An index future is a derivative, similar to a stock future, whose value is dependent on the value of the underlying, in this case, the index like the S&P CNX Nifty or BSE Sensex.
By trading in index futures, an investor is buying and selling the basket of stocks comprising the index, in their respective weights.
Stock index futures are traded in terms of number of contracts. Each contract would be to either buy or sell a fixed value of the index. The value of the contract would be the lot size multiplied by the index value.
About Nifty futures
Nifty futures are index futures where the underlying is the S&P CNX Nifty index. In India, index futures trading commenced in 2000 on the National Stock Exchange (NSE).
For Nifty futures contracts, the permitted lot size is 50, and in multiples of 50. Like other futures contracts, Nifty futures contracts also have a three-month trading cycle -- the near-month, the next month and the far-month.
After the expiry of the near-month contract, a new contract of a three-month duration would be introduced on the next trading day. Investors can trade in Nifty futures by having a margin amount in their account. This margin is a percentage of the contract value. It is usually about 10-12 per cent(Varies time to time).
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