Futures Trading Basics and Expiry Concepts
A futures contract is an agreement linked to an underlying asset and a defined expiry. In Indian equity derivatives, futures trade in standardised lot sizes and their value changes as the underlying market moves.
Futures are time-bound contracts
Unlike a cash equity holding, a futures contract has an expiry date. A trader who wants continued exposure beyond that expiry may need to close the current contract and take a position in a later contract, subject to market conditions and their own plan.
Expiry affects liquidity and pricing behaviour, especially as the contract approaches its final trading days.
Lot size and exposure
Futures are traded in exchange-defined lot sizes. This means the notional exposure can be much larger than the cash amount used as margin. A relatively small move in the underlying can therefore create a meaningful profit or loss.
Margin availability should never be confused with low risk. Leverage increases sensitivity to price movement.
Futures price versus spot price
The futures price can trade above or below the cash-market price because of carrying costs, dividends, demand and time to expiry. The difference usually changes as expiry approaches.
When analysing a futures contract, confirm which expiry you are viewing rather than assuming all contracts represent the same price.
- Check expiry
- Check lot size
- Check liquidity
- Understand notional exposure
- Review risk before using leverage
Practice before using real leverage
A virtual environment can help users understand contract selection, quantity and P&L behaviour without real-money execution. It still cannot reproduce every live-market execution detail, so simulated results should be treated as educational practice.