Futures
A promise to buy or sell later at a price fixed today: lot size, expiry, margin and daily settlement
Rules as on 12 October 2026; SEBI study figures for FY 2025-26
Verified 12 October 2026
For training and education only. Not investment advice.
Trainer notes
Say this at the start: Trustner is a mutual fund distributor. We do not distribute or recommend derivative trading. This deck explains how a futures contract works so that staff can follow a scheme document and answer a client's question with facts. The deck 'Derivatives: what they are' comes first; this one goes deeper into futures and margin.
A futures contract binds both sides to trade on a later date at a price fixed today. Neither can simply walk away.
The buyer gains if the price rises and loses if it falls. The seller is in the opposite position. What one side gains, the other side loses.
Trainer notes
A position can be closed before expiry by taking the opposite trade, at the price then ruling. That ends the duty but does not undo the gain or loss already made. Costs and taxes are paid by both sides, so the two together end up with less than they started with.
Four terms in every futures contract
Underlying
What the contract is on: a share or an index. The price of the future follows the price of the underlying.
Lot size
The fixed number of units in one contract. Futures price × lot size = contract value.
Expiry
The last day of the contract. Positions still open are settled on that day and then cease to exist.
Margin
A deposit held against possible losses. It is a part of the contract value, not a part-payment for it.
Trainer notes
The exchange fixes the lot size and the expiry day; the buyer and seller agree only the price. Gains and losses are worked out on the full contract value, not on the margin. That is the point to carry into the next slide.
One contract, three days
THE SET-UP
An invented index is at 30,000, and so is its future. One contract is 50 units: ₹15,00,000.
A buyer takes one contract and deposits a 12% margin: ₹1,80,000.
All figures are assumed.
- Day 1: the future settles at 30,300. Gain: 300 × 50 = ₹15,000, credited to the buyer.
- Day 2: it settles at 29,700. Loss for the day: 600 × 50 = ₹30,000, to be paid in cash.
- Day 3: it settles at 29,400. Loss for the day: 300 × 50 = ₹15,000, again paid in cash.
- Net result: +15,000 − 30,000 − 15,000 = a loss of ₹30,000. Check: (29,400 − 30,000) × 50.
Result: The index fell 2%. The buyer lost ₹30,000, which is 16.7% of the ₹1,80,000 margin.
Illustration with an invented index and assumed prices, lot size and margin. Costs and taxes ignored.
Trainer notes
This daily settling is called mark to market. The buyer does not wait until expiry to pay: each day's loss is collected the next day, and the full margin must still be in place. If he cannot pay, the broker can close the position. The seller of this contract had the mirror result: a gain of ₹30,000. 30,000 ÷ 1,80,000 = 16.67%.
Margin: what is collected, and when
Initial margin
Based on 99% value at risk: a loss that should be exceeded about 1 time in 100. For futures the horizon is two days.
Extreme loss margin
An extra layer on top: 2% of the contract value for index derivatives and 3.5% for stock derivatives.
Paid before the trade
The broker must collect these margins from the client upfront, before the position is taken.
Settled every day
Each day's gain or loss is worked out at the day's settlement price. Losses are paid in cash; gains are received.
Checked during the day
The clearing corporation takes at least four snapshots a day. The highest margin need, the peak, is compared with what the client has given.
Sources: NSE Clearing, equity derivatives margins and settlement pages (read 12 Oct 2026); SEBI circular SEBI/HO/MRD2/DCAP/CIR/P/2020/127, 20 Jul 2020.
Trainer notes
The percentages are those shown by NSE Clearing on 12 October 2026 and can change. NSE Clearing works out initial margin with a system called SPAN, which looks at the whole portfolio. 'Peak margin' came from SEBI's July 2020 circular and was phased in: 25% of the peak was checked at first, then 50%, 75% and finally 100%. The end-of-day comparison continues alongside it. Stocks with large daily price swings carry additional margin.
How the contracts are built today
| Feature | The rule now | Source |
|---|---|---|
| Contract value | An index contract must be worth at least ₹15 lakh when it is introduced. Lot sizes are revised from time to time to keep to this. | SEBI circular, 1 Oct 2024 |
| Lot size | Nifty 50 contracts on NSE: 65 units, from contracts expiring in January 2026. Before that, 75 units. | NSE circular, 3 Oct 2025 |
| Expiry day | NSE contracts expire on a Tuesday; monthly ones on the last Tuesday of the month. This applies to expiries from 1 September 2025. | NSE circular, 25 Jun 2025 |
| Months traded | Three monthly futures are open at a time on NSE: the near month, the next month and the far month. | NSE contract specifications |
| Final settlement | Index futures: in cash, at the index's closing value on the last trading day. Stock futures held to expiry: by delivery of the shares. | NSE Clearing; SEBI 2018; NSE 2021 |
Sources: SEBI circular SEBI/HO/MRD/TPD-1/P/CIR/2024/132; NSE circulars NSE/FAOP/70616 and NSE/FAOP/68747; NSE equity derivatives pages (read 12 Oct 2026).
Trainer notes
Check the exchange's website before quoting a lot size: it is reviewed periodically. SEBI's circular of 26 May 2025 limited every exchange to Tuesday or Thursday for equity derivatives expiry; NSE chose Tuesday. If the Tuesday is a trading holiday, the expiry is the previous trading day. SEBI mandated delivery settlement of stock derivatives in phases from its circular of 11 April 2018; before that, stock futures were settled in cash. Delivery means the buyer must pay for, and the seller must hand over, the full quantity of shares.
A hedge with index futures
THE HOLDER
An invented investor holds ₹30,00,000 of shares that move in step with the index, at 30,000.
She sells two futures contracts of 50 units at 30,000: ₹30,00,000.
All figures are assumed.
- The index falls 5% to 28,500. Her shares lose 5% of ₹30,00,000 = ₹1,50,000.
- Her futures gain 1,500 × 100 units = ₹1,50,000. Shares and futures together: no change.
- The index rises 5% to 31,500 instead. Her shares gain ₹1,50,000; her futures lose ₹1,50,000.
- Together: no change again. She has given up the gain in return for avoiding the loss.
Result: Selling futures against a holding fixes its value for a time. It does not add a return.
Illustration with assumed figures. Not a suggestion to hedge or to trade. Costs and taxes ignored.
Trainer notes
In practice a hedge is rarely exact. A real portfolio does not move in step with the index, and the futures price and the index can drift apart before expiry. The futures leg also needs margin, and its daily losses must be paid in cash while the gain on the shares stays on paper. A mutual fund scheme that hedges does so within SEBI's exposure limits, as its scheme document states.
Where things stand
SEBI's study of individual traders in equity derivatives, and the tax on a futures sale.
- FUTURES: IN LOSS
- 66%About 66% of individual futures traders made a net loss in FY 2025-26.
- OPTIONS: IN LOSS
- 87.7%The same measure for individual options traders in FY 2025-26.
- AVG LOSS, ₹ LAKH
- 1.42Per individual stock futures trader, FY 2025-26 (₹1.56 lakh in FY25).
- STT, FUTURES SALE
- 0.05%Of the traded price, from 1 April 2026. It was 0.02% before.
Sources: SEBI, 'Profitability of Individual Traders in the Equity Derivatives Segment (FY25-FY26)', August 2026; NSE circular NSE/FATAX/73524, 31 Mar 2026 (Finance Act, 2026).
Trainer notes
SEBI's sample is the top 15 brokers, about 90% of individual traders; losses are after transaction costs. The figure for index futures alone was 62% and for stock futures 64%. The average loss per trader in index futures rose from ₹54,025 to ₹71,412. Over FY25 and FY26 together, 8.67 lakh individuals traded futures against 121.7 lakh in options. STT is securities transaction tax; the seller pays it. Trustner does not distribute or recommend derivative trading.
If you learnt this from older material
What older decks say
- Index contracts are worth ₹5 lakh to ₹10 lakh (the 2015 rule).
- NSE contracts expire on the last Thursday of the month.
- Stock futures are settled in cash at expiry.
- Margin collection is checked on end-of-day positions.
What holds now
- At least ₹15 lakh when introduced, from 20 November 2024.
- Tuesday, for NSE contracts expiring from 1 September 2025.
- Held to expiry, they are settled by delivery of the shares.
- Verification also covers the intraday peak (4+ snapshots).
Sources: SEBI circulars of 1 Oct 2024, 11 Apr 2018 and 20 Jul 2020; NSE circular NSE/FAOP/68747, 25 Jun 2025.
Trainer notes
Older material also explains futures with a private agreement between two people, such as a grower and a buyer of a crop. That is a forward. A future is traded on an exchange in a standard size, and a clearing corporation stands between the two sides, which is why margin and daily settlement exist.
Four things people get wrong
Misconception'Less money down, so less risk.'
What is trueThe margin is small but the gain or loss is on the full contract value. In the example, a 2% fall took 16.7% of the margin.
Misconception'The margin is the most I can lose.'
What is trueLosses are collected every day. A sharp move can cost more than the margin deposited.
Misconception'I can wait for the price to recover.'
What is trueEvery contract expires, and each day's loss must be paid in cash. A position that cannot be funded is closed.
Misconception'A hedge earns something extra.'
What is trueA hedge fixes a value for a time. The gain given up on one side pays for the loss avoided on the other.
Take-away: Trustner does not distribute or recommend derivative trading. This deck explains; it does not coach.
Trainer notes
If a client asks about futures: say that Trustner is a mutual fund distributor and does not distribute or recommend derivative trading; explain margin with the three-day example; give SEBI's figures with the year and the source. Do not suggest strategies, tips, brokers or position sizes.
Check yourself
Question 1: A futures contract is 40 units of an invented index. A buyer enters at 25,000; it settles at 24,600 that day. What is the contract value, and the day's loss?
Answer: Contract value: 25,000 × 40 = ₹10,00,000. Loss: (25,000 − 24,600) × 40 = 400 × 40 = ₹16,000, payable in cash.Question 2: The margin on that contract is an assumed 15%. What is the margin in rupees, and what share of it is the day's loss?
Answer: Margin: 15% of ₹10,00,000 = ₹1,50,000. The loss of ₹16,000 is 10.7% of the margin (16,000 ÷ 1,50,000), from a 1.6% fall in the price.Question 3: On which day of the week do NSE equity futures expire now, and how is an index future settled at expiry?
Answer: Tuesday (the last Tuesday of the month for monthly contracts), for expiries from 1 September 2025. Index futures are settled in cash at the index's closing value on the last trading day.
Sources and disclaimer
Sources for the figures in this explainer
- Margins and daily settlement: NSE Clearing, equity derivatives pages on margins, settlement mechanism and settlement price, read 12 Oct 2026.
- Peak margin: SEBI circular SEBI/HO/MRD2/DCAP/CIR/P/2020/127 (20 Jul 2020), in SEBI's Master Circular for Stock Exchanges and Clearing Corporations (Dec 2024).
- Contract value and expiry days: SEBI circulars SEBI/HO/MRD/TPD-1/P/CIR/2024/132 (1 Oct 2024) and SEBI/HO/MRD/MRD-TPD-1/P/CIR/2025/76 (26 May 2025).
- Lot size and expiry day on NSE: NSE circulars NSE/FAOP/70616 (3 Oct 2025) and NSE/FAOP/68747 (25 Jun 2025); NSE contract specifications.
- Traders' results: SEBI, 'Profitability of Individual Traders in the Equity Derivatives Segment (FY25-FY26)', August 2026. Delivery settlement: SEBI circular of 11 Apr 2018.
- Securities transaction tax: Finance Act, 2026, per NSE circular NSE/FATAX/73524 (31 Mar 2026). Index, investor and all example figures are invented.
This material is for training and investor education only. It is not investment, tax or legal advice and is not a recommendation to buy, sell or hold any security or scheme. Examples use assumed figures unless a source and date are shown. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Trustner Asset Services Pvt. Ltd. is an AMFI-registered Mutual Fund Distributor (ARN-286886).