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What is stock future ? How to trade in Stock Future?

To understand the Stock Future, we should understand first two things first one is contract and second one is lot size.

A) Contract - Each Future having a duration and on or before that time we have to settle that. Example, suppose SBI Future 26 Sep 2018. It is a contract which will be fully closed by exchange on 26 Sep 2018. Normally a contract duration approximate 3 months. Means if September 2018 expiry is running, then you can buy the contract of October and you can also buy November Contract also. Hope this word contract clear to you now.

B) lot size - Exchange has defined a particular lot size for each and every stock according to their market price.

Suppose SBI current market price is Rs. 300 and you think that it can move to Rs. 305 in next few minutes or in next hours or in next few days. So one option is there, you can buy 10 / 20 /50 / 100 / .../ 1000 quantity from equity market. Means you can buy shares. If you are buying 1000 share of SBI at Rs. 300, it means it will require Rs.300000 to buy this stock. Mostly brokerage house giving intraday margin. It could be five to ten times of your capital. If you have 50000 rs in your trading account, means if you can buy the shares of 2.5 lacs for intraday trading if your broker giving you five times margin. Normally, broker tell us to clear our position before 3:15 pm, nowadays some broker providing T+5 facility also. So suppose you bought 1000 share at 300 and it not moved 5 rs as per your expectation today and came down to 295. and time came to close your intraday equity position, it means you will have to book loss of 5000 rs. And may be possible, next day morning SBI will open at your target price of 305. Some broker giving facility to hold your stock for three to five days without paying full amount. But suppose if your account balance is Rs. 50000 and you bought 1000 share of SBI , and if any case SBI or Market started coming down heavily then broker can ask you to clear your position or to pay the full amount or some more amount for their safety. So Stock Future is somehow good in this kind of situation. So, if you think that SBI is good , so you can buy SBI Future. SBI Future lot size is 3000 nowadays. Means you are going to buy 3000 share of SBI in one go. Means you are going to buy one lot of SBI Future. You can buy September contract or October contract or November contract of SBI Future today. Mostly you will find difference in spot price and future price. If in cash, SBI running at 300 then SBI Sep Future may be 301 or 302 or any price. Only margin require to buy any Future. Margin define by exchange for each stock future.. yon can ask to your broker or you can check in website. Suppose SBI Future required margin is Rs. 1 lakh and your trading account balance is Rs. 2 Lakhs.

So let us suppose, you bought SBI Future today at 300 and just after 30 min it becomes 303. It means you are in profit now. If you want to book this profit you can sell your future at 303. So what will be your profit . Your profit will be Rs. 9000.

303 ( Sell price ) - 300 (Buy Price) ] x 3000 = Rs. 9000 (Profit)

But suppose you bought at 300 and till market closing it not moved and came down to 298, it means you are loosing Rs. 6000 at closing time. But you dont want to book this loss, so no problem, you can carry this position for next day. If your account balance was Rs. 2 Lakh then Rs. 6000 will be debited from your account and margin will also be blocked. Now if next day SBI Future open at 305 and you want to book profit then just sell it at 305 and your profit will be Rs. 15000. But your account will be credit according to its previous day closing price. As we assume that it closed at Rs. 298, so your account will be credited with Rs. 21000.

305 ( Sell price ) - 298 (Previous day closing Price) ] x 3000 = Rs. 21000 (Profit)

If you bought SBI Nov Future on 15 Sep 2018 and expiry date is 29 Nov 2018. So you will have to clear your position on or before 29th Nov 2018. If you are not doing so, then exchange will do it then exchange will settle at settlement price.

Now I hope that Stock Future trading concept is clear to you. If you want to share your view with us or having any kind of query and want to ask any question then you can post it here, as soon as possible, you will get the reply.You can directly write to us to email id "stocknifty@yahoo.com" or call at +919981722011.

 

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