Future & options definition
speculation vs hedging
Futures vs options
What is derivative market?
Forward contract vs future contract
Future contract types & expiry
Near contact (current month)
next contact(next month)
Far contact(next 2nd month)
Expiry date if future contract: last Thursday day of every month.
Lot size(group shares)
In future & options (FNO) contract has to be standard.
Lot is a group of share.
If lot size =100 (then 100 shares of a company stock)
Example TCS contact:
TCS share price 2000
Lot size decides by stock price
So total future contract value= shares*share price
if you want to buy in cash/NSE you have to pay 5 lakhs.
Contract value: lot size *price for share.
FNO margin & leveraging
in the above instead of buying at whole you pay margin amount.
It’s calculated automatically while buying contact.
Ex: for 5 lakhs you have pay only 1 lakh.
4 lakhs as leveraging.
Margin money by your stock broker:
in cash market/equity: margin amount lend by your stock broker is 50% of your current stock holdings.
In futures market maybe 6x times than your current holdings/assets.
Standard contact value most of the companies at 6 lakhs.
Decides by exchange and sebi.
After selling future contract you may get profit or loss by leveraging (1+5 lakhs). you spent 1lakh for 6lakhs property &sold at 6.5 as a profit without spending 5lakhs that’s called leveraging.
Future contract: Settlement
If loss you have to pay loss only to broker.(
Ex: 1 lakh margin 6lakhs contract
60000(share price if 100* 6000share price each)
If share. Price down at 5500 within contact period (1/2/3) months.
500*100=50,000 you have to pay to your broker, otherwise he sells your stocks and settles his fees& commission.
STCG: selling contact within maturity
LTCG: selling after maturity period
know more here