Help me with my first Futures Trading

Dear folks,
I am just spent an hour straight reading you posts:) specially admired @haribabu.

My understanding after reading around to increase the capital, one needs to trade in Futures ? I went to the screener.smallcase.com and saw the cash & carry FUT. screen. Do you think I should pick any of it. What is the risk… I can wait few days to entire duration for a good profit. Right now I have 31K in the account. It would be great you could give me a head-start…

I’m just a month baby in the whole stock stuffs. I bought a few CNC stocks. Seems they are raising well :slight_smile:

Thanks in advance.

First read this, before doing anything further

Hi,

Once you get the basic theory knowledge about futures, which is very clearly given in varsity documents, make a list of stocks which are in F&O segment from your favorite segment say, FMCG , Automobiles etc.

Study the volume transactions and price movements for a few days before making your first futures investment. You could study the leverage available also from zerodha calculator in the meantime. With 31K, there will be only very few stock futures that you could buy. Identifying those stocks and invest in Current month futures, only if you are 100% confident. Post mid month, generally it is advisable to go for next month’s or later futures than current. Basic analysis of volume of trade and bids/offers ratio study is the same for futures as in equities.

2 things to keep in mind

  1. You could lose more money than you have invested in futures.

Ex. You bought Nov futures of lot size 4500 at Rs.250 , paying 60,000. If the price falls to 232 by Nov 30th, total loss will be 81,000 , i.e you will lose the 60K paid and there will be an additional payment of 21K required from your side to cover losses.

  1. Square off the position before expiry time. Auto square off will cost you much more due to additional charges. ( Not Rs.20 )

Can you explain this…

The loss of a future trade is allowed only till exposure margin. If the loss enters the span margin, then the position will be squared off so there is no chance of losing more than invested in a futures trade, unless some really sharp move happens against your trade because of news or if come crazy move happens at market opening.

The charges for futures trades remains the same before expiry as well as at the time of expiry. It is only the STT for buy option positions that increases on expiry and if the STT is greater than the profit made, then the position will not be exercised and you will only lose your premium amount.

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Thank you for the detailed explanation on points I had mentioned.

  1. I had lost more than invested amount once. Specifically saying in ‘idea’ shares futures when it went up by 5% and fell down more than 5% on the same day. It didn’t auto square off that day.

It is important for any investor to know and be prepared for the worst case scenario as well.

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Hi,
This is explained by Srinivas above. STT might end up high enough to eat up all your profits. Hence, never wait for expiry and auto square off.

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