Futures contract

A standardised, exchange-traded agreement to buy or sell an asset at a set price on a set future date. The exchange's clearing house stands between buyer and seller, so neither faces the other's credit risk, and both post margin that is settled against the market price every day.

Contracts trade in lots fixed by the exchange. Buy one index futures lot of 50 units at 24,000 and you hold exposure of ₹12 lakh. If the index closes at 24,300 the next day, ₹15,000 is credited to your account and debited from the seller's that evening, before either of you has closed the position.

India's futures and options segment, usually called F&O, covers index and single-stock contracts on the NSE and BSE, with lot sizes and margins set to rules SEBI has tightened since 2024. Daily settlement is what makes futures safe for the exchange and dangerous for a trader with thin cash: a position that would come right in a month can be closed out by margin calls within a week.

Size the position to survive the margin calls, whatever the view.