Glossary
What is Futures? Meaning, Example & Why It Matters
A contract to buy or sell an asset at a fixed price on a future date, traded in standard lot sizes.
A futures contract is an agreement to buy or sell an underlying asset, such as a stock or index, at a price agreed today for settlement on a set future date. On Indian exchanges, futures are standardised: each contract has a fixed lot size and expiry, and positions are marked to market daily, with gains or losses settled in your account every day.
Why Futures matters to you
Futures offer leverage. You only deposit a margin, a fraction of the contract value, to take the position. If the price moves in your favour, the return on your margin can be large; if it moves against you, losses can be just as large and can exceed your margin. You may need to add funds quickly if the position goes against you.
Costs for futures are calculated mainly on contract value. They include brokerage, STT, exchange charges, SEBI fees, stamp duty on the buy side and GST. Because contract values are large, even small percentage charges translate into meaningful rupee amounts.
Practical tip: always calculate the full contract value, not just the margin, so you understand your true exposure. Decide your exit level in advance, and avoid holding positions you cannot fund if margin requirements increase suddenly during volatile markets.
Example: Illustrative only: if a futures contract has a value of ₹5,00,000 and the margin required is ₹1,00,000, a 2% move in the underlying changes the contract value by ₹10,000, which is 10% of your margin.
See it in rupees: every charge and tax on a real trade, at every broker. Open the brokerage calculator
Related terms
- GlossaryF&O (Futures and Options)
The derivatives segment where traders buy and sell futures and options contracts based on stocks or indices.
- GlossaryOptions
A contract giving the buyer the right, but not the obligation, to buy or sell an asset at a set price before expiry.
- GlossaryLot Size
The fixed number of units of the underlying asset in one futures or options contract, set by the exchange.
- GlossaryMargin
The money or collateral you must keep with your broker to take and hold leveraged positions.
Frequently asked questions
What happens to a futures contract at expiry?
If you do not close it, the contract is settled as per exchange rules, which may be cash settlement or physical delivery for stock futures.
What is mark-to-market in futures?
It means your profits or losses are calculated and settled daily based on the closing price, so your account balance changes every day.
Can I hold futures overnight?
Yes, futures can be held overnight until expiry, as long as you maintain the required margin.