We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
No key takeaways from this video 🙂
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1. Introduction to forwards market
00:05:26
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2. Introducing the futures contract
00:06:33
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3. Margins
00:06:29
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4. Leverage and Payoff
00:08:23
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5. Futures trade
00:10:09
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6. Settlement
00:03:59
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7. Open Interest
00:05:25
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8. Shorting futures
00:05:06
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9. Overview of Contracts
00:05:14
What will happen to my balance/trade if I don’t close by position during end of the expiry day
Varun, based on the position, it will be settled accordingly by your broker.
Hi Karthik,
As it is said in the video, that as we approach the expiry date of the futures contract, the margin required increases. Therefore, will the margin become equal to the total contract size of our position on the day of the expiry, since we have to ensure physical delivery on the expiry date?
Yes, it goes up considerably, almost to the extent on contract value, depending on the contract under consideration.
I sold IGL 400 PE @ 3 and currently somewhere at 9 due to sharp fall. Lets say if it goes further down to 380 and by the expiry how the settlement happens exactly. Will I get the stock price at 380 or 400 as I sold the 400 contract. Also how the losses will be adjusted. Please explain with some examples.
Yes, since its an ITM option, short PUT will result in taking delivery of the stock. Hence you need to have the necessary margins in your account.
Please explain me about currency option settlement. For example,
USDINR CONTRACT EXPIREY DATE OCTOBER 30 , 2021
SPOT PRICE ON EXPIRY 77
I SOLD 78 Put , 1 lot
My question is that, how much I need to pay for settlement on expiry.
It depends on the spot price on expiry right?
Hi Karthik,
Can you help to understand last sentence from video “If you are short seller you have to make sure you have those share in your DP account” in futures perspective ?
It means that upon settlement, you will have to deliver shares from your demat account, for which you need to have shares in your DP.