Stock Market · Futures Trading

What a futures contract is

A futures contract is a binding agreement to buy or sell an asset at a predetermined price on a specific future date. Both parties, buyer and seller, are obligated to fulfil the contract.

The key words: binding and future

Unlike stocks where you buy and own something immediately, futures commit you to a future transaction at today's agreed price. Neither party can back out without closing the position.

An Indian example

Today: Nifty 50 is at 22,000. You expect it to rise.

You BUY a Nifty futures contract at 22,050 (futures trade slightly above spot, we'll cover why).

One month later: Nifty is at 23,000. Your futures price is also ~23,000.

You made: 23,000 − 22,050 = 950 points × lot size (75 units) = ₹71,250 profit.

If Nifty fell to 21,000, you'd have lost ₹78,750. You had no choice. The contract was binding.

> Futures don't let you just observe price movements. You're committed. That's the power and the danger.

Who actually uses futures?

• Hedgers: companies or investors protecting against adverse price moves. An airline hedging jet fuel prices. A farmer locking in crop prices.
• Speculators: traders taking directional bets, like our Nifty example.
• Arbitrageurs: exploiting price differences between futures and spot markets.

In Indian markets, Nifty 50 and Banknifty futures are the most actively traded. NSE also offers futures on individual stocks and commodities via MCX.

3 monthly expiriesFutures contracts available at any time (current, next, far month)

TuesdayNSE futures expiry (Nifty/Bank Nifty: last Tuesday of the month, since Sep 2025). BSE Sensex futures expire Thursday.

Takeaway. A futures contract is a binding obligation to buy/sell at a set price on a future date. Both parties must fulfil. Profits and losses are symmetric, no safe exit without closing the position.