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Section 3 · Module 3.1

Futures Trading (NSE F&O)

7 min read

Spot

Futures

Futures > Spot — normal carry / bullish structure.

Long 1 Nifty lot @ ₹24,000 (25 units). Adjust Day 1 close:

Close: ₹23,900 → MTM ₹-2,500 debited/credited overnight

Contract Specifications & Mechanics

Futures bind buyer and seller to transact at a set price on a future date. Traded in standardized lots (e.g. Nifty 25 or 75 units per lot).

Monthly expiry on the last Thursday (or preceding Wednesday if holiday). Rollover closes the expiring contract and opens the next month to maintain exposure.

Margin Mechanics & MTM Settlement

Futures use performance bonds instead of full capital:

  • SPAN margin: Covers worst-case single-day move.
  • Exposure margin: Additional volatility buffer.
  • MTM: Daily P&L debited/credited against cash balance overnight.

Contango & Backwardation

Contango: Futures > Spot — normal carry, bullish structure.

Backwardation: Futures < Spot — bearish panic or aggressive hedging.

Knowledge check

Long 1 Nifty lot at ₹24,000; close ₹23,900; lot size 25. What happens overnight?