Futures trading is a lucrative opportunity in India given the numerous changes that the Indian government has brought about in the financial markets and the various initiatives taken at the central level in commodities exchanges.
You can start your futures trading as a business as well since it is a lucrative opportunity and needs very little start up capital. Futures trading is part of the derivatives market whereby all financial instruments which are available for trading are dependent on underlying assets. These can include commodities, stocks, market indices and so forth. Futures are contracts which can be traded in the market and are agreements between sellers and buyers to buy or sell a certain commodity or any other type of underlying asset at a pre determined price at a future date.
Futures trading is unlike stock trading whereby you become owners of actual stocks. Trading in futures indicates not actually owning or buying anything but predicting the direction in which the price of a stock or a commodity is going to move. Thus, sell or buy strategies do not signify actual physical transactions but the strategies to be adopted as per price movements.
Futures trading on the NSE NIFTY Index would involve buying futures contracts if the price would be going up while the sell strategy would be employed if an investor thought that the price of the index was going down. In such cases, no transactions are actually taking place. For futures trading, one does not need to pay anything apart from brokerage costs which are taken as a guarantee that, in case of losses incurred, one will pay up the damages.
Futures trading has several benefits. The main advantage is that, there is high leverage with such trading. If someone can employ the right strategies, one can make a profit from futures trading whether the market is bullish or bearish. One has to deposit a small amount of money while purchasing such contracts, know as margin money which is usually 10% of the entire cost. If cards are played right, one can sell as easily as one can buy and hence, such trading can prove highly profitable in a short while.
Futures trading can only go wrong if one does not employ the right strategies on time and the holding position is not closed before the delivery date. If such a situation occurs, one will be left having to pay for the entire asset as specified in the contract and at the agreed price, whether he or she is interested in the goods or not.