You might be aware that investment in shares (Commonly referred as “stock”) would provide good returns over long-term. However in case of stock futures, the stocks are purchased/sold for a day or for a period of 30, 60, 90 days expecting the price to increase/decrease within this period. However there is no delivery of the shares. It is a future commitment either to purchase or to sell by paying a margin amount at the current price. Here an investor need not pay the entire investment amount. He/She need to pay only the margin amount
Examples: if one has to purchase stock futures of Infosys which is trading at Rs.2,200 per stock. One can buy in a lot of 125 which costs Rs.265,000 (125 x 2200). The margin money to be kept is 20%. Say in this case we need to pay only 20% i.e. 55,000 and hold the stock futures for the period for which we purchased.
Purchasing of stock now, expecting that in future the price would increase is called “Long”.
Selling of stock now, expecting that in future the price would go down is called “Short”.
Stock future expiry period
Stock future expires on every last Thursday of the month which generally falls after 25th of the month. For e.g. Reliance Future of Jul-12 expires on 26-Jul-12 (Last Thursday of July month). Stock futures would be available in a lot of 125 and above depending on the price of the stock
Investment required for trading in Stock futures
A minimum of Rs.1 Lac is required to trade in stock futures.
Profit margins in stock futures
If an investor has purchased 125 lot of Infosys July future @ Rs.2,200 on 5-Jul-12 and expected that price goes up before the July future expiry date. The margin amount to be kept is 20%. So a investor need to have an investment amount of Rs.55,000 (Rs.2,200 x 125 x 20% = Rs.55,000)
On 16-Jul-12 the stock increased to Rs.2,200 and the investor sold this stock. He made money of 100 per share. For a lot of 125, the amount he earned is Rs.12,500 (Excluding brokerage charges which would be Rs.250). An amount of Rs. 67,500 (125 x 2200) would be realized thru the sale of this stock future. The profit is Rs.12,250 (Rs.67,500 sales minus purchase price of Rs.55,000, minus brokerage charges of Rs.250)
Profit margins for Intraday stock future
If an investor has purchased 125 lot of Infosys July future @ Rs.2,200 on 5-Jul-12 morning and expected to increase the price before the end of the trading day. The stock increased to Rs.2,210 on the same day and the investor sold this stock. He made money of Rs.10 per share. For a lot of 125, the amount he earned is Rs.1,250 (Excluding brokerage charges which would be Rs.250).
Sounds good? But do we make money every day?
No. We may not be successful every day unless we have some trading strategies on how we trade.
Is this one of the best investment option in india ?
Yes. Once you read the complete article, you will accept the fact that this is oneof the best option for investments.
5 simple steps to be followed for maximising return in stock futures in a month
1) Trade only blue chip stock futures. Do not get any midcap or cheap stocks. Many stock brokers advice to make money thru midcap, just ignore them. With such cheap stocks, you end up losing money.
2) Positive news about the stock: In case you hear positive news about the stock about their investment strategies, company policies etc., and company stock prices goes up. The stock price may go up only for 1-2%, however the profits thru this would be Rs.2K to Rs.5K. Surprised? Just watch for a particular stock and tell me in case I am wrong.
3) Performance: One of the stock future trading strategies can be based on the company performance. Recently Infosys announced results which could not attract the customers. The stock price continued to fall even after 3-4 days of the declaration of the company performance results. This is one of the good strategies to buy/sell stock futures with this approach where we can earn good amount of money. Just to let you know that I earned Rs.4K in two separate trading by doing Infosys short (Sell in the morning and buying in the evening).
4) Industry trends: This is another way making money thru stock futures. Here, the industry trends needs to be considered. If a sugar industry is under pressure no matter what kind of stock it is, it would take the beating when the market sentiment for the day is negative.
5) Government Policies / Directions: This is one more good strategy which one can adopt while trading in stock future. Here the Government policies / directions need to be considered. For e.g. if RBI is taking certain steps which is going to effect the banking sector either in positive way or negative way, the impact would be there in banking / financial services stocks. The impact would be seen for 3-4 days continuously. We need to just en-cash them based on the market sentiment
6) Global markets: I have seen three weeks back when US markets ended up with 2% up on Friday (US time), we have seen a similar sharp upside in Indian markets on Monday. No matter what we say, the global market sentiments carry to Indian market most of the time.
Final word of caution
There is no guarantee that one can earn good amount if we adopt above strategies. Just take a note pad and try adopting above 6 strategies for a period of 45 days to 90 days without investing any money. Once the confidence is built in, you can start trading with Rs.1 Lac investment and earn 100% returns in one month.
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