Overview

On Wednesday morning, Nifty was at 21,800. Two sessions ago, you bought one lot at 22,100. The difference: 300 points × 75 units = Rs. 22,500. That amount was debited across two sessions: Rs. 11,250 Monday evening, Rs. 11,250 Tuesday evening. Your Rs. 1.5 lakh margin is now Rs. 1.27 lakh. Broker sent a margin call. You did not trade on Tuesday. You did nothing. The deduction happened anyway. This is futures trading: MTM settlement at 3:30 PM daily, whether or not the position is touched.

	Nifty 50 Futures	Equity Delivery
Margin required	~Rs. 1.5-2L for Rs. 16.5L exposure	Rs. 16.5L for Rs. 16.5L exposure
Daily settlement	MTM debits/credits every session	Settled only at sale
Expiry	Last Thursday of month	No expiry
Short selling	Clean, regulated, no borrowing	Restricted and complex
NRI eligible	No (RBI restriction)	Yes
Physical delivery risk	Stock futures: delivery in expiry week	N/A

Key Takeaways:

Open demat account with derivatives activation for NSE futures and options trading and MCX commodity futures trading.

What is futures trading: daily MTM settlement, not settled at exit. Stock futures trigger physical delivery if not squared off in expiry week

Futures contract example: Nifty 50 lot = 75 units × Rs. 22,000 = Rs. 16.5 lakh on approximately Rs. 1.5-2 lakh margin

Derivatives market: hedgers transfer risk, speculators accept it, arbitrageurs capture spread mispricings

Futures trading strategy: specify stop-loss in rupees per lot before entry, not as a percentage after entry

What is Futures Trading?

What is futures trading: an obligation. Stock futures contract trading in India since October 2019: positions not squared off before expiry go into physical delivery. One Reliance lot (250 shares) held through last Thursday = physical delivery of 250 shares. Index futures are cash-settled; stock futures are not.

Futures contract example, Nifty 50: lot size 75 units, contract value Rs. 16.5 lakh at 22,000, initial margin approximately Rs. 1.5-2 lakh (SEBI SPAN framework), expiry last Thursday. Stock lot sizes: Reliance 250 shares, Infosys 400 shares, TCS 175 shares.

Why Should You Consider Futures Trading?

Hedging was the reason derivatives market was created. Not leverage.

Specific use cases:

• Short exposure: futures and options trading gives clean short access without stock borrowing
• Commodity futures trading (MCX): cooking oil importer buying 10,000 tonnes in 4 months buys crude palm oil futures today. If prices rise, futures gains offset the higher import bill
• Directional leverage: Rs. 1.5 lakh margin controls Rs. 16.5 lakh of Nifty exposure.

How Does Futures Trading Work?

MTM settlement at 3:30 PM: Nifty long at 22,000, market closes at 21,800 = Rs. 15,000 debited (200 × 75). If margin falls below the maintenance threshold, top up by 10 AM next session or the position is squared off.

Futures market trading participants: hedgers (airlines hedging crude oil, exporters hedging USD/INR), speculators (accepting risk hedgers shed), arbitrageurs (buying cash and selling futures when premium exceeds fair value).

What Are the Risks Involved in Futures Trading?

Company X closed at Rs. 480 Friday. You hold one long lot of 1,000 shares. Friday evening: accounting fraud announced. Monday opening: Rs. 290. Loss: Rs. 190 × 1,000 = Rs. 1.9 lakh. Your initial margin: Rs. 1.2 lakh. You owe Rs. 70,000 beyond what you deposited. Losses in futures contract trading are not bounded by margin.

Key risks:

• Overnight gap: single-company events are binary. Stock futures more exposed than index futures
• MTM exhaustion: 3-4 adverse sessions reduce margin below maintenance without the position being fundamentally wrong. Many traders get stopped out at the worst point of a temporary move
• Rollover cost: closing and reopening in the next month every last Thursday. Contango or backwardation is a recurring cost
• Physical delivery: stock futures not squared off in expiry week trigger delivery; additional delivery margins apply

Stop-loss at 1.5-2% below entry on Nifty = Rs. 16,500-22,000 maximum loss per lot.

How to Get Started with Futures Trading?

Requirements:

• KYC-verified demat account at a SEBI-registered broker
• Derivatives activation: ITR, salary slip, or 6-month bank statement as income proof
• SEBI risk disclosure acknowledgement for futures and options trading
• Full margin in the trading account before the first trade (SEBI peak margin rules, September 2021)

NSE’s simulator: run one full monthly expiry cycle with paper trades before committing real margin. The rollover mechanics and MTM cash flows over 30 sessions are more instructive than any guide.

What Strategies Can Be Used in Futures Trading?

Futures trading strategy must specify entry trigger, stop-loss in rupees per lot, and exit condition before the trade. “Buy on strength” is undefined risk, not a strategy.

• Hedging: sell Nifty futures proportional to portfolio beta. Rs. 75 lakh portfolio with beta 1.0 = approximately 6 short lots before budget or earnings season
• Trend following: enter after a confirmed breakout with volume; stop-loss below the breakout level. Premature entries are punished by leverage; confirmation discipline is the strategy
• Calendar spread: buy near-month, sell far-month (or reverse). Lower margin than outright positions; useful in commodity futures trading where seasonal patterns create predictable spreads
• Basis arbitrage: buy stock in cash market, sell the same stock’s futures when futures premium exceeds carrying cost. Hold to expiry convergence.

How Can You Analyse Futures Markets?

Open interest: rising price + rising open interest = trend building with new money. Rising price + falling open interest = shorts covering; move is position-driven, reversal likely.

Futures premium vs spot: Nifty futures at significant premium to Nifty spot signals bullish participants. Futures at discount: bearish expectations. For commodity futures trading, commercial hedgers’ seasonal positions show real supply and demand direction.

Conclusion

Futures trading asks one question before any other: does your margin account move daily whether or not you act? It does. MTM settlement is not a settlement at exit. Rs. 22,500 gain or loss on a 300-point Nifty day is in the account that evening.

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