Trading in futures gives the investor the great advantage of trading with a much higher volume of stocks than they would have if they bought the original stocks. A thorough analysis of the nifty price chart can ensure that you make astute decisions.
The Nifty Futures Index’s nifty 50 chart stocks represent more than ten different industries. This diversification provides stability, which protects you if your point of view shifts in the wrong direction. This diversification also enables us to gain a high-level perspective of short-term and long-term trading.
Before we get into the benefits of Nifty Futures and Options, let’s first define Nifty Futures and Options.
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They allow the buyer to buy or sell shares or another underlying financial instrument at a predetermined price during a specific period. Nifty options are derivative instruments in which the underlying asset is the Nifty.
These have a lot size of 75, different strikes, and multiple expiry periods, similar to Nifty50 futures. It is similar to futures, but unlike futures, your profit/loss will not be linear depending on the up/down movement of the NSE NIFTY.
As we all know, a futures contract is a derivative contract whose value is determined by an underlying asset. In Nifty futures, the underlying asset is the index itself. As a result, the Nifty Futures are based on the Nifty Index.
So this means that as the value of the Nifty Index rises, so will the value of Nifty futures. Similarly, if the Nifty Index falls in value, so will the index’s future.
The bid-ask difference, or the rate difference between buyer and seller quotes, is represented by the spread. It is essential for traders, especially those who use the scalping trading method.
The lower the spread, the lower the trading fees. The bid-ask spread is nearly as wide because nifty futures and options are so popular. As a result, trading in the Nifty yields higher returns whether you buy or sell.
The Nifty Future is highly diverse. The Nifty Futures Index’s 50 stocks represent more than ten different industries. This diversification provides stability, which protects you if your point of view shifts in the wrong direction. This diversification also enables us to gain a high-level perspective on the short-term and long-term trading markets.
The margin needed to open a position in nifty futures is only 8%. An average margin of 13 percent is required to obtain positions compared to stock futures. Some brokers offer intraday trades in nifty futures with as little as Rs.5000 margin. Furthermore, some brokers provide Nifty futures tips.
Because of the high liquidity of Nifty options, conducting research and making a trading decision is simple. Look at a range of out-of-the-money and in-the-money options, as well as open interest. You can use these options to hedge your long or short positions.
Most stocks follow the same pattern because the Nifty is a benchmark index. As the stocks are likely to move in tandem with the Nifty, you can use it to hedge against your stock portfolio. On the other hand, hedging is only available to large investors. As a result, small traders can exit if the market becomes highly volatile.
Since there is sufficient liquidity in the Nifty futures contracts related to stock futures, it is simple to enter a position by purchasing next and back month Nifty contracts. Complex trading strategies can be implemented on the Nifty futures using the long and short sequence.
Performing a rigorous bank nifty live chart analysis coupled with all the above benefits can help a diligent investor make handsome monthly returns in future trading.