Sunday 1 Feb 2026 was Union Budget day, and NSE opened for a special session. The February Nifty future settled at 24,853.50. On Monday it settled at 25,141.80, 288.30 points higher. One lot is 65 units. So a trader who had been long one lot from Sunday's settlement was marked up Rs 18,739.50 on Monday evening, and the trader on the other side was marked down the same amount. Nobody had closed anything. Both positions were still open. That is the real difference between a future and a share you buy and put away: the gain or loss is settled in cash every evening, whether you sell or not. This lesson follows one lot through that ledger. Every figure comes from NSE end of day files and is dated, not live.
3By the end you can
- Work out the rupee result of a long or short Nifty future from its entry price, exit price and the lot of 65.
- Say what margin is and is not, and why a loss on a future is paid in cash each evening.
- Explain how a future differs from an option in what each side can lose.
The idea, plainly
A future is a promise, made on an exchange, to buy or sell something at a price fixed today, on a date fixed today. SEBI's investor site calls it a standardised exchange traded contract. For Nifty nothing is delivered. The two sides settle the difference in cash. That is the F in F&O. The O is options. An option works differently: its buyer holds a right, not an obligation, and pays a premium for it. Options start with the call option, and the short answer to what F&O is has its own page.
Long result =
(exit price less entry price)
x 65 x lots
A future gains and loses the same amount for every point, both ways
The short side is the mirror: it gains when the index falls and loses when it rises
Read 4 more paragraphs, 235 words
There are two sides. The long side gains when the index rises and loses when it falls. The short side is the mirror. Each rupee one side makes, the other loses, so before costs the two results add to zero.
The short result is the same number with its sign reversed.
The lot is the unit. A lot of Nifty is 65 units, so the June future at 23,240.10 is a position worth Rs 15.1 lakh. You do not pay that. Both sides post margin, a deposit collected for the clearing corporation. It comes in two parts. SPAN is a loss estimate that should be exceeded about one day in a hundred, worked over two days for futures, because the day's loss may not be collected before the next day's trading starts. The extreme loss margin on an index future is 2% of the contract value, which was Rs 30,212 a lot on 10 Jun 2026.
Margin is collateral. It is not the price, and it is not the most you can lose. Say margin ran to a tenth of the value. I use a tenth for the sums because the real figure moves every day. One lot would then need about Rs 1.51 lakh, and a one percent move in the index changes the lot by Rs 15,106, a tenth of the deposit. That is leverage, and it cuts both ways.
Futures or options for a first trade?
People ask which one is gentler. Neither is built to be. A bought option risks only its premium, though many options expire worthless and then the whole premium goes. SEBI's August 2026 study found that 87.7% of individual F&O traders lost money in FY26, and that options carried 92% of the losses. A future has no premium to lose, and its loss is not limited to the margin: for every point against you, the lot of 65 units takes its share. An option fails by decay. A future fails by margin call. Three questions are worth asking of any contract. How much can it cost on a bad day? Can the account pay that? What happens when it goes wrong? The comparison of buyers and sellers is in module F13. A future is the plainer tool when the aim is to hedge shares you already own, which module I03 covers. The short version of this section is on the futures or options question page.
Worked example: one lot, 10 to 29 Jun 2026
Take the June Nifty future, which expired on Tuesday 30 Jun 2026. Follow one lot of 65 units from its settlement on Wednesday 10 Jun to its settlement on Monday 29 Jun, the last session before expiry. One account is long and one is short. Charges are left out.
Every evening the clearing corporation moves the day's gain from one side to the other
| Settlement | Points | Long lot |
|---|---|---|
| Wed 10 Jun: the future settles at 23,240.10 | start | start |
| Tue 16 Jun, four sessions on: 24,001.00 | 760.90 | Rs 49,458.50 |
| Mon 29 Jun, eight sessions on: 23,972.90 | −28.10 | −Rs 1,826.50 |
| Total | 732.80 | Rs 47,632.00 |
Nifty ran up to 16 Jun, then drifted: the long account gained first and gave a little back
Read 4 more paragraphs, 271 words
Each evening NSE Clearing fixes a daily settlement price for the contract, normally the volume weighted average price of its last half hour. Every open position is reset to that price, and the difference moves from the losing side to the winning side. The cash settles through the clearing banks on the next working day. A short that cannot meet the debit is asked for more margin, and a position left short of margin can be closed by the broker.
The short lot is the same table with the signs reversed. The long account was marked up Rs 49,458.50 over the four sessions to 16 Jun, then marked down Rs 1,826.50 over the eight sessions after that. The total, Rs 47,632.00, is the same as (23,972.90 less 23,240.10) x 65. Marking to market changes when the money moves, not how much moves.
Now look at the short account. It was debited Rs 49,458.50 in the first four sessions while its position stayed open. That is real cash leaving the account on the way. A short that could not meet each debit would have been closed at whatever price the market gave that day, even though the index later gave a little back.
On Tuesday 30 Jun the contract was marked one last time, at the final settlement price, and it ended. For an index future expiring before 7 Dec 2026 that price is the index close on expiry day. SEBI's circular of 15 Oct 2026 changes the method from 7 Dec 2026. Stock futures are different: they settle by delivery of shares. Module F16 covers settlement in full.
The common mistake
The belief: A loss is only on paper until I close the position.
That is true of a share, which is a holding whose price moves. It is not true of a future, which is a contract settled every day. In the ledger above, the short account was debited Rs 49,458.50 by 16 Jun without buying or selling anything, and that cash left the margin account. If the margin runs short, the broker asks for more or closes the position. A recovery afterwards does not reopen a position that was closed on the way down. The test for a future is not what a bad week costs on paper. It is what the week costs in cash, and whether the account can pay it.
Key takeaways
- A future fixes a price today for a date. Long gains if the index rises.
- One lot is 65 units, so multiply every index point by the lot.
- Margin is collateral. It is not the price and not the most you can lose.
- Gains and losses are settled in cash every evening, before any exit.
- Index futures settle in cash at expiry. Stock futures settle by delivery.
- Neither futures nor options is safe by design. They fail in different ways.
3 terms this section turns on
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study