Best Method To Trade Nifty Futures
Nifty Future is a deal, which gives a buyer or seller a chance to buy or sell the Nifty 50 index at the current price on a later date. Nifty options are of two types – call option and put option.
A call option gives this buyer the right to purchase nifty at a fixed price during the prescribed period. Whether Bayer can exercise his right. If he wants, he can not even use his authority. Similarly, the put option gives the buyer the right to sell the index. Deals of index futures are settled in the cache.
How does the Nifty Futures and Option deal work?
Let us consider it with an example. Suppose trader A thinks that the Nifty will climb to the level of 10,7000. For this, he pays some margin, which is a small part of the total cost of contracts. The deal he deals with is the trader B, who sells the Nifty at this level.
If the Nifty climbs to a level of 10,8000, then A will have the right to buy the Nifty at the price of 10,700 from its B and sell it at its current price ie 10,800 level. In this way, it would be worth 7,500 rupees (75×100).
Similarly, if the Nifty Futures slips to 10,600, then B will sell Nifty futures to A at 10,700 level. In such a way, A will lose Rs 100 per share.
A will have to pay a premium of 200 rupees (close closing price of Friday) per share to buy call options at a level of 10,700. If the Nifty hits a 100-point jump to reach 10,800 before the expiry, then the value of the option will increase to 100 rupees.
In such deals, the seller’s money is considered to be more frustrated. However, the call buyer may also have a loss, if the Nifty rolls over its expectations. If there is no specific condition or rule of the stock exchange, the settlement of these deals is in cash.