or rather at Rs. What if I no longer feel bullish about TCS at Rs. Do I really need to hold on to the agreement until the contract expiry date i. Well, as I had mentioned in the previous chapter the futures agreement is tradable. Meaning, at any point after entering into a futures agreement I can easily get out of the agreement by transferring the agreement to someone else.

This means I can close the existing TCS futures position and book a profit of Rs. Not bad for a 1 day job right? By squaring off, I offset an existing open position. In case of the TCS example, initially I bought 1 lot of TCS futures and when I square off I have to sell 1 lot of TCS futures so that my initial buy position is offset. The following table summarizes the concept of square off in general —. When I intend to square off a position I can either call my broker asking him to square off the open position or I can do it myself on the trading terminal.

The following things happen when I opt to square off the TCS position —. Note, if at Rs. As long as I continue to hold the futures, I continue to hold the risk of TCS price fluctuation.

In fact, here is the snapshot of TCS futures taken on 23 rd Dec , just 1 day before the expiry of the contract, had I opted to hold the futures till 23 rd Dec my profits would have been much higher — TCS futures is trading at Rs. In fact on 16 th Dec when I decided to book profits at Rs. Now here are two simple questions for you —. If you are unable to answer the above two questions, you can drop in a query in the comment box below and I will be happy to explain the answer.

Yes, your short position will be squared off. Instead, buy 2 lots, one lot will be offset with the existing short and the other will be a fresh long position. Thanks for advising me. If I want to roll over nifty march future to next month what is the procedure?

You just have to close the Feb futures and initiate the same position in the March futures. On 16th Dec I squared off my position at Rs. Hi Karthik, I apologize for asking you a question on Options which is presently out of context.

But I would appreciate if you could clear this doubt as this doubt has occupied my mind. I have a doubt on Options trading. I would like to trade a bull call spread strategy. I also sell a CE. Suppose on any day before expiry the spot price has moved from to Now I know that the CE is in the money and I am in profit.

My questions are- a Could you tell me if the CE which I sold is in the money? If the spot price is I know the CE which I sold is out of the money b If before the expiry the spot price is and I decide to square off, then will I keep the premium for the CE which I sold?

The reason I am asking you this is because I thought if the price moved from to and then back to then the CE that I sold would be in the money, but I have doubt in this case, when the price would move from to without moving beyond and back below Hi Karthik, I got the answer. I had confused myself when I typed in the above message. As long as the Spot price is below the strike price for the Short CE the other party would not exercise the option and I will have the premium the other party paid.

Hi Karthik, I still have one small doubt. Can I square off my position both long and short CE before expiry? If the answer is Yes, then I assume I will profit the premium paid by the other party for the short CE?

Hi Karthik, I have one more question for you. Say I go to the NSE webpage and look for the derivative quotes of an XYZ stock. There I find the details for the XYZ futures contract and see that in the order book for the Jan29 future contract there are 2,07, buy quantity and 7,93, sell quantity. Does this mean that more number of contract holders expect the price to go down? Markets are so dynamic that the situation can turn ard sooner than we can imagine.

I have to sit and write the content sir! We are a bunch of people working on it Sushil, not just me: Thanks for offering your help, will keep that in mind!

Not necessary, the contract will cease to exist upon expiry. Hence it as as good of auto-square off by the exchange. If I want to hold the future stock to next month what should I do. Is it possible to hold my future stock from current month to next month. You can buy the contract expiring next month mid month in this month current month itself. It just means you need to buy the call option The premium will be We will discuss more on this when we take up the module on Options.

Hi Karthik, Thanks a lot for answering one of my question about how to stay short for a long time in market. After I went through this chapter I felt how trivial my question was. I now have one more basic question now. This is regarding the TCS example you have quoted to explain. You mentioned that December is not a friendly month for IT stocks and the downtrend in TCS is likely to turn around. So you have opted to go long in this future contract.

But my question is why would some counterpart accept the contract. Since we all have same views on the market, according to my assumption finding a counterpart must be difficult or if it happens it must be someone who accepts this contract without knowing the consequence that I will make the profit and not him. Sorry for such a long message. Different opinion is what makes a market.

For example think about it, when the new Govt came, it was a no brainier that the market will go up so why dint everyone buy?

Likewise at any given point people have different opinions…which is what markets are all about. Hi karthik sir I bow down to you for such a simple and easy explanation on how futures trade is done. Honored to know this Santosh! We are glad you liked the content here. Please feel free to post your queries and we will reply back as soon as we can.

Hughes Optioneering

On the day of the expiry all derivative contract ceases to exist. This means even if forget to sq off the exchange considers it squared off. Also there is no penalty for doing so.

Can you please let me know on how the Cost of Carry both buy and sell and implied volatility and annual valatility will be caliculated for a futures contract. Cost of carry is simply the interest rate component in the futures pricing formula…. Request you to read this chapter on Futures Pricing — http: Also all topics related to Volatility will be explained in the Options Module.

Sir On expiry if there is no buyer available for my future contract then what happen about my future contract And also on expiry chances of buyer is low is this true And Why any other people buy future contract on expiry if is so short time. If there is no buyer on expiry day then not to worry as the exchange will make sure you are settled. People buy for various reasons — maybe they could just be doing a shortcover or rollover.

Can we Rollover a Futures Contract?. If yes, then how can that be done?. What are the charges applied?. Can you please provide a more detailed explanation to this?. Rollover is the act of closing this months contract to buy the next months contract…nothing more at all. Standard trading charges such as brokerage, STT, Transaction charges etc are applicable here.

I would suggest you look at this to understand different trading charges — https: Hi Karthik Sir, What is the difference between stock future trading and commodity future trading?.. Waiting for Commodities Future Trading Module… but it will take more than month i guess..

Thanks for your patience, but I hope you understand. Sir, lets assume we entered a future contract from 15 December to 24 December. But we squared off the contract on 16 December.

So the person, who buys from us, will he enter the contract from 16th Dec to 24 Dec? Or some part of it? You are right, when you buy on derivative contract you are entitled to hold the contract till expiry. However you can choose to close it earlier.

The Profit or Loss is credited to your account the same day. Sir, lets assume I enter into a future contract of 50 shares, Rs each with ABC on 15 Dec. The expiry date is 25 Dec. So, Rs will be blocked from my account. Then if i square off the contract to XYZ on 16 Dec, at Rs each, will i be credited the whole profit, i.

Or will I be credited Rs only as per the margin for XYZ? If yes, when will the rest of the amount be credited in my account? Sir can you please tell how to hedge a long future position with options. For example I am bullish on ABC stock and so I go long on it by buying 1 lot of future contract, now if because of some sudden bad news the next morning the stock goes in down trend say — 2 or 3 percent or even more.. Sir if possible please explain with example of some stock. You can hedge the futures position by a deep ITM option.

For example if you buy Infosys Futures at , then you can go ahead and buy ITM PUT option to hedge your futures position. I would suggest you read about Delta as explained in the Options module to understand the rationale. In the above example of infosys.. Thank you so much! Module 6 will contain many options strategies including the bull call spread.

But from whom would you buy the shares? With the expiry date nearing,and the price still decreasing,wont it become more difficult to transfer the agreement? Also,will not the buyers of the future prior to the expiry date be of a speculative nature? A I would buy from another counterparty who would think selling TCS at point makes sense.

Remember in a market place, different people have different opinions on the same asset. This is what really makes a market. B As long as there is ample liquidity lots of buyers and sellers it should not be a problem. Yes, I would agree trading near to expiry is speculative. I would suggest you read the chapter on open interest to get a better clarity. I think under Scenario 3 I. TCS stock price remains unchanged the buyer of future contract would loose a bit. As price of futures would fall a little as expiry nears.

On 16 Dec TCS future was trading So loss of about 10 points. Sir i have a question if I buy 2 lots of xyz company 1 lot with near month expiry and other lot with mid month expiry.

After some days can I square off mid month expiry lot first than the other lot. Hello sir, Can Stock price carry away the price of future?

OR Future price is responsible? Underlying price dictates the derivatives price but for short periods it could be the other way round as well. I have a nifty future bought for 45 k as an exmaple nifty Jan series. I dont have any more cash in Trading my account. Make sure you maintain SPAN margin at any given point, this will ensure your position in the market.

Sir at 1st Thank you so much for your wonderful explanation i have two question 1. Can i participate future contract without buying as a seller? Yes, of course you can sell and buy back later. Profits will be added and loss will be deducted.

Nope, generally there is no cash equivalent for indices. However you can buy a Nifty ETF Niftybees …this is like the cash equivalent. Well firstly the profit calculation should show you a profit of Rs. Anyway, as you pointed out when dividends are paid out, it gets adjusted with the spot price and therefore the futures price.

So your entire notional profit 8. I do not agree , with this , in practicality , whether one has taken position in equity features , as per example NMDC , whether a dividend is declared or not, as that div. Usually the dividends are adjusted on ex date. Mostly it happens with Infosys and wipro, features of those 2 equitie are hammered , once they become ex. Absolutely — you buy and sell long trade or sell and buy short trade then you have completed the trade and its a done deal: You will have no more obligations, what so ever.

I have a couple more questions to ask. One too many, perhaps, but I want to have all my doubts cleared so I can trade confidently. What would happen if I were to buy a lot of crude oil Mini through Zerodha and hold on to it till the expiry date?

I believe Zerodha does not allow physical delivery, but a confirmation from your end would be nice. Is it prudent STRATEGY to go either short or long in index features or equity features in next month contract , i. As one gets ample days either 60 days or 90 days -to get MUCH SOUGHT profit , or one should STICK to current month contact only ….

Now , as we all know BAJAJ FINANCE CORRECTED Now to in spot 28th April he is PROFIT, had it been worst scenario then whether strategy of averaging was OK, …..

Well no one can give a specific answer to this one, in general you should know that averaging on a losing trade is a bad idea as you are throwing good money after a bad trade, and the trade can go worse. However for the exact opposite reason, averaging on a winning trade is a good idea. Hi Karthik Sir, I never traded futures before but now I want to.. I short 1 lot of futures later Yes, what you explained is right, you would make 8K on this trade. Also, it is good to use limit orders while trading stock futures.

And TA works best on spot charts. Now my question is whether Nifty Futures Contract can also come under this ban list if this limit is reached?

The no of contracts are decided by the exchanges. Yes, ban is applicable to all instruments. However Nifty futures has so much liquidity that it is quite difficult to reach that status. I am new to futures trading. Understood a lot from the content posted. Please tell me can we square off a position same day in futures. Talking about above example , can we sell shares of TCS on 15th dec ,if the price rise the same day.

In fact both futures and options can be squared off any second after taking the position. The prices are market driven and the transactions are routed through exchanges. So all the adjustments are taken care by the exchange.

Sir can I use the same technical analysis I use for equities to predict the direction of movement? Sir i have a doubt in SQUARE OFF. While squaring off whether i have to sell or transfer my open position may be short position or long position OR i have to take the opposite position to square off? Are they both same or different things? Please explain me sir. When you squareoff, you actually transfer your position to someone willing to take that position. Thank you for your response sir, but please give me some clarity on this doubt sir.

If i say the broker to square off my open short position then what is he actually doing. He will just initiate an opposite position which technically means he has transferred risk from you to someone else. But,sir i still have one doubt that when we square off the position by selling the futures contract do we have to pay initial margin again and if yes when will i receive the margin back???

Learn to buy and sell Futures Contract in BSE, NSE, MCX, NCDEX & MCX-SX

Sir i have one more question that is it possible for me to take delivery of stock on expiry date.. Sir as you said that on expiry futures contract are cash settled than how will anyone make money incase of reverse arbitrage as incase of reverse arbitrage you buy stocks from futures market and sell it in spot market and the price difference in future and spot market is your profit,So for selling it in spot you need to lend stock from exchange under Under stock lending scheme of exchange.

In SLBM, you borrow, short, and cover at a later stage. This is again settled in cash. I dont see a problem at all. Or maybe I have not understood your question well. Can you kindly elaborate please, thanks. Sir what i mean to say if futures are only cash settled than how is arbitrage gain possible because in arbitrage you buy from spot market of which you get the delivey to your account and sell the same in future market because of the price difference.

So my my question is if you dont deliver stocks that you have purchased in spot market and settle it through cash settlement then how arbitrage gain possible???? Arbitrage is only possible when buy from one market spot market and sell it in other market future market …so for this to happen settlement through delivering the asset is necessary know rather than doing a cash settlement because you will only able to earn profit by delivering asset what you have purchased in the spot market rather than a cash settlement as price in spot market is low as compared to futures market???

You need to be aware that futures are cash settled and in spot delivery based is by default settled in actual movement of shares. Keeping this in view you need to scout for opportunities and execute only those trades which makes sense with this arrangements. Sorry sir i am many question but i just want to clear my doubts. My question is What if the price of the future goes up than my purchase price but i dont find any buyer to whom i can sell my stock??

Sorry sir i am asking you many question but i just want to clear my doubts. My question is What if the price of the future goes up than my purchase price but i dont find any buyer to whom i can sell my stock at profit before expiry date? If you intend to hold the futures till expiry then you need not worry about finding a buyer as the exchange will take care. However if you want to sell before the expiry, then it really depends on the liquidity.

If you are trading couple of of lots, liquidity is not a problem. Sir is it possible to First buy a july expiry future contract and then squaring off or exiting the future by selling it in august expiring future contract or vice versa?? For example if price of july expiring Infosys future contract is Rs and august expiring infosys future contract is Rs so it possible first to sell august expiring contract for Rs and then immediately squaring off or exiting future contarct by buying a july month future contract for Rs??

Sir i wanted to trade in future and option segment,but i am really very worried about whether i will find the counterparty or not to whom i can sell my future contract. Till now i was trading in normal market where i was finding immediate buyers and sellers of the stock. So just wanted to confirm with you that is that same even with futures and option segment???

Harshit, you need not worry about counter party risk. Stick to Nifty 50, and top 5 stock futures. Sir thankyou for answering all my queries and i am really very sorry that i am asking you many questions but i just need to clarify my doubts.. Sir suppose there are three contracts for a stock that is near month ,next month and far month. Suppose i go long buy buying a far month future contract.

So my question is when i am squaring off my futures contract can i sell that contract to anyone or i must look for a person who is willing to buy the far month contract only not near or next month…So basically my question is can i sell that far month contract which i have bought even to a person who is willing to buy near or next month contract or i can only sell that future contract to a person who is looking for the far month contract only….

Harshit — when you want to sell it is the job of the exchange to identify a buyer for you. Over the next few seconds the exchange will do the needful. This is assuming there is liquidity in the market. Sir,as you said that exchange will do the needful but i should atleast know at which price the exchange is going to sell or square of my position. How to know that???

Settlement will upon the expiry price if you let your contract expire. Otherwise you can specify the price by opting for a limit price. Hi, so TA of spot graph is one way of forming the directional view that traders use.. On average if there are about contracts being traded every minute then I would consider that as ample liquidity for retain traders. Hi Sir, I am first time visiter of your chapters,and i can say this is the best content i ever had.

A very simple and a very clear content,it it just like a teacher wow know how to teach. Somewhere in chapter u wrote,Assume on 24th Dec , the stock price of TCS has gone up from Rs. Please clarify this for me.

The August contract will be invalid after Aug month expiry…so Aug contract will be invalid anyway. So technically you are buying Sept contract as a fresh position…and as long you are sure that about your directional view, then you can stay in the trade. Either which ways you will be settled for August contract weather you sell it yourself or hold to expiry.. Request you to post this query here — http: Someone asked following query in comment but I guess you missed to reply…..

Could you help with that???? Well, the loss has to be measured in terms of Rupees and not number of shares. In case you lost Rupees, then your loss is Could you please answer my query. If contract is held till expiry in future and it expires. Settlement is only in terms of cash, there is no physical stock settlement. I read that trading in F and O ban scrips attracts penalty of 5k per contract.

And is it applicable even if contract is closed same day intraday sold off too. When you buy a security which is under ban period then you maybe assigned a penalty. Hence its best to avoid stocks in ban period. Would like to know zerodha policy in this regard.

Is it correct to assume that scrip was in demand and as it exceeded possible quantity it goes into ban. And so as soon as its out of ban it would show good movement. What does 1 gain by rolling over. Or is it just terminology for this action with no real advantage.

How to Trade in NSE Intraday Spot/Futures/Options with FuturesTree Technical Analysis software ?

Scrip gets into ban period when maximum open interest is reached. Some details here — https: You develop a view on the stock either bullish or bearish and act upon it by either buying or selling the futures. Replies to the quarries further adds to learning process. My question is regarding calculation of profit in futures. My understanding is that the profit or loss on future trade is calculated on the basis of price prevailing on the date and time of exiting from the position or expiry date as the case may be only, and any fluctuations in the intervening period have no bearing on it.

Thanks for your reply that too on Sunday it self I had read only chapter 3 on futures I ought t o have read chapter 5 and all other material on the subject before seeking clarifications. Who knows, it may be turning point. I am sorry if my Question is nt making sense. WILL THIS ORDER SQUARE OFF THE EXISTING LONG POSITION AND SHORT 1 LOT?? Incase I have purchased 1 lot of a future assuming TCS lot size , By means of square off OR selling I have to sell the complete lot i.

Is partially selling allowed in futures?? Check this — https: Can you pls clarify if the below statement was a typo. I have a counterparty who is buying TCS shares from me at Rs Its actually me who is buying TCS at , isnt it?

I am not trying to identify typos, but just want to make sure I am getting the concept right. Well, it simply means by purchasing TCS futures on 15th Dec , I have digitally entered into an agreement with a certain counterparty agreeing to buy TCS shares from me counterparty at Rs. When you intend to buy the shares before placing the order you are considered a buyer.

Hi Sir, Thank you very much for the teaching very easy to understand for newbies like me. I would like to know whether you would open a topic on futures spread trading especially on commodity like FCPO Crude Palm Oil Futures too?

Hi Karthik, First of all, thanks a lot for your easy-to-go explanations and great education material. I appreciated your teaching style elsewhere as well, but it seems no appreciation is enough — you have designed this education blog so very well!

Really a great piece of work. It was a successful experience with Rs. And I am happy. Yes, the amount seems ridiculous, here people talk about lakhs of Rs but I am a small trader: I just took some liquid scrips Infy, Airtel, LIC HSG FIN, Tata Steel. I followed their charts 1 min intraday and tried to identify a trend or pattern. With a small movement of the scrip, I came out with a small profit. My luck helped me in the first trade.

I got Rs. Then in the 2nd trade I put a stop loss such that my loss will be limited to Rs which I just earned. I did not wait for long and with a small profit itself I came out.

May be just 0. I repeated this for times in various scrips and started collecting small profits. Together end of the day it is giving me Rs after deducting the brokerage, tax etc. I have double checked with Zerodha brokerage calculator and it does show that I am in profit. This is my first time in futures. So I am little surprised — is it really so easy? Or am I missing some hidden charges or taxes which will eat out my profit?

Just follow the chart for mins at a stretch, develop a feel how it is behaving and take a chance or come out. If it is really done in this way, then I am fine. But I thought I will double-check with you before I put myself into some unknown problems.

Trading in futures seems so much easier than options where I was playing for last 2 weeks and both of them give much more return than Equity, needless to say.

Please help me to understand if there is any risk I am unknowingly taking or if any other taxes or charges applicable apart from what is shown in Zerodha brokerage calculator. Yes, it is that easy. You just need to identify a stock, observe its price movement, and place a trade.

But as you might have guessed, this simplicity can be quite misleading especially when you see price going against you. Just keep at it, be rest assured the markets will teach you few valuable lessons.

My intention was to capture 1 point movement, that is enough. Before I could even put a stop loss order, the price moved down by 10, and then as I was perplexed, it just went down by 20 points more. All that I earned in last 2 weeks, vanished within few minutes. We should stay away on the result date.

Infosys result was not really so bad to give up all gains, but market behaves in its own way. Better to stay away on the result date, specially for new traders like me. Well, the result day can offer some really great opportunities.

You will discover this when you learn options. The bigger lesson I guess is on estimating Risk to Reward expectation of a trade. You need to ask yourself if a 1 point gain on Infy was worth the risk? Actually I understood the real reason behind the damage was a delay in putting the stop loss.

We should use BO type order with a stop loss. I was not aware of it. I was manually putting the stop loss order after the execution of the primary order, and there was 1 min of delay or so. And I had to pay a big cost for that. Otherwise the loss would have been limited.

You are very correct that we must judge the risk-reward appropriately. After we assess that, we need to use stop loss for limiting the loss. That was my bigger mistake. I analyzed the whole situation and here is the background. The price was hovering around — oscillating within a range from to It traversed that range for at least 6 times around 9: It already corrected from to and then it was range-bound. I got convinced and went for a kill. I admit my mistake.

The question is different. It was at I placed the order and it was executed. I was on the 1-min candlestick chart. I was looking very closely for each granular oscillation of the price. Suddenly, really suddenly, within a moment it went from to And the volume for this moment went up very very high.

This volume was the highest trade volume in the day.

Error (Forbidden)

The price dipped by 20 points in a single moment. The question is, how this is possible? There must be so many other buyers with price between and So the price is supposed to come down in a gradual manner — not all of a sudden. If I assume that some algo trade was set with decreasing price quote at each small difference and with high volume, then also the price should come down gradually with execution of each order.

I could not understand how an extremely liquid stock like Infy can fall by 20 straight points just in a moment it already corrected by 30 points — so there must be enough buyers in the system. If you can technically explain such sudden fall, I will be very glad. I want to learn so that I understand what is happening behind the board. Yes, SL plays an important role, but end of the day it is just the logistics part of the trade life cycle. The real gravy is in identifying the right opportunities with the right risk reward ratios.

Quite possible, it had a massive correction from , consolidated at range before the trend continued further down. You will get an understanding of this when you look at the nature of corrections and uptrends across multiple stocks and indices. Chances are there was a big short order placed which would resulted in such a dip. It could have come from an algo or a trader.

Hey Karthik thanks for valuable lessons. I am not able to understand the full cycle of Future contracts here. I understood the perspective of person buying the contract or trading it with someone else before expiry. But how does this contract cycle start?

I am taking a guess: For example, I place an order to buy TCS futures on my terminal at a certain price and you place an order to sell TCS futures at the same price, then assuming the price and quantity matches a trade happens between us. We will never know the identity of someone, but the exchanges would know and their risk management mechanisms ensure the money is credited and debited as per how the trade evolves.

Sir when we place order in nifty future then it get placed at current market price or it get placed when again market touch the price. Please reply it I post this again. Depends on which order you place — limit or Market order. Market order means you get Nifty futures around the current market price, but limit order you get it when the market touch the prices you have specified.

What will happen if I forget to square off the future contracts before expire date and it comes to my day after expiry..? Above query is concerned with future trading. Actually I do option trading but very new to future trading. Hi Karthik, is it necessary that underlying Market Price is always less than Future contract value? If the Fut price is less than spot, then Fut is said to be under discount….

Dear sir, I have a basic question in Options data positions. Also, if the nearest OTM put option has shown increase in open interest, it might indicate that it is hedged at that level for the long positions in the stock. Would you be able to clarify. I think you will only be complicating the matter by combining the moneyness of an option along with its OI.

Suppose I have a 1 lot of Just Dial for next month i. Now it goes into a ban. I am sitting on profit. Can I square off my position during the ban, or Will I be incurring penalty. Also what if the stock remains under ban on Expiry too. Than, At what price will Exchange sell my lot. Will it be sold at price before the day of ban period or at the underlying price on expiry. You can only unwind the position during ban period, no new fresh positions can be initiated.

So, yes you can unwind. Remember, only derivative contract is banned, not its spot. Spot and futures prices converge at the expiry. Hence, the futures price will reflect the spot …even during the ban period. So that will be the price you will get settled at. Q2 do the seller at expiry quickly buys the stock at low price assumed in the open market and sell that to us. So basically if the prices really go down then how does seller take advantage of low price in the market at expiry?

How does he realize the profit? They are released once the trade is squared off. The seller makes a profit if the price goes down and buyer makes money if the price increases.. Remember, at a given point only one of them makes money. It is all cash settled and there is no requirement of actual deliver of shares. Is it possible to close the lots one by one ,even if its bought at the same time and how to do that?

I normally click exit. Yes, you can exit piece by piece. Suppose you have bought 10 lots, click on F2 to invoke the sell order form, enter the desired number of positions to sell maybe 2 or 3 and submit the order. If there is a bearish sentiment in the stock for long run next one year. Should the spot price be above than near month future price and near month future price be above than far month future price spot price — Near month futures price — far month futures price.

If there is a bullish sentiment in the stock for long run next one year. Should the spot price be below than near month future price and near month future price be below than far month future price spot price — Near month future price — far month future price. Irrespective of the sentiment in the stock, by default the futures tends to be higher than the spot. They invert due to short term supply demand mismatch.

Check this module — http: Trading Normal future were already explained in depth. Can you please help to understand how to trade future as MIS. Hello karthik sir Sir Why there is standered lot size concept instead of just single loose stock or index. You just have to login and start trading. The next demo is tomorrow 2: Check our youtube channel. As I mentioned earlier, it really depends on your expectation.

You can square off the very next second you entered into the contract or hold till expiry. From above example, What if i had short 1 lot of TCS 1. I would have been end up making the loss of Rs Yes, please do check this — https: Pleade give me a reply 1.

Can i sell the lot share tomorrow mornong future trade which is buy today evening? Sir, What about the premium we need to pay to make a future contract. If the appreciation of the asset is less than the premioum, will it be a loss. After you squared off your position at Rs. Now imagine this scenario- At expiry, the price is suppose Rs. Do both of them pay up? Where does the money go?

And also can you please explain a full cycle of a contract at 2 times squaring off till expiry from each of the contract holders perspective.. I meant how does one full cycle of a contract work when one buyer squares off their position and it transfers to other buyer.

Suppose A and B entered into a contract and then B squared off and sold it to C. Now A squared off and sold it to D. Final contract between D and C. So how does the money transfer look like in this situation?

So does not matter what the counterpart does…the final contract could be between A and D as well…margins are blocked and everyday the funds are settled via M2M. In derivatives, especially futures, one of the parties always makes money…i.

But if the price at expiry is then the one who bought it at new buyer has also suffered a loss and the original seller has also suffered a loss except the buyer who exited at he made a profit right? Ok, if market is at , and if a trader has shorted at , then yes, he is making a loss. Also if a trader has bought at , the he too is having a loss. The counter parties to both these trades i. B will be selling at at the time of expiry?

Since B has sold at , his short price is fixed at unless he averages along the way. If C decides to square off then it would be with B or a new market participant. Remember there is a M2M that occurs on a daily basis. When A has bought from B, B could either be squaring off an old trade or could be creating a new one. Assuming its a new one, and there are only 3 players in the Mkt, the trade is now between B and C. CHAPTER 3 The Futures Trade. January 9, at 6: Why we should buy future stock instead of equity, pls clarify…..

January 10, at 7: It is explained in the next chapter 4, the same will be uploaded next week. March 16, at March 17, at January 10, at 1: January 11, at 1: January 11, at 5: January 11, at January 12, at 1: January 12, at January 12, at 4: January 12, at 5: February 13, at You are doing excellent work.

This all modules and chapters very very useful for newbies. Happy to know you liked it, Ankit. Good luck and happy learning. January 12, at 9: January 13, at 4: July 1, at 6: July 1, at 9: April 18, at 7: April 19, at Check your tradebook in Q. January 19, at 8: January 19, at 5: January 19, at February 6, at 7: February 6, at March 13, at 8: March 13, at March 14, at 5: March 14, at 1: You need a strategy for the trade, without which losses are bound to happen.

March 14, at March 14, at 6: Hi Karthik, Can you please let me know on how the Cost of Carry both buy and sell and implied volatility and annual valatility will be caliculated for a futures contract. March 15, at 5: May 18, at 2: May 19, at 4: July 1, at Hi Karthik, Can we Rollover a Futures Contract?.

June 13, at June 14, at 3: June 16, at 8: June 17, at 5: June 16, at 1: June 28, at 7: June 29, at 4: June 30, at 7: July 1, at 7: July 20, at 8: July 21, at 6: August 8, at 8: August 9, at 3: October 24, at 7: October 26, at 6: November 1, at 5: November 2, at 5: Yes, you can do that.. November 11, at 6: November 12, at 4: Because Future offers leverage.

November 22, at 7: November 23, at December 24, at 5: December 24, at December 25, at 2: June 26, at 4: June 27, at Futures and Spot always move in same direction although the prices differ.

January 15, at 6: Query on Future I have a nifty future bought for 45 k as an exmaple nifty Jan series. January 16, at January 18, at 2: January 19, at 6: February 26, at 9: February 27, at February 29, at April 1, at 1: April 1, at 2: May 1, at 6: May 2, at 5: April 17, at 6: Hello Karthik, Great series, this! April 17, at 7: Thanks for the kind words Ajay!

April 17, at 9: April 18, at April 29, at 1: April 29, at May 6, at 7: May 7, at 1: May 7, at May 8, at 3: May 18, at 6: May 18, at 7: June 1, at 1: June 2, at June 2, at 1: TA is applicable to all assets which has time series data. June 23, at June 24, at 2: June 24, at 7: June 25, at 3: June 25, at 6: Thank you very much for clearing the doubt sir.

June 26, at 8: July 5, at 4: July 5, at No, when you square off an existing option you just unblock margins. No, upon expiry all options will be settled in cash. No physical delivery of stock is allowed. July 6, at 3: July 6, at 8: July 6, at 9: July 7, at July 6, at July 6, at 1: Please feel free to ask as many questions as you want, it helps not just you but many others.

July 10, at 3: July 11, at The same answer I suggested for your GMR query holds true here as well. July 12, at July 13, at July 13, at 7: July 14, at 8: July 14, at 9: July 15, at 7: July 31, at 1: July 31, at In fact I only look at the Spot chart to develop a directional view!

August 5, at 2: August 5, at 9: August 7, at 9: August 8, at 4: August 8, at August 9, at August 12, at August 18, at August 19, at 5: September 7, at 2: August 27, at August 28, at 8: September 8, at Is it neccessary that if the price of underlying in spot market also the future price increase? Thats how it works — both futures and spots move in tandem. September 16, at 5: September 17, at 8: They both will be same. September 27, at 4: Hi Karthik, I read that trading in F and O ban scrips attracts penalty of 5k per contract.

September 27, at 6: September 28, at 5: October 3, at I have a kite account. October 4, at October 16, at 8: October 16, at 9: October 17, at December 6, at 5: December 6, at 6: You can choose to square off the position and cut your loss anytime. December 7, at December 8, at Yes, this will net off square off the existing position and create a new short position. December 12, at 1: December 13, at All transactions is in the multiple of the lot size.

You cannot transact in partial units. December 17, at December 18, at 7: January 3, at 4: January 4, at But I hope this helps — When you intend to buy the shares before placing the order you are considered a buyer. January 5, at 7: January 6, at 1: Yes, its on the to do list.

Maybe sometime in May-June this year. January 13, at January 13, at 3: