Dear Members , Please Explain NIfty Trading ..

Hi all , I would like to know all about trading the nifty , i have no knowledge on the subject , so far i am only active in the cash market , pls explain how i go about this .. what exactly is nifty trading ? what does 1 lot of mean ? .how nifty points earn money .. what is mininifty ? diffrence between nifty spot and futures and why there is a diffrence sometimes .. basically i want to know everything .. in simple easy to understand language pls .. thank you so much and i hope you guys will help me and other beginners in the derivatives trading world .

908

very cute thread

um , so . is everyone as helpful as renu here ? please someone explain nicely what exactly nifty trading is .. or sorry if my question is to stupid for u pro traders but i thought i would get some help here

In futures trading , you cn either play in specific stocks or the whole nifty.

If u want to go long , you will buy nifty or minifty.
Nifty has 50 shares whereas minifty has 20 shares.
IF ur new would advise you to play with Minifty ( 20 shares lot ).

For either buying or shorting a Minifty lot you hav to pay an upfront margin to ur broker. for Minifty its arnd 12000 for 1 lot.

Exp date is the last date till which u hv to sq off ur trades or else NSE will sq off itself.

Prem or Discount is when either Future price is more or less than spot respectively. These diff are due to mkt sentiment. In a bullish mkt there will be a high premium and in a falling mkt a discount ( price less than spot )

Eg , if today u take 1 lot (20 shares ) Minifty at 2965 and if on monday nifty is at 3065 then minifty wll also be arnd 3065 ( on prem as mkts are up ) ,assume minifty is at 3070. Ur profit will be 3075-2965 *20 = 2100 excl brokrg.

Another imp thing of Fut is MTM , mark to mkt loss. Assume that in ur above trade . on monday nifty plunges 200 points. So ur loss will be 2965-2765*20=4000 loss. 4000 will be debited frm ur account even if u dont book loss , this is MTM and adjusted every day.

Read proper info on Fut before doin trades and use minifty first , trade for 3-4 months then switch over to nifty

In futures , u cn sq off ur contract within minutes after initiating it. No waiting for T+2 days like u do for shares.

Any more queries???

Plz dont get disheartened , renu mam must be in a joyful mood so she commented like that , i assure u that she is one of the most helpful members of traderji.

Let me help you understand continuing with coolboy007's explanation:

1. Current month minifty contact is minifty-27-nov-2008, because it will expire on 27th nov 2008. next month's contact will be minifty-25-dec-2008, as 25-dec and 27-nov comes on last thursday of the month. so futures expire on last thursday of every month.

2. Now, we buy Minifty-27nov contract @ 3005 (nifty future is at 3005), which means we'll have 20 shares of nifty @ 3005.

3. Tomorrow, our 27nov minifty future, open up at 3035, and you sell it for a profit of 30 points (buying 3005, selling 3035) = 30points * 20 shares = 600 rs - 0.05brokerage = -60.4 = 539.4 profit. brokerage is very less for futures than for delivery.

4. suppose, we bought minifty future @ 3005 and you did not touch your contract till nov-27 and at 3:30pm 27th nov 2008; the contract expires at 2905. a loss of 100 points. so, you'll loose 100*20 = 2000+60brokerage = 2060.

5. suppose the above 3005 contract ends up at 3505, you'll get 500 points profit - 70rs brokerage. 500*20 = 10000-70 =9030rs profit.

6. supposing that we bought at 3005 and minifty goes up and down, then daily at 3:30pm, we'll be given or taken away the difference.

We bought minifty @ 3005
1st day nifty future closes @ 2905 = -2000
2nd day nifty future closes @ 2955 = +1000
3rd day nifty future closes @ 3055 = +2000
4th day nifty future closes @ 2755 = -6000
5th day nifty future closes @ 2205 = -11000
6th day nifty future closes @ 2805 = +12000
7th day nifty future closes @ 2905 = +2000
8th day nifty future closes @ 3005 = +2000

and on 9th day (assuming it to be the last thursday of the month)
9th day nifty future closes @ 3105 = +2000

So, overall, you'll get 2000 rs. at the month end.

also see this new-futures-option

Dear 908.
NSE site has a section on Education.. and it has got excellent PDF that will answer all your questions. You brokers site will certainly be having FAQ on F&O.

Please spend some time in self study and be specific with question.
Renuji atleast cared to respond yesterday.. I wanted to give this pointer yesterday but hold myself back. But today when I saw your response to Renuji's comment, I can't hold myself from writing this.

FastRizwan and Coolboy have given their fair share of time to reply to your query.
Now ball is in your court to put effort and learn. There are really helpful and knowledgeable members here so respect the community and get the best from here.

Happy trading.

Dear Members,
I am very thnakfull for your explaination on Futures Trading which i was looking from a long while. I would request you to alo explain us about going LONG and SHORT in futures with examples...Thank You so Much

going long = buying a nifty lot/contract. if nifty goes up you get profit.
going short = selling a nifty lot/contract. if nifty goes down you get profit.

example:

going long on 1 lot of nifty @ 2540. (you buy 1 lot of nifty at 2540 future contract) if it goes to 2540+ then it's good and vice versa for going short.

Thanq rizwaan for your guidance..but for going short whats the process should click Sell first i only see buy and seel on the future scrip..iif u dont mind please guide me.