What a futures contract is
When you buy a Nifty futures contract, you agree to buy the index at today's futures price on the expiry date. You do not pay for the index; you deposit a margin with your broker and settle the daily change in price. If the futures price rises, money is credited to your account at the end of the day. If it falls, money is debited.
The seller takes the opposite side. Every contract has one buyer and one seller, and the exchange's clearing corporation stands between them, so neither depends on the other paying up.
Nifty futures at a glance
| Nifty futures | |
|---|---|
| Underlying | Nifty 50 index |
| Lot size | 65 units, from the January 2026 series |
| Contract value | About ₹16.25 lakh with Nifty at 25,000 |
| Expiry | Last Tuesday of the month, three monthly contracts at a time |
| Settlement | Cash, at the final settlement price of the index |
| Tick size | ₹0.10 |
| Margin | SPAN plus exposure margin, around 12% of contract value |
| Daily settlement | Profit or loss credited or debited each evening |
The lot size is revised from time to time so that the contract value stays within the range SEBI sets. Stock futures have their own lot sizes, and a stock futures lot is usually worth ₹10 lakh or more.
Margin and leverage
To hold one Nifty futures lot worth ₹16.25 lakh, you deposit margin of roughly ₹1.9 lakh to ₹2.1 lakh, depending on the day's SPAN calculation. That is leverage of about eight times: a 1% move in Nifty, or 250 points, changes the position's value by ₹16,250, about 8% of the margin.
Leverage works both ways. A 5% fall in the index, which happens several times in most years, would cost ₹81,250 on one lot, about 40% of the margin. Brokers issue a margin call when the account's balance falls below the required margin, and square off positions if it is not met.
Daily mark-to-market settlement
Futures positions are settled every day at the closing price.
The daily settlement means losses must be funded as they happen, not at expiry. A position that is eventually right can still be closed out if the account cannot fund an interim loss.
Futures price, spot price and the basis
The futures price is usually a little above the spot index. The difference, called the basis or cost of carry, reflects the interest a buyer saves by paying margin instead of the full value, minus the dividends the index pays before expiry.
With Nifty at 25,000, an interest rate of 6.5%, a dividend yield of 1.2% and 28 days to expiry, the fair futures price is about 25,102. The actual futures price moves around this value with demand. A futures price far above fair value suggests strong buying; a price below the spot index, called backwardation, is unusual for Nifty and often appears when dividends are concentrated before expiry or when traders are heavily short.
The basis shrinks to zero at expiry, when the futures contract settles at the spot index's final value.
Expiry and rollover
Nifty futures expire on the last Tuesday of the month. On expiry day the contract settles in cash at the final settlement price, which NSE calculates from the index's closing values. There is nothing to deliver.
Traders who want to keep a position past expiry roll it: they close the current month's contract and open the next month's. The next month's contract usually costs more, by roughly the basis, so rolling a long position costs the carry each month, about 0.4% in the example above.
Stock futures are different. Since 2019, stock derivatives that are open at expiry settle by delivery: a long stock futures position receives the shares and pays the full value, and a short position must deliver them. Most traders close or roll stock futures before expiry to avoid this.
Futures vs options
| Futures | Options | |
|---|---|---|
| Obligation | Both sides are obliged to settle | The buyer has a right, the seller an obligation |
| Cost to enter | Margin, no premium | The buyer pays a premium; the seller posts margin |
| Profit and loss | Linear: every point counts the same | Depends on strike, time and volatility |
| Time decay | None | Erodes the buyer's premium |
| Maximum loss | Large, limited only by the index's move | Buyer: the premium; seller: large |
Futures suit a clear directional view with a stop loss. Options suit views that involve the size of a move, time or volatility, and trades where the maximum loss must be fixed. Our guide to what options trading is covers the other side.
How traders use futures
- Directional trades. A long or short futures position is the simplest way to trade a view on the index. Strategies such as an opening range breakout or a moving average crossover are often traded in futures.
- Hedging. A portfolio of large-cap stocks can be hedged by selling Nifty futures in proportion to its beta. The hedge removes market risk while the stocks are held, at the cost of giving up the market's gains.
- Pairs and spreads. Two related futures, such as two bank stocks, can be traded against each other. See pairs trading.
- Calendar spreads. Buying one month and selling the next trades the basis rather than direction, with a margin benefit for the spread.
Costs of trading futures
| Cost | Rate |
|---|---|
| Brokerage | Flat per order at most discount brokers; see the brokerage calculator |
| STT | 0.05% of the traded value on the sell side |
| Exchange transaction charge | Around 0.0017% of turnover |
| SEBI turnover fee | ₹10 per crore |
| Stamp duty | 0.002% on the buy side |
| GST | 18% on brokerage and exchange charges |
On one Nifty lot, STT alone is about ₹810 per round trip at 25,000. Costs matter more for futures than for options because the traded value is the full contract value.
Futures in automated trading
Futures are well suited to automation: there is one contract per month, prices are liquid and the P&L is linear, so a rule tested on the index applies directly. In QuantPower's strategy builder, a futures strategy has an instrument, an entry rule, a stop loss and a target. A trailing stop loss can follow the trend, and an MTM stop loss caps the day's loss across positions.
Two practical points for automated futures strategies:
- Roll before expiry. Set the strategy to switch to the next month's contract a few days before expiry, when the current month's liquidity starts to fall.
- Check margin for overnight positions. Margin is recalculated daily, and a volatile day can raise it.
Our guide to futures analysis covers the tools QuantPower offers for futures data.
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Frequently asked questions
How much money do I need to trade Nifty futures?
Margin of roughly ₹2 lakh per lot, plus a buffer for daily losses. A buffer of at least the same amount again is sensible, so that one bad day does not force a square-off.
What happens if I hold Nifty futures until expiry?
The contract settles in cash at the final settlement price. Your account is credited or debited the difference from the previous day's settlement, and the position disappears.
Why is the futures price higher than the Nifty index?
Because of the cost of carry: the interest saved by posting margin rather than paying the full value, minus dividends. The gap shrinks to zero at expiry.
Can I lose more than my margin in futures?
Yes. Losses are not limited to the margin. A large gap against your position can cost more than you deposited, and the broker will collect the difference.
Are stock futures settled in cash?
No. Since 2019, stock futures and options open at expiry settle by delivery of shares. Index futures settle in cash.
Sources
- NSE: Equity derivatives contract specifications
- SEBI circular SEBI/HO/MRD/DoP1/CIR/P/2018/161: Physical settlement of stock derivatives, 31 Dec 2018
- SEBI circular SEBI/HO/MRD/TPD-1/P/CIR/2024/132: Measures to strengthen the equity index derivatives framework, 1 Oct 2024
- Finance Act 2026, STT rates from 1 April 2026