Futures Contract
A standardised exchange-traded agreement to buy or sell an underlying asset at a set price on a set future date.
Formula
Contract Value = Futures Price x Lot Size; Profit or Loss = (Exit Price - Entry Price) x Lot Size, sign adjusted for direction
Unit
₹
In depth
A futures contract obliges both parties: the buyer must buy and the seller must sell, which is the fundamental difference from an option, where only the writer is obliged. Because there is no premium, the payoff is linear and symmetric — a hundred points gained and a hundred points lost are equal in size. Positions are marked to market daily and cash settled through margin accounts, so losses are realised each evening rather than accumulating silently. The obligation is why a futures position can lose far more than the margin posted.
Worked example
Long one Nifty futures lot of 75 at 24,000 and the index falls to 23,600: loss = (23,600 - 24,000) x 75 = ₹30,000. Against a margin of about ₹1,00,000, a 1.7% index move produced a 30% loss on capital.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Futures Contract” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.