PocketX Learn / Module 4
Futures Trading
Learn futures contracts, margin, expiry, hedging, leverage and the mechanics behind derivative positions.
1. What is Futures Trading?
Futures trading is a type of derivatives trading where two parties agree to buy or sell an asset at a specific price on a future date. Rather than trading the asset itself (like st...
2. How Does a Futures Contract Work?
A futures contract is a standardized legal agreement between two parties to buy or sell an asset at a predetermined price on a specified future date.
3. What are the Key Components of a Futures Contract?
Futures contracts are standardized trading instruments that allow participants to buy or sell an asset at a predetermined price on a future date. These contracts are carefully stru...
4. How is Futures Trading Different from Stock Trading?
While both stock and futures trading involve participating in financial markets to generate returns, they are fundamentally different in structure, objective, and risk profile. Und...
5. What are Margins in Futures Trading?
In the world of futures trading, you don’t pay the full value of the contract upfront.
6. What is Mark-to-Market (MTM) in Futures Trading?
Mark-to-Market (MTM) is a daily settlement process in futures trading where the value of your open positions is adjusted to reflect the day’s closing market price.
7. What are the Types of Margins in Futures Trading?
In futures trading, a margin is the amount of money a trader must deposit to initiate and maintain a position.
8. What is Open Interest in Futures Trading?
Open Interest (OI) represents the total number of active (open) futures contracts that have not yet been squared off (closed), expired, or exercised. It is a critical metric used b...
9. What are the Common Underlying Assets in Futures Trading?
In futures trading, the underlying asset is the financial instrument or commodity on which the futures contract is based. The value of the futures contract moves in tandem with the...
10. What is Contract Rollover in Futures Trading?
In futures trading, contract rollover refers to the process of shifting your position from a near-month futures contract (about to expire) to a next-month contract of the same unde...
11. Difference Between Intraday & Positional Futures Trading
Futures trading allows traders to speculate on the price of assets like indices (Nifty, Bank Nifty), commodities (Gold, Crude), or stocks.
12. How Can Futures Be Used as a Hedging Tool?
Hedging is a risk management strategy used to protect investments from potential losses due to unfavourable market movements.
13. How is Profit or Loss Calculated in Futures?
A Futures Contract is an agreement to buy or sell an asset at a predetermined price on a future date. Traders use these contracts to:
14. What is the Role of a Clearing House in Futures Trading?
Futures trading is a contract between a buyer and seller to transact in the future. But what if one party fails to honour their promise?
15. Significance of the Futures Expiry Date
In futures trading, every contract comes with a predefined time frame. The expiry date is the last day a futures contract is valid for trading. After this date, the contract is com...
16. How is Futures Pricing Determined?
Futures prices are not arbitrarily set. They are derived from the spot price of the underlying asset and adjusted for something called the cost of carry. This cost includes financi...
17. What are Basis and Basis Risk?
This is a comprehensive educational module suited for learners at ATS Academy, covering not only the definitions and formulas but also real-world applications, step-by-step hedging...
18. Are Futures Contracts Physically Settled?
This version is structured for deeper understanding and training purposes at ATS Academy, covering not just the concept, but also the regulatory evolution in India, practical impli...
19. What are the Risks in Futures Trading?
Designed for students and traders at ATS Academy, this comprehensive guide explores each type of risk associated with futures trading, real-world examples, and how to manage these...
20. Who are the Main Participants in the Futures Market?
The futures market is a dynamic ecosystem where various participants interact based on different motivations. These participants ensure liquidity, price discovery, and efficient ri...