Selling Before T+2 settlement

mahesh2007 · #11 1st June 2008, 02:21 PM

Quote:

Originally Posted by Raju

I have a query regards futures..

If u buy futures today u can sell anytime before expiry .Is my assumption correct ?
(Even before < than 3 days)

As I have already got the bad experience of Auction

in Cash market I am learning futures for the same.

Raju

There is no auction in F&O,as In India every contract is settled in cash and no physical/electronic delivery is needed.
u can square up a future contract immediately(forget days,hours within minutes /seconds).
All outstanding contracts of the month are automatically settled on the expiry day of the month(last thursday of the month) at the closing price of the expiry day.

Raju · #12 1st June 2008, 03:58 PM

Hi Mahesh2007,

Thanks for the information.Few more queries regards futures..I am sorry if I am posting in wrong thread...

We can entend the contract for next month also ..Is this what is called as rollover ?

MTM-Mark to market - Is this the amount which gets deducted or added if future contract price decreases/increases.How is this amt calculated.. ?

I had once bought voltas contract and sold later on , but could not get the calculations involved in it(Lost some money , ofcourse had stop loss so not much).

So nowadays I am restricting myself in Intraday futures (Mere Luck, have earned in voltas/Ispatind.I had played short sell and buy same day.)

Raju

mahesh2007 · #13 1st June 2008, 07:51 PM

Quote:

Originally Posted by Raju

Hi Mahesh2007,

Thanks for the information.Few more queries regards futures..I am sorry if I am posting in wrong thread...

We can entend the contract for next month also ..Is this what is called as rollover ?

MTM-Mark to market - Is this the amount which gets deducted or added if future contract price decreases/increases.How is this amt calculated.. ?

I had once bought voltas contract and sold later on , but could not get the calculations involved in it(Lost some money , ofcourse had stop loss so not much).

So nowadays I am restricting myself in Intraday futures (Mere Luck, have earned in voltas/Ispatind.I had played short sell and buy same day.)

Raju

There are always 3 series available -(1) current month(for ex. Jan)(2) next month(feb)(3)next to next month(Mar).
Roll over is squaring up of your position in (1) and taking the same position in (2) Also squaring up of your position in (2) and taking same position in (3).

For ex. - If u are long in Nifty future for the month Jan,then u square up your position by selling Nifty future and again going long Nifty future for the month of Feb. This is called rollover from one series to the next.

MTM(mark to market) is the notional loss(paper loss) or notional profit(until u square up your position).

For ex.- U short a Nifty future contract at 5000 and spot nifty becomes 4800 then your MTM loss is 10,000 rs.(5000-4800=200 and 200*50=10000).
50 is the lot size of nifty contract.

brokers square up your position when amount equal to MTM loss is not handed over to them.

Raju · #14 1st June 2008, 09:19 PM

Hi Mahesh2007 ,

Thankyou very much for clearing my doubts.

MTM - When would the brokers square up ? Is it on expiry day ?

Assume I maintain 20% margin amount required by RCOM ~ 24000/-

Suppose I buy RCOM on June 1st , 1 lot @ 240 & decide to hold for 2-3 days.(1 lot=500.).Same day closing is 230.My loss is 10*500=5000 (First Day)

June 2nd close for RCOM is 220.My loss is again added 10*500=5000 (Second Day).

Third day I sell@220.
So total loss = 20 * 500 = 10,000.

For calculation brokerage is not considered (It will further get added).

So when will they square off..On 26th June when on expiry date..

Kindly guide..!!!

Thanking You,
Raju

mahesh2007 · #15 2nd June 2008, 09:57 AM

First, let's take realistic example-
RCOM's lot size is 350 and for strike price of RCOM(577.10), future closing price for June series was 577.70 on 30/5/2008.
Suppose u bought a lot @600 few days before then your MTM loss shall be-

600*350-577.70*350=7805.
If your margin is suppose 5000 then your broker(supposing him to be a good one) shall give u a call and ask for depositing the MTM loss ie 7805-5000=2805.

Be it clear in mind, that there is no hard and fast rules for cutting the position; it all depends uppon your rapport with him.

During january fall some brokers cut positions of clients who were having sufficient margin with the broker.
If brokers would have cut positions on expiry only then no body have condemned the broker.

Raju · #16 7th June 2008, 07:52 PM

Hi mahesh2007 ,

Thanks for the good explanation.I was unable to access net from my house so could not read the thread.But U have helped me understand a lot.Thanks buddy.And I had made a mistake in last post I was suppose to type Rpower instead of RCOM.By the way as I was not knowing much of MTM and had queries so played Intraday-Futures.
I was lucky enough and made some bucks in Rpower..(Ofcourse S/L was there when timming failed.Result was some quick(though less)in learning phase..

Thanks,
Raju