Trading Nifty Futures with Rs 20,000 Capital: Strategy Inside! (2024)

Rakesh Deshmukh

/ Categories: Knowledge, General

To trade futures and options effectively, a trader must thoroughly understand F&O concepts and be aware of the associated risks before placing any orders.

Trading futures is always exciting for me, and I’m eager to delve deeper into it. However, I've often been concerned about the substantial capital required for futures contracts. Have you faced this challenge too? What if I told you a secret that could reduce your margin requirement for futures trading by around 50 per cent? Interested? Let’s explore this together, but first, let’s quickly review what futures contracts are.

A futures contract is a standardized agreement between two parties to buy or sell an underlying asset at a set price on a specific future date. In a futures contract, you can either take on the role of a buyer or a seller. If the asset’s price increases, buyers benefit since they purchased at a lower price. Conversely, if the price decreases, sellers profit by selling at a higher price.

Trade With Less Margin

Let’s illustrate this with an example. Suppose you want to trade Nifty futures, and the Nifty contract has a lot size of 25. If the July futures contract is priced at 24,345, the total contract value is Rs 6,08,625. Typically, brokers do not require you to pay the entire contract value upfront. Instead, they offer leverage, requiring only a margin to trade the contract. For this contract, the margin required would be approximately Rs 75,985, which is about 12.5 per cent of the total contract value. If you need even more leverage for trading this futures contract, there’s a way to achieve it with just one additional step.

So, to trade futures contracts with less margin, you simply need to add an option contract to your basket. Let's say you have a bullish view and foresee Nifty will go up in the upcoming days. Then, you need to buy a put option contract of Nifty and then buy a futures contract; this would cost you around Rs 28,590, as shown in the image below.It's up to you what you add ATM, OTM, ITM every option category has its own set of risk and delta variance.

The catch here is that you need to add the options contract first: if you are bullish, then add a Put option contract, and if your view is bearish, then add a Call option contract before adding the futures contract.

Trading Nifty Futures with Rs 20,000 Capital: Strategy Inside! (2)

One thing you need to keep in mind is that adding At-the-Money (ATM), In-the-Money (ITM), or Out-of-the-Money (OTM) options carries a different set of risks. You need to check the option Greeks before placing the order, especially the delta for your spread, which will eventually tell you how much money you are going to earn based on how many points Nifty moves in your direction or vice versa. Additionally, if you carry this spread, there is a Mark-to-Market (MTM) risk in the future and theta risk in the option contract.

Risk In Futures Trading

In the case of buying Options, your maximum risk is limited to the money you have spent on these options. If your prediction proves completely inaccurate and your options become worthless by the contract's expiration, you may incur a loss equivalent to your initial investment. Contrastingly, with futures contracts, you face unlimited liability. You are obligated to cover daily losses by injecting additional capital through a margin call. Daily losses might compel you to persist in the trade even if the underlying asset moves unfavourably. If most of your investment is in futures contracts and you lack funds to meet margin calls, you might potentially accumulate debt.

Disclaimer: The article is for informational purposes only and not investment advice.

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Trading Nifty Futures with Rs 20,000 Capital: Strategy Inside! (2024)

FAQs

How much capital required for Nifty future? ›

So, to open this NIFTY future's position, you would need to allocate a total initial margin of INR 2,00,000 (VAR of INR 1,00,000 + ELM of INR 1,00,000). Moreover, if the contract's value increases by INR 5,000 in a day, you might need to allocate additional capital to cover this change in MTM margin.

Can I day trade with 20k? ›

First, pattern day traders must maintain minimum equity of $25,000 in their margin account on any day that the customer day trades. This required minimum equity, which can be a combination of cash and eligible securities, must be in your account prior to engaging in any day-trading activities.

Which strategy is best for Nifty? ›

Top Trading Strategies for Bank Nifty Options
  • Buy and Sell Trades. This two-part technique uses trade orders for both buying and selling. ...
  • Candlestick Chart for 5 minutes. ...
  • Bull Call Spread. ...
  • Short Straddle. ...
  • Long Straddle. ...
  • Bear Call Spread. ...
  • Bear Put Spread. ...
  • Stay Updated On Market And Economic Trends.
Sep 27, 2023

How much capital is good for option trading? ›

The Bottom Line. You don't need a considerable sum of money to become an options trader. You can start small with a capital of less than Rs 2 lakhs too. However, as you start small, you need to be a careful trader so that you can cut down on the possibility of losses and enhance the return potential of your trades.

How much capital do I need to trade futures? ›

To apply for futures trading approval, your account must have: Margin approval (check your margin approval) An account minimum of $1,500 (required for margin accounts.) A minimum net liquidation value (NLV) of $25,000 to trade futures in an IRA.

How much money do I need to buy Bank Nifty futures? ›

The value of the futures contracts on BANKNIFTY may not be less than Rs. 5 lakhs at the time of introduction. The permitted lot size for futures contracts & options contracts shall be the same for a given underlying or such lot size as may be stipulated by the Exchange from time to time.

Which trading strategy has the highest success rate? ›

Indicator-Based Directional Trading

This strategy uses an indicator to determine the direction of the trade. The indicator provides a clear signal when it's time to enter or exit a trade, making it easy to work with. Traders who use this strategy can expect to see consistent results and high success rates.

What is the simplest most profitable trading strategy? ›

One of the simplest and most widely known fundamental strategies is value investing. This strategy involves identifying undervalued assets based on their intrinsic value and holding onto them until the market recognizes their true worth.

What is the 9 20 Nifty strategy? ›

The 9:20 AM short straddle strategy capitalizes on the initial market volatility that often occurs right after the opening bell. This strategy involves selling both a call option and a put option simultaneously.

What is the minimum capital for futures trading? ›

There is no minimum capital that's set in stone for futures trading. However, you will have to deposit a margin for taking a position in any futures contract.

How much money is needed to trade futures in India? ›

How much funds do I need to trade futures? Trading in futures contracts involves margin payment. The volume of margin will depend on the stake size. However, most brokers will ask for at least 10 percent upfront margin to place a trade.

What is the safest option strategy? ›

The safest option strategy is one that involves limited risk, such as buying protective puts or employing conservative covered call writing. Selling cash-secured puts stands as the most secure strategy in options trading, offering a clear risk profile and prospects for income while keeping overall risk to a minimum.

What is the margin required for Nifty future? ›

Example 1: Futures Trading

Suppose you want to trade Nifty futures on the National Stock Exchange (NSE). The contract quantity is 100, and the current market price is 25,000. The required span margin for Nifty futures on the NSE is 10% of the contract value.

How much money is required to buy futures? ›

How much funds do I need to trade futures? Trading in futures contracts involves margin payment. The volume of margin will depend on the stake size. However, most brokers will ask for at least 10 percent upfront margin to place a trade.

How much money is required to buy 1 lot of Nifty futures in Zerodha? ›

How much money is required to buy a 1 lot Nifty 50 in the future in Zerodha? The money required is approximately 1 lakhs. and it varies as nifty moves. To calculate this you have to multiply lot size with nifty futures value( current month futurs).

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