Future Segment is an offering by the National Stock Exchange (NSE) to the traders. It allows the traders/investors to hedge their portfolio and indulge in speculative trading of stocks and indices. In this article, you will understand some of the important concepts of the future segment. Furthermore, it will help you in taking correct positions in a future segment.
Trading in Future Segment
The stock market runs on sentiments and news flows. Therefore, the traders and investors are always eager to take a position in the market on such events. Furthermore, trading in the future segment can be a game changer. It can give higher returns to the traders if they are on the right side of the trade.
Trading in future segment requires a trader to trade in lots, give margins, etc. So let us understand these concepts in detail. Let us first understand the concept of the lot.
Future Segment Lot Size
The lot size of the securities in future segment varies from stock to stock. However, the futures contract on any security cannot be less than Rs. 5 lakhs. Therefore, lot size is determined by dividing Rs. 5 lakh by the price of the stock. The lot size is often rounded off by the exchange to ease the trade calculation. The permitted lot size in the future segment is same for an underlying security until the exchange changes it. The same is changed from time to time by the exchange.
For example, if the price of Reliance Industries is Rs. 850. So according to the future segment rule, the lot size calculation can be done in following way Rs. 5,00,000 / 850. The calculation comes to 589. Therefore, the lot size would be around 500 to 600 shares when rounded off. To sum up, the trader can take a position in the future segment in the lot size that is laid down by the exchange.He cannot purchase any random quantity of shares according to his own wish.
The position in future markets expires on the last Thursday of every month. The trader has the option of either squaring off the position or rolling the position by purchasing the next month’s future.
After understanding about the lot size, it is important to know about the margin amount in a future segment.
Margin Amount in Future Segment
Margin amount is the amount that is kept in the demat account of the investor or trader in future markets. The amount is kept in good faith. To put it another way, the margin amount acts as a security if the trader or investor books loss on any position in the future market. Before entering into any futures contract, margin money is compulsory. The amount of margin money ranges from 5% to 10% of the future contract.
The money that is deposited initially, before taking a position in the future market is called initial margin. Furthermore, the initial margin money can be sometimes more than 5% to 10%, if the market volatility is high.
Future Segment Example:
The trader or investor in the future market can take positions not only in individual securities but also the indices. Like for example, the trader can take a future position in Nifty future, Bank Nifty Future, Pharma Nifty Future, Metal Nifty Future and so on. The position on any future segment is possible only if the trader has initial margin money in his demat account.
Learn about Future Segment with Trading Fuel
Future Segment trading is not easy. It requires market experience and knowledge to earn handsome returns. Trading Fuel provides articles and blogs that will help you achieve higher returns in the market. Our articles and blogs are full of important information about the future markets. They help you take right future position and make more returns. In fact, stock markets can take away all your wealth if you don’t have the knowledge and information about the important concepts. We help you to overcome this barrier by giving you the right set of the learning experience. Visit and read our blogs/articles and reap long-term benefits while trading in the future segment.