School of Stocks


Module Overview

The three most important derivative instruments that are transacted around the world are Forwards, Futures, and Options. In this module, we will extensively talk about Futures. We shall talk about various concepts and elements that are related to Futures so that the reader would have a sound knowledge of this versatile instrument and be able to incorporate it for purposes such as trading, hedging, understanding market dynamics etc.


1. Background and Context

11 Lessons

In this introductory chapter, we will talk about the background and the context that led to the emergence of Futures. We will start this chapter by discussing the history of Derivatives and the purpose why Derivative contracts came into existence. We will also distinguish between the two markets where Derivatives are traded. Finally, we will talk about the oldest form of a Derivative contract called Forwards, the problems that these instruments faced, and why these very problems gave birth to Futures.

2. Introduction to Futures

7 Lessons

In this chapter, we will introduce Futures. We will start by defining what a futures is and how it is different from forwards. We will talk about a few basic, yet vital futures-related terminologies. More importantly, we shall introduce the concept of Margin and present a simple example of how the futures P&L is calculated. We shall conclude this chapter by talking about various participants in the futures market as well as various futures instruments that are available for trading in India.

3. Elements of a Futures Contract

7 Lessons

In the previous chapter, we talked about some of the key aspects of a futures contract. These included the underlying instrument, lot size, total contract value, and margin. In this chapter, we shall continue with our discussion from the previous chapter and talk about other vital aspects of a futures contract.

4. Pricing of Futures Contract

7 Lessons

In this chapter, we will talk about the pricing of futures contracts. Although it is not an absolute must for a trader to know how the pricing is done, we still advise reading this chapter because knowing how the futures price is calculated would be helpful when deploying advanced strategies using futures, when hedging, understanding whether the futures contract is underpriced or overpriced etc

5. Margins in Futures

14 Lessons

In this chapter, we will discuss a crucial concept related to futures – margin. Given the importance of margin in futures trading, we urge readers to spend a good amount of time on this chapter to get a strong hang of the way margins function.

6. Futures Strategies – Part 1

15 Lessons

Over the next two chapters, we shall discuss various strategies involving futures. For our discussion, we will keep our universe restricted to index and stock futures that are traded on the NSE. The objective of this chapter and the next is to enable the reader to understand various strategies that can be deployed using futures. In this chapter, we shall focus on long futures, short futures, and Calendar Spread.

7. Futures Strategies – Part 2

19 Lessons

In this chapter, we shall continue with our discussion from the previous chapter and talk about the remaining futures strategies that we want to cover in this Module. The two strategies that we would be speaking in this chapter are Ratio Trading and Hedging.

8. Miscellaneous

8 Lessons

In this chapter, our aim is to cover three vital areas that a trader must keep a track of when trading in the futures segment.These are Volume, Open Interest, and Charting Futures.