Robert miner's high probability trading strategies book16 comments
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In simple language one future contract is group of stocks one lot which has to be bought with certain expiry period and has to be sold squared off within that expiry period. Suppose if you buy futures of Wipro of one month expiry then you have to sell it within that one month period. Important - Future contract get expires at every last Thursday of every month.
If you buy October month expiry future contract then you have to sell it within last Thursday of October month. Likewise you can buy two months and three months expiry period future contract.
You can buy maximum of three month expiry period. Indices future trading As you can do future trading on stocks likewise you can do trading on different indices like Nifty index, IT index, Auto index, Pharma index etc.
Successful trading in futures Future or derivative trading is the process of buying or selling stock future or index future for a certain period of time and squaring off before the expiry date. Expiry period can be of one month, two month and three month and not more then of three month. Most of the times on 3rd month expiry future you may see very less trading volumes. But on Nifty index contract or on other index contract you may see good trading volumes even on 3rd month expiry future also.
You can also buy and sell or sell and buy future contract on the same day of any expiry month. This is called as day trading or intraday in futures. Selling future contract before buying is called short selling. Short selling is allowed in futures trading. Major Advantages of Futures Trading over Stock Trading 1 Margin is available - In future trading you get margin to buy but can hold only up to maximum of 3 months , while in stock trading you must have that much of amount in your account to buy.
But limitation for this is your expiry period. Means if you bought future of one month expiry then you have to square off within that one month likewise you can buy maximum of three months expiry.
This is not possible in stocks. You can short sell futures and can cover off within your expiry period. For example - If expiry period of your future contract is of 1 month then you have time frame of one month to cover off your order like wise if your future expiry period is of two months then you have time frame of two months and this continues till three months and not more then three months.
In short selling of futures also you get margin as you get in buying of futures. Disadvantages of Future Trading over Stock Trading 1 Limitation on holding - If you buy or sell a future contract then you have limitation of time frame to square off your position before expiry date. For example - If you buy or sell future contract of one month expiry period then you have to square off your position before your expiry date of that month, so in this example you got one month period.
So likewise if you go for two month expiry period then you get 2 months and if you go for three month expiry then you will get 3 month expiry period to square off your position. You can only do on listed stocks on Nifty and Jr. For example - suppose this is month of October then you have to buy till maximum month of December expiry and you have to sell it within last Thursday of December month.
You can sell anytime between these periods. Lot size group of stocks in one future contract varies from future to future contract. For example Reliance Industries future lot size has quantities of shares while a Tata Consultancy service has shares. The margin in other words price of one lot size varies on daily basis based on its stocks closing price. Future trading can be done on selected stocks listed under Nifty and Jr. Nifty and not on all stocks. The price of future contract is determined by its underlying stock.
Trading in Futures Derivatives. Welcome to Investment House Important points to Remember while doing future trading 1 First up all you have to decide whether you want to buy stock derivatives or index derivative. Once you buy certain expiry period then you have to sell cover off your order before that period. Its no need to wait till the expiry period, you can even square off on the same day if you are getting profit or anytime whenever you feel to book profit, no compulsion to cover off your order on the last day of expiry.
Method of Short Selling Short selling selling before buying in future trading In future trading you can do short selling and buy cover later when price comes down from your selling price you can short sell stock future as well as index future. But again same restriction will apply and that is of expiry period. If you need any clarification on futures trading please Contact us. Information presented on this site is a guide only. It may not necessarily be correct and is not intended to be taken as financial advice nor has it been prepared with regard to the individual investment needs and objectives or financial situation of any particular person.
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