New to Futures and Options--- Help required

[vibhunair]

Hi fellow boarders, I m new in here and also to the world of stock markets. Infact started only 3 months back and soon enough realised I m not ready enough for Intraday trading. Needless to say i started delivery based trading for medium to long term. The recent volatile markets have led me to having modest gains and since most of my current holdings seem good for the long term I m not too worried about the reds in my portfolio. However I would like to utilise this time available to study more about stock market namely futures and options.

It would be really helpful to me if the better informed traders in here can guide me towards some good books on the subject. Whatever knowledge i have is from the websites in general. But even after going through the matters i have not been able to develop a clear enough idea about the whole process to finally take a plunge.

My understandings and my doubts on futures are as below.

A future contract is a contract that gives me the obligation to buy a particular lot of shares in a company after the expiry of a particular time frame. 50 NIFTY 24 Feb 2011 futures @ 5920 means I ll buy 50 units of Nifty on feb 24 2011 at Rs 5920 per unit.
I hope I am correct upto here.

How much do I need to spend upfront to buy the 50 Nifty 24 feb 11 futures?
Is it 50*5920?
Or is it a percentage of the amount?

I think it ll be better if i go step wise so that i can move ahead after clearing my fundamentals...

I thank everyone in advance for the help..

 

[AW10]

In futures trading, one just needs to put margin money upfront (approx 1o to 12% of contract value) to take this obligation. Nifty future is settled in cash i.e. there is no delivery of it at the end. So u will never have to shell out 3 lac from your pocket. At the end, depending on the difference between settlement price, and your purchase price, final obligation will be calculated.

In case of commodities or stock futures, you may have physical delivery at the end, where u will have to put the complete contract value and take the delivery. To best of my knowledge, less then 2% of futures contract do not reach delivery stage. Generally producer / consumer /or big banks hedgefund have interest in delivery otherwise majority of traders use futures to speculate and close the position before expiry.

You can to to NSE site Home > NCFM > NCFM Modules and check out the study material of Derivatives Market (Dealers) Module. This will help u in clarifying lots of basic doubts.

Happy learning and trading

 

[vibhunair]

Thanx a ton AW 10

So I ll need a percentage of the value of contract as margin to start off with futures, n that percentage i think varies from brokers to brokers.
Thanx for the link suggestion. Have many doubts but wont post them here now. will go through the link u ve suggested and try to clear them myself. As no point if I m not ready to put in efforts from my side too....

Thanx again

 

[DiwaliCrackers]

In Sharekhan it is 15% margin you have to pay...

 

[rajeshn2007]

Thanx a ton AW 10

So I ll need a percentage of the value of contract as margin to start off with futures, n that percentage i think varies from brokers to brokers.
Thanx for the link suggestion. Have many doubts but wont post them here now. will go through the link u ve suggested and try to clear them myself. As no point if I m not ready to put in efforts from my side too....

Thanx again

Since you have said you are new to the markets, stick with delivery based trading. It would be better if you would avoid futures and options. :thumb:

 

[vibhunair]

Rajesh

thanx for the suggestion. yeah I m keeping away from them for the time being. But staying away and bypassing something without knowing it or giving it a try is not the right way forward in my views. Thats why I decided to study and do proper research on the derivatives market, develop an understanding of concepts and strategies and try to figure out if it will work out before taking the plunge...

 

[DiwaliCrackers]

go ahead bro...:thumb:

Rajesh

thanx for the suggestion. yeah I m keeping away from them for the time being. But staying away and bypassing something without knowing it or giving it a try is not the right way forward in my views. Thats why I decided to study and do proper research on the derivatives market, develop an understanding of concepts and strategies and try to figure out if it will work out before taking the plunge...