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About Nifty Futures And Trading Strategy

By Author: Arthur Jackson
Total Articles: 19

Nifty is the index of National Stock Exchange and an index future is a derivative, similar to a stock future, whose value is dependent on the value of the underlying. In this case the index like Nifty 50 or BSE Sensex. By trading in index futures, an investor is buying and selling the basket of stocks comprising the index, in their respective weights. Like stock future, index futures are traded in terms of number of contracts. Each contract would be to either buy or sell a fixed value of the index. The value of the contract would be the lot size multiplied by the index value.

About Nifty futures

In India, index futures trading started in 2000 on National Stock Exchange (NSE). For Nifty Future contracts, the permitted size is 75 and in multiples of 75. Like stock future and other index future, Nifty futures contracts also have a three month trading cycle- the near month, next month and the far month. After the expiry of the near month contract, a new contract of three month duration would be introduced on the next trading day. Margin required for Nifty future is 9-12 percentage of total value of the contract. Investor can buy or sell Nifty future by having margin amount in their DMAT account.

Those who know Nifty Trend is bullish, can buy Nifty futures comprising 75 shares. Bears or those who thinks Nifty Future Today is in bearish mode, they can short sell Nifty. First you have to know the trend of Nifty by Technical Analysis and news which is updated daily on “Nifty Future Today” so that you can make a trading strategy, weather to buy “Call or Put Option”. In case of bullish Nifty Trend trader can buy a “Call Option” and in case of bearish trend one can buy a “Put Option”. Here one can find daily Technical analysis, technical trend of Nifty, support, and resistance of Nifty and financial news which can affect its trend. Individual stocks trend can be known from Nifty trend as it comprises of all stocks.

Different Strategies for Nifty Future Trading.

First of all know the technical trend and daily support resistance level in “Nifty future today” to trade and utilize below mentioned strategy.

Speculative gains—

If you are certain about future market movements, you can make profits through index futures. If you are bullish on the market, buy index futures. If bearish, you should sell index futures.

Hedging-

In simple terms, hedging is a strategy that helps limit losses. Here you buy and sell same stock in one market in case of unknown trend of that stock.

Short stock and long index futures—

Some times when you buy a stock, but there is a downward trend in market, thus resulting in loss. Index futures help you to mitigate this risk. By shorting the index future when you are buying stock, you can minimize the risk as well as loss.

Equity Portfolio—

When you own a big portfolio and are uncomfortable about market trend, you can hedge this by selling index futures. The concept vests on the fact that every portfolio has index exposure and risks are accounted for by fluctuations in the index.

Mr. Arthur Jackson, Technical Analyst and Founder of Nifty Trend providing trading advisory services in Nifty future today, Equity, Derivatives and Commodity market. He also made a guest appearance in various workshops which were conducted on stock market awareness.

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