The Nifty Futures is a special commodity in the Indian derivatives market. Nifty Futures is the most traded futures instrument in India, making it one of the most liquid contracts on Indian derivative markets. You may be surprised to learn that Nifty Futures is one of the most traded index futures contracts in the world. As soon as you become comfortable with futures trading, I imagine that you will be trading Nifty Futures like many others. It would be logical to learn all you can about Nifty Futures.
Assuming you have a basic understanding of the index, I will now discuss the Index Futures and the Nifty Futures.
The futures instrument, as we all know, is a derivative contract whose value derives from an underlying asset. The Index is the underlying asset in the context of Nifty Futures. The Nifty Index is the underlying of the Nifty Futures. The Nifty futures value will also increase if Nifty Index's value increases. The Index futures would also decline if Nifty Index's value falls.
Here's a snapshot of Nifty Futures contract
Nifty Futures can be purchased in any of the three options available for futures contracts: current month, middle-month and far month. For your convenience, I have highlighted them in red. For your reference, I have also highlighted the Nifty futures price at Rs. 11,484.9 for each unit of Nifty. The equivalent underlying value (index in spot) was Rs. 11,470.70 The futures pricing formula is responsible for the difference in the spot and futures prices. In the next chapter, we will discuss futures pricing concepts.
You will also notice that the lot size is 75 The contract value is -
CV = Futures Price * Lot Size
= 11484.90 *75
= Rs.861,367/ -
These are the margin requirements to trade Nifty Futures.
|Type of Order||Margin|
|BO & CO||Rs.12,902/ -|
These details should give an overview of Nifty Futures. Nifty Futures' liquidity is one of its main strengths. Let's now learn what liquidity is, and how to measure it.
Last updated 24 August 2021. According to the NSE definition of Impact Cost, it is the cost that buyers and sellers must bear in order to execute a transaction in a security. This measure is used to assess market liquidity. It provides traders with a more accurate picture than the bid-ask spread. It is different for the buy-side and the sell-side. The amount of the transaction will also affect it. The order book changes the impact cost dynamically. Stocks that are included in indices, such as Nifty 50 or Nifty 500, must meet a minimum impact cost threshold to be eligible.
Here's how to calculate the impact cost:
Ideal Price = (Best Price in Orderbook + Best Selling Price in Orderbook)
Actual Buy Price = Sum (Quantity * Execution price) / Total Quantity
Impact Cost (for that quantity) = (Actual buy price - Ideal price) / Ideal price * 100
Let's take Infosys as an example to illustrate this.
Let's say that a person wants 350 Infosys. Let's now calculate the impact cost of this transaction.
Ideal price = (1657.95+1658)/2 =1657.9751657.98
Actual Buy Price = (15*1658) + (335*1658.20), / 350 = 1658.19143, 1658.19
Impact Cost of buying 350 shares = (1658.19 -1657.98 / 1657.98 / 100 = 0.12%
These are the key messages I want to convey from this discussion:
The Nifty Index is a collection of 50 stocks. These stocks represent a broad range of India's economic sectors. Nifty is a good indicator of India's wider economic activity. Nifty's value will rise if there is an increase in general economic activity or at least the expectation of it. Nifty Futures trading is a better option than single stock futures. This is due to many factors. Here are some: