Futures Contracts and Contract Specifications
A futures contract is a standardised, exchange-traded version of a forward — same economic promise to buy/sell at a fixed price on a fixed future date, but the ...
Futures Contract
A futures contract is a standardised, exchange-traded version of a forward — same economic promise to buy/sell at a fixed price on a fixed future date, but the contract size, expiry, tick size and settlement are fixed by the exchange and every trade is cleared and margined through a clearing corporation.
Exchanges standardise five things: (1) Underlying — e.g., Nifty 50, Reliance; (2) Contract size (lot size) — e.g., Nifty 25, Reliance 250 shares; (3) Expiry — near, next and far month, typically last Thursday for Nifty; (4) Tick size — minimum price move, ₹0.05 for stock futures, 0.05 points for index; (5) Settlement — cash for indices, physical (delivery) for single-stock futures per current SEBI rules. Every buyer and seller faces the clearing corporation as counterparty, eliminating bilateral credit risk. Positions are marked-to-market daily and gains/losses flow through margin accounts the same day.
Everyone buys the same lot size, same expiry, same everything — just different price
You never know who the actual other side is
Losses settle every day at 3:30 PM — no surprises at maturity
Liquid — just trade it to close before expiry
A Practical Example
| Parameter | Specification |
|---|---|
| Underlying | Nifty 50 Index |
| Lot size | 25 units |
| Tick size | 0.05 points |
| Contract cycle | 3 overlapping expiries (current, next, far month) |
| Expiry day | Last Thursday of expiry month (previous day if holiday) |
| Settlement | Cash — based on closing Nifty 50 on expiry day |
| Trading hours | 09:15 – 15:30 IST |
What Makes This Important
Frequently Asked Questions
Daily mark-to-market prevents build-up of unrealised losses that could make default catastrophic. By debiting losses daily, the clearing corp limits its exposure to a single-day adverse move covered by the initial margin.
🧠 Quick Quiz
2 questions to check your understanding