What is Stock Future? and Why Stock Future Tips?

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What is Stock Future? and Why Stock Future Tips?

About Stock Future

NSE commenced trading in stock future on November 9, 2001. The stock future contracts are available on 226 securities stipulated by the Securities & Exchange Board of India (SEBI).

Stock Future and Nse Future are the common terms associated with dealing in stock futures.

Trading cycle

Stock Future contracts have a maximum of 3-month trading cycle - the near month (one), the next month (two) and the far month (three). New contracts are introduced on the trading day following the expiry of the near month contracts. The new contracts are introduced for a three month duration. This way, at any point in time, there will be 3 contracts available for trading in the market (for each stock) i.e., one near month, one mid month and one far month duration respectively.

Expiry day

Stock Future contracts expire on the last Thursday of the expiry month. If the last Thursday is a trading holiday, the contracts expire on the previous trading day.

Price steps

The price step in respect of stock future contracts is Re.0.05.

Price bands

There are no day minimum/maximum price ranges applicable for stock future contracts. However, in order to prevent erroneous order entry by trading members, operating ranges are kept at +/- 20 %. In respect of orders which have come under price freeze, members would be required to confirm to the Exchange that there is no inadvertent error in the order entry and that the order is genuine. On such confirmation the Exchange may approve such order.

Stock Future Tips and Stock Future Trading Advantages

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.For example - If you plan to buy stock XYZ at Rs. 100 and quantity 1000 shares then you have to pay 1 lakh rupees (RS 100 x1000 qty). But if you plan to buy XYZ future contract and that contract lot size has 1000 quantity of shares then instead of paying 1 lakh rupees you have to pay just 20% to 30% or as decided by exchange of whole amount which comes to 20 thousand to 30 thousand rupees.In short in stock future trading you have to pay just 20% to 30% of the whole amount what you pay if you buy stock of that price. 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.

Possible to do short selling

You can short sell futures- You can sell futures without buying them which is called short selling and later buy within your expiry period, to cover up your positions. This is not possible in stocks. You can’t sell stocks before buying them in delivery (you can do in intraday). You can short sell futures and can cover off within your expiry period.

Brokerage is Low

Brokerages offered for future trading are less as compared to stock delivery trading.

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