Future trading rule?

Relish

Well-Known Member
#1
Dear Members,

I am new to trading. I tried to understand rules on F&O shares. My father had an account of trading and dmat account. It happens last month august series and continues in sept series due to roll over.

I have question about future trading as:

if i bought 500 shares of any share on 4th sep 2012 at price Rs 100 and it's series will expire on 27 sept 2012 with price Rs 90 what will happens:

case 1: There will be loss of Rs 10 plus other charges. So total profit / loss in this case 500 * 10 = - 500 at end of series and - 500 deducted from my balance.

Case 2: 4th sept: closing of share at Rs 110. There is settlement and share sold at 110 so profit Rs 10. As 500 * 10 = 500

5th Sept: Share bought at Rs 110 at 9.15. Share last traded at 3.10pm or 3.30 pm at RS 90. as 110-90 = -20. So total bill 500 * 20 = -1000

6th sept Share bought at 90 at 9.15. Share last traded at 70. So profit/ loss = 90 - 70 = -20 Total P/L = 500 * -20 = - 1000

7th sep share bought at previous closing at 70 and sold at closing 50. so Profit / loss same = - 1000

Total money deducted in this case Profit / loss = 500 -1000- 1000 = -1500

So rs 1500 deducted from my account and loss of Rs 1500 in three days. in this case is it right or wrong?


Question are: Is first scenario is applicable or 2nd scenario?

Please help since due to 2nd case we are loosing money, my broker is denied mode, not guiding what is happening and this was trade which we never authorized?

If above both cases are wrong, then what will be correct case.

Thank's & Regard's
Vivek
 

Reggie

Well-Known Member
#2
2nd scenario applies. The net debit or credit to your account will be the difference between the sale price - cost price if long, or vice versa if short.

Besides the margin, the daily price movement will be debited or credited to your account.

Dear Members,

I am new to trading. I tried to understand rules on F&O shares. My father had an account of trading and dmat account. It happens last month august series and continues in sept series due to roll over.

I have question about future trading as:

if i bought 500 shares of any share on 4th sep 2012 at price Rs 100 and it's series will expire on 27 sept 2012 with price Rs 90 what will happens:

case 1: There will be loss of Rs 10 plus other charges. So total profit / loss in this case 500 * 10 = - 500 at end of series and - 500 deducted from my balance.

Case 2: 4th sept: closing of share at Rs 110. There is settlement and share sold at 110 so profit Rs 10. As 500 * 10 = 500

5th Sept: Share bought at Rs 110 at 9.15. Share last traded at 3.10pm or 3.30 pm at RS 90. as 110-90 = -20. So total bill 500 * 20 = -1000

6th sept Share bought at 90 at 9.15. Share last traded at 70. So profit/ loss = 90 - 70 = -20 Total P/L = 500 * -20 = - 1000

7th sep share bought at previous closing at 70 and sold at closing 50. so Profit / loss same = - 1000

Total money deducted in this case Profit / loss = 500 -1000- 1000 = -1500

So rs 1500 deducted from my account and loss of Rs 1500 in three days. in this case is it right or wrong?


Question are: Is first scenario is applicable or 2nd scenario?

Please help since due to 2nd case we are loosing money, my broker is denied mode, not guiding what is happening and this was trade which we never authorized?

If above both cases are wrong, then what will be correct case.

Thank's & Regard's
Vivek
 

Relish

Well-Known Member
#3
2nd scenario applies. The net debit or credit to your account will be the difference between the sale price - cost price if long, or vice versa if short.

Besides the margin, the daily price movement will be debited or credited to your account.
What I understand, once you buy or short share in future, it will be everyday's difference of price which will be credit or debited from account until we didn't sell or buy our future share.

Where I can find all these rules since I tried on NSE but failed to get such rules for equity, future and options?

Thank's: clapping:
 

Reggie

Well-Known Member
#4
NSE Settlement mechanism for futures :

The positions in the futures contracts for each member is marked-to-market to the daily settlement price of the futures contracts at the end of each trade day.

The profits/ losses are computed as the difference between the trade price or the previous day's settlement price, as the case may be, and the current day's settlement price. The CMs who have suffered a loss are required to pay the mark-to-market loss amount to NSCCL which is passed on to the members who have made a profit. This is known as daily mark-to-market settlement.

Theoretical daily settlement price for unexpired futures contracts, which are not traded during the last half an hour on a day, is currently the price computed as per the formula detailed below:

F = S * e rt

where :
F = theoretical futures price
S = value of the underlying index
r = rate of interest (MIBOR)
t = time to expiration

Rate of interest may be the relevant MIBOR rate or such other rate as may be specified.

After daily settlement, all the open positions are reset to the daily settlement price.

CMs are responsible to collect and settle the daily mark to market profits / losses incurred by the TMs and their clients clearing and settling through them. The pay-in and pay-out of the mark-to-market settlement is on T+1 days (T = Trade day). The mark to market losses or profits are directly debited or credited to the CMs clearing bank account.

More :

http://www.nseindia.com/products/content/derivatives/equities/settlement_mechanism.htm

What I understand, once you buy or short share in future, it will be everyday's difference of price which will be credit or debited from account until we didn't sell or buy our future share.

Where I can find all these rules since I tried on NSE but failed to get such rules for equity, future and options?

Thank's: clapping:
 

Relish

Well-Known Member
#5
Thank you Reggie for your help. I appreciate your help.
 

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