Tuesday, May 24, 2022

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    Let’s deep dive into the futures!

    The commodities market is a platform where traders and investors trade in the equity or the cash market and the derivatives or the futures market.

    Investors invest for long term and short term and they have physical shares in hand. Trading is done for the stipulated time period that is 9:15 AM to 3:30 PM within one day. This trading method is called INTRADAY TRADING. 

    Futures are majorly done as intraday trading but of cash amount and not of physical shares.

    The futures stock on a long position has to be brought to a shot position so as to square up the transaction. Hedging is done to reduce the risk. Parties involved in this are the buyer and the seller.

    LONG means to BUY and SHORT means to SELL. Apart from this Futures market is called derivatives market because derivatives are something you deal in the future into the asset classes like Sensex, nifty, or any stock or indices.

    Futures are traded on both NSE and BSE platforms. Dealing in futures brings two types of contracts namely Forward contracts and Futures contracts. Forward contracts are buying and selling of underlying assets with prior discussion on the expiry date, no. of contracts held and these forward contracts settle just once at the time of expiry of the contract. The most common forward contract in India is found to be the dollar forward contract, it’s priority usage is to hedge the risk of currency.  The trading platform for forwarding contracts is OTC or Over the Counter contract.  Futures contracts are derivative contracts that deal with the long and short of an asset for predefined dates and rates in the future.

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