A pair held over several sessions in India runs on futures, so lot, roll and ban rules enter the test

A pair held over several sessions in India runs on futures, so lot, roll and ban rules enter the testDiagram with 6 boxes. Check the cash rule: a retail cash short is squared off the same day to Pick the two stock futures and read their lot sizes; Pick the two stock futures and read their lot sizes to Set the hedge ratio, then round it to whole lots; Set the hedge ratio, then round it to whole lots to Check the F&O ban list and the margin for both legs; Check the F&O ban list and the margin for both legs to Plan the roll before expiry week and price its cost; Plan the roll before expiry week and price its cost to Charge STT, fees, spreads and funding, then read the net result.Check the cash rule: a retailcash short is squared off thesame dayPick the two stock futuresand read their lot sizesSet the hedge ratio, thenround it to whole lotsCheck the F&O ban list andthe margin for both legsPlan the roll before expiryweek and price its costCharge STT, fees, spreads andfunding, then read the netresult
The checks that come before a futures pair is tested, from the cash rule to the net result. A map of method, not a recommended pair. Source: RupeeCase method map; NSE contract specifications. As of 16 Oct 2026.

The textbook pair trade buys one stock and sells another, then holds the short leg until the spread comes back. In the Indian cash market a retail account cannot generally carry a short overnight: an intraday short is squared off the same day, and borrowing shares to carry one is thin. So a position meant to last several sessions cannot use cash shares on the short side.

The common workaround uses futures. Both legs are stock futures, one long and one short, sized by a hedge ratio. Futures allow a short exposure that can be carried into the next session, but they come with a lot size, a margin, a daily mark to market and a monthly expiry that forces a roll. Stock futures settle by delivery at expiry, so both legs are closed or rolled before then.

Each of those frictions changes the test. Lot sizes make the hedge ratio lumpy, so the hedge is only approximate. A roll in expiry week adds a cost and can move the basis. An F&O ban on one stock blocks new positions in that leg, so the pair can be stuck half built.

The flow below lists what to check before a futures pair is tested. Each step is a place where the paper result stops matching what a trade would have earned.

Costs belong in the test from the start. Futures carry STT on the sell side, brokerage and fees on both legs, and the spread on each leg when the position is entered and exited. A pair that looks good before those costs can look different after them.

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