Trading Opportunities in Equity Index Futures

Trading futures online can prove difficult if strategies are not defined, then followed. Trading All Products Home. When spread received is greater than spread paid the investor gets profit and when spread received is lesser than spread paid he incurs a loss. In the falling market he would get the scrips at cheaper rates but he will have to pay off the loss in the Index Futures. Have securities, lend it to Market Highlights on remaining six strategies: Each futures trading strategy specializes in one technique for trading either momentum, swing trades, and trend trading.

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You could trade an intermarket spread, for example, by simultaneously buying hard red winter wheat and selling soft red winter wheat or vice versa, depending on market conditions. These are also called inter-commodity spreads. This is any type of spread in which each position is created in a different futures exchange.

Strategies By Investopedia Share. A Brief History Futures Fundamentals: The Players Futures Fundamentals: How To Trade Futures Fundamentals: Long and Short Trades Trades can be entered in two different directions, depending on where you expect the market to go. There are several different types of spreads, including: Writing bull put credit spreads are not only limited in risk, but can profit from a wider range of market directions.

CFD versus Spread Betting investment products, which offer significant market exposure with a small initial deposit. Commodity spread betting is a way to speculate on price movements of various commodities. Now, he simply unwinds the spread by executing orders opposite to the original trade.

Sign In Sign Up. Return to Course Overview. What is an Index Future? The Importance of Depth Volume. Who Uses Equity Index Products? What is Equity Index Basis? Rolling an Equity Position Using Spreads.

Trading Opportunities in Equity Index Futures. To lock the market, he should go short in the three month Index Futures, valuing his portfolio value at the current market price. After three months, he can dispose off his securities in the stock market. As he disposes off his portfolio, he should simultaneously cover his short position in Index Futures by buying back Index Futures equivalent to the value of scrips sold.

By the time he sells his complete portfolio of scrips he would have covered his entire position in Index Futures. In the falling market, the investor would incur loss in his portfolio but since he is short in Index futures he would profit by covering his short position at the lower rate. Thus loss in Stock Market gets offset by the gains in Index Futures. In the rising market, the investor would get profit from his portfolio but he will have to forego the same as he would be incurring loss in Index Futures.

Thus, Index Futures is a risk management technique used to reduce market risk and therefore no profit and no loss from the market movements. Have Fund, go long in Index Futures: Supposing an investor is going to get some fund in a short span of time which he intends to invest in stocks.

He also requires time to analyse the stocks. He is quite bullish about the market. He prefers to purchase the stocks at the current market price but he has not received the fund. If he waits for the fund to arrive, the market may go up and therefore his cost also would go up. To avoid this he wants to lock the market at the current price. He should go long in Index Futures immediately.

As he receives the fund and buys the scrips, he should simultaneously reduce his exposure in the Index Futures by selling the Index Futures. In the rising market he would have to pay more to get the securities, which he would get back from Index Futures. In the falling market he would get the scrips at cheaper rates but he will have to pay off the loss in the Index Futures. In the absence of the Derivatives Market, when an investor is bullish about the market he immediately assumes long position in any of the scrips thinking that the scrips will definitely reflect the market trend.

With Index Futures Contract in place when an investor thinks the market is bullish he can buy the market itself by going long in Futures Index. Similarly if he is bearish about the market he can sell the market by going short in Futures Index. Have Fund, lend them to the market Have Securities, lend them to the market In the liquid market, one can get an attractive bid and offer and a trade can take place at less impact cost.

By taking into account the bid price, offer price and the duration of the contract, one can at any point of time analyse and see if one can lend money at an attractive interest rate or if one can receive money from the market by lending securities in the market. Have Fund, lend them to the market: Suppose the Nifty spot is at and the two month futures are at and suppose the transactions costs involved are 0.

Different Strategies of Index Trading :

Futures traders try to predict what the value of an underlying index or commodity will be at some point in the future. Speculators in the futures market can use different strategies to . Trading futures online can prove difficult if strategies are not defined, then followed. You may have heard the futures market referred to as a ‘zero sum game’. This means for every profitable trade, there is an equal, losing trade. The Futures Market & Trading Strategies. Futures are a popular trading market for both day and swing trading. Futures contracts are how many different commodities, currencies and indexes are traded, offering traders a wide array of products for futures trading.