What Is Nifty Futures?

A 'Future' is a contract to buy or sell the underlying asset for a specific price at a pre-determined time

Thus it is forward contract which is a derivative type of instrument in which buyer and the seller are agreed to transact set of financial instrument/ Physical commodities for future at a particular price i.e. if you buy a futures contract, that means you promise to buy something that a seller has not yet produced at a particular price and specific time.

If you are entering in future market it is not compulsory that you will have to liable for receiving any delivery (in case of commodities). This is why futures contracts are known as financial instrument.

Every futures contract has the following constituents:

• Buyer

• Seller

• Price

• Expiry

Expiry is the time and the day that a particular delivery month of a futures contract stops trading, as well as the final settlement price for that contract.

Nifty Futures

Nifty Futures is also a financial instrument in which futures contracts are done on the basis of S&P Nifty index which is the benchmark of NSE. Nifty futures are a instrument type of market in which trading is done on the basis of the underlying index S&P CNX NIFTY.

Nifty is index of 50 blue chip companies consisting in NSE (National Stock Exchange) and represent the performance of these companies. Nifty covers more than 70% of traded values of stocks in NSE and also it covers around 60% of total market capitalization.

Nifty futures trading cycle

S&P CNX Nifty futures contracts have a maximum of 3-month trading cycle - the near month (1st ), the next month (2nd ) and the far month (3rd ). A new contract is introduced on the trading day following the expiry of the near month contract. The new contract will be introduced for three month duration. This way, at any point in time, there will be 3 contracts available for trading in the market i.e., one near month, one mid month and one far month duration respectively.

Expiry day

S&P CNX Nifty futures 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.

Advantages of trading in NSE Nifty Index

An index represent the entire stocks consisted in its exchange, so you can trade the entire ‘Stock market’ rather than individual stocks.

1. Highly liquid

2. Large intra-day price swings

3. High leverage

4. Low initial capital requirement

5. Lower risk than buying and holding stocks

6. You have to target only one index instead of 50's of stocks

Index futures are cash settled so there is no fear of bad delivery, forged etc. You are required to pay a small fraction of the value of the total contract as margins. So you need not to worry to invest a huge amount in the market.