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FUTURES is the price of a particular Stock in Future Segment which
are available in Derivatives Segment for Trading which is for the
particular month which can be bought only in a particular quantity
or lot size and can also be Sold in that Lot Size only. It is at
par to Cash Equity Segment but with few Differences detailed explanation
as under: -
Difference 1 :
We cannot sell the Futures in Parts. It needs to be sold on the
basis of their lots only.
Eg: - If you have bought 1 lot of Tata Motors (1 lot = 5700), then
you cannot sell 2500, 3000 or any quantity lesser than 5700 shares,
you will have to sell 5700 shares only at one short.
Whereas if you had bought 5700 Shares in Cash Segment, then you
have an option to sell in parts.
Difference 2 :
In cash if we buy 5700 shares of Tata motors lets say @ 320, then
we have to pay entire cash to the Exchange in T+5 days, which is
almost Rs. 18,24,000/-
However, in future derivatives for this, you will have to pay only
Rs. 3-4 Lacs Cash Margin and you can roll over your positions month
on month, as Future contracts Expires every month.
Difference 3:
In cash, you just need to hold the Stock
In future Derivatives, you will have to roll over your positions
to next month contract, due to which brokerage will be applied.
Drawbacks :
In future Derivatives, in case if your holding Stock goes up then,
that much amount gets credited or added to your portfolio Cash balance
very next day and in case if it goes down, it will be debited or
deducted to your portfolio Cash balance very next day. Sometimes,
due to even margin constraints or shortfall, Exchanges or Brokers
auto Square off their positions.
Conclusion :
This is better option when an Investor is willing to buy positionally
in Cash say 5000 to 10000 shares and if that share is available
in Future Derivatives Contract of equitable quantity.
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