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Finance GlossaryFutures Contract
Futures Contract
Definition of Futures Contract
A futures contract is a derivative instrument that is legal agreement between two parties for the mandatory purchase or sale of an underlying asset at a pre-agreed price and date.
Every futures contract contains a standard lot size on top of the agreed price and date as they are a standardized derivative traded on a stock exchange, most commonly on NSE and BSE.
The price of a futures contract is known to vary from the spot price of the same underlying asset due to factors like the cost of carry, interest rates, and more.
Every futures contract contains a standard lot size on top of the agreed price and date as they are a standardized derivative traded on a stock exchange, most commonly on NSE and BSE.
The price of a futures contract is known to vary from the spot price of the same underlying asset due to factors like the cost of carry, interest rates, and more.
Related Terms
Capital Asset Pricing Model
Capital Asset Pricing Model or CAPM is used to determine the expected return one can earn on an asset by evaluating the associated risks and how markets price the asset.
Indices
Indices are a collection of financial instruments that measure the performance of those very instruments.
For example, stock market indices like Nifty 50 and Sensex measure the top 50 and 30 stocks by market capitalization.
If indices go up, it generally means that the underlying stocks are performing well. The opposite is true when indices plummet.
By the way, there’s no limit to how many instruments an index can track. The Nifty Smallcap 250 tracks 250 stocks whereas Nifty Bank tracks 12 stocks.
For example, stock market indices like Nifty 50 and Sensex measure the top 50 and 30 stocks by market capitalization.
If indices go up, it generally means that the underlying stocks are performing well. The opposite is true when indices plummet.
By the way, there’s no limit to how many instruments an index can track. The Nifty Smallcap 250 tracks 250 stocks whereas Nifty Bank tracks 12 stocks.
Best Efforts Underwriting/Offering
A best efforts underwriting or offering means the underwriter will do their best to market the securities for the issuer (company, supplier, etc) to investors. The underwriter will not buy all the securities from the issuer, only those the underwriter’s clients want to purchase.
Morning Star Pattern
The Morning Star Pattern is a three-candle bullish formation that appears after a decline and suggests a shift in market momentum. It begins with a clear bearish move, followed by a phase of indecision, and ends with a strong bullish candle. Traders often view this pattern as an early signal of renewed buying interest.
Short Selling
Short selling is a popular intraday selling strategy. Through this strategy, traders can sell shares that they currently don’t own. They expect the prices to fall, so they borrow the shares and sell them at the current price. The goal is to buy the stock back later at a lower price. However, traders can incur significant losses if the prices rise instead. That’s why risk management is crucial in short selling.
Mutual Fund Sahi Hai
Mutual Fund Sahi Hai is a popular investor awareness slogan/website launched by the Association of Mutual Funds in India (AMFI). It aims to educate people about mutual funds and encourage informed, long-term investing by highlighting the benefits of diversification, professional management, and disciplined investment habits.
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