By trading in index futures, an investor is buying and selling the basket of stocks comprising the index, in their respective weights. Stock index futures are traded in terms of number of contracts. Each contract would be to either buy or sell a fixed value of the index. The value of the contract would be the lot size multiplied by the index value.

In India, index futures trading commenced in on the National Stock Exchange NSE. For Nifty futures contracts, the permitted lot size is 50, and in multiples of Like other futures contracts, Nifty futures contracts also have a three-month trading cycle -- the near-month, the next month and the far-month.

After the expiry of the near-month contract, a new contract of a three-month duration would be introduced on the next trading day. Investors can trade in Nifty futures by having a margin amount in their account. This margin is a percentage of the contract value. It is usually about per cent. In simple terms, hedging is a strategy that helps limit losses. Exposure to a stock is equivalent to exposure to an index. This is because most stocks move in tandem to the market.

Why and how to trade in Nifty futures - lazuxyderonav.web.fc2.com Business

Exposure to index futures helps hedge this risk. If you are certain about future market movements, you can make profits through index futures. If you bullish on the market, buy index futures. If bearish, you should sell index futures.

How do they work?

You enter into a Nifty futures contract at a specified index value. On the expiry of the contract, the investor's profits would be the difference between the level forex asb the index forex new years eve hours expiry and the level specified in the futures contract at the time of purchase.

Short stock, long index futures. There are times when you sell the stock, but there is an upside in the market, thus resulting how to trade in nifty futures with example lost potential profits.

Index futures help you mitigate this risk.

By buying index futures when you are short on the stock, you can minimise the amount of potential profits lost. Equity portfolio, short index futures. There are rapid withdrawal binary options when you own a portfolio and are uncomfortable about market conditions.

You can hedge this risk by selling index futures. The concept vests easy ways to make money in runescape p2p the fact that every portfolio has index exposure and risks are accounted for by fluctuations in the index.

S uppose you are long shares of Reliance Industries at the price of Rs 1, per share; spot Nifty is at 5,; and Nifty how to trade in nifty futures with example is at 5, To protect your Rs 5 lakh Rsposition from a market downturn, you need to sell Nifty futures.

On closing, both the positions, you would earn Rs 2, Your position in Reliance Industries would have dropped by Rs 25, and the short Nifty would have vkc credit and forex services ltd chennai Rs 27, [i.

Nifty Futures: What Every Trader Needs to Know

Suppose you are short shares of Infosys Technologies at the price of Rs 2, per share; spot Nifty is at 5,; and Nifty futures is at 5, To protect your Rs 10 lakh Rs 1 million position from a market upside, you need to buy Nifty futures.

Your position in Infosys would result in a loss Rs 50, and the short Nifty would have gained Rs 50, [i. Suppose the spot Nifty is at 5, and the three-month Nifty futures at 5, To protect a portfolio of Rs 5 lakh Rsfrom a drop in the market, you need to sell December Nifty futures.

Your hedging strategy would earn you a profit of Rs 51,[i. ZaraBol - Trending Topics.

Understanding Futures Trading by a simple example

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