What Makes Futures Different

A futures contract obligates you to buy or sell an underlying asset at a set price on a future date — and because
you only put up a fraction of the contract’s value as margin, small price moves translate into larger swings in
your position’s value. That leverage is the core appeal of futures, and its core risk.

Index Futures vs Stock Futures

Index futures (Nifty, Bank Nifty, Sensex) track a broad basket of stocks and tend to be less prone to
single-company shocks. Stock futures are tied to individual companies and can move sharply on company-specific news
like earnings — which means position sizing needs to account for that extra source of volatility.

Reading Open Interest and Rollover

• Rising open interest alongside a price move suggests genuine conviction behind the trend
• Falling open interest during a move can hint at short-covering or long-unwinding rather than fresh conviction
• Rollover percentages near expiry indicate whether traders are carrying positions into the next series

Margin and Position Sizing

Because margin requirements determine how much capital a position ties up — and how much leverage you’re
effectively using — position sizing in futures should be based on the distance to your stop-loss, not on how much
margin you have available to deploy.

Hedging: The Other Side of Futures

Beyond speculation, futures are also used to hedge an existing portfolio — for example, shorting index futures to
protect long equity positions during a period of expected weakness, without needing to sell the underlying holdings.

Discipline Over Frequency

Leverage means undisciplined futures trading can damage an account far faster than equity trading. A defined
stop-loss, sensible position sizing, and a willingness to skip unclear setups matter more than being active every
session. This discipline sits behind every idea in our futures tips provider
service.