Futures & Options
Understand futures trading before you trade it
Index and stock futures — like NIFTY and BANKNIFTY contracts — let traders take a view on price direction without owning the underlying shares. Every contract has a fixed lot size, an expiry date, and moves on margin, meaning small price shifts can create outsized gains or losses.
Lot size & contract value
Futures trade in fixed lots, not single shares. The exchange periodically revises lot sizes so each contract's notional value stays within a defined band — that's why lot sizes change over time even for the same index. You post a margin against this contract value, not the full amount.
SPAN + exposure margin
Your broker blocks two components: SPAN margin (covers a worst-case one-day move) and exposure margin (an extra buffer). Together they're a fraction of the contract's full value — this is what creates leverage, and why losses can move faster than the margin you put down.
Expiry cycles
Index futures typically expire weekly or monthly depending on the index; stock futures expire monthly, on the last Thursday (or the previous trading day if that's a holiday). Open positions are marked-to-market daily and must be closed, rolled to the next series, or settled by expiry.
Settlement: cash vs. physical
Index futures settle in cash. Stock futures in India settle by physical delivery of shares if held to expiry — meaning you (or your broker, per their policy) may need to actually deliver or take delivery of the underlying stock unless the position is closed beforehand.
Leverage cuts both ways
Because you control a large contract value with a smaller margin, a 1% move in the underlying can mean a much larger percentage move on your capital — in either direction. This is the single most misunderstood part of futures for new traders.
Hedging vs. speculation
Futures aren't only for directional bets. An existing stock investor can short an index future to hedge portfolio risk during uncertain periods — a very different use case from speculating on short-term price moves, with a different risk profile.
Common mistakes new futures traders make
Oversizing positions
Using all available margin on a single trade leaves no room for the position to move against you before a margin call.
Ignoring expiry mechanics
Holding a stock future into expiry without a plan can trigger physical delivery obligations you weren't prepared for.
No stop-loss discipline
Leverage punishes indecision — a plan for exiting a losing trade matters more in futures than in cash equity.
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⚠ Risk disclaimer: Futures & options trading involves substantial risk and is not suitable for all investors. Losses can exceed the initial margin deposited. Contract specifications (lot size, margin, expiry rules) are set and periodically revised by the exchange — always confirm current specs with your broker before trading. Please understand the risks fully before trading. See our full risk disclosure.