The textbook futures contract definition says you agree today to buy or sell an asset later at a fixed price. On an Indian exchange, that is only the start. Your position is revalued every trading day, and the gain or loss is paid the next day. In practice, the futures contract meaning is a daily cash commitment on the full contract value.
Futures Contract Meaning: What You Agree To
A futures contract is a standardised, exchange-traded agreement to buy or sell a fixed quantity of an asset at a price agreed today, on a set expiry date. Both sides carry an obligation. The exchange fixes the underlying (the asset traded), the quantity and the expiry; trading sets only the price.
NSE describes futures as forward contracts traded on an exchange. A forward is a private deal on custom terms; futures standardise the same promise, so you can exit before expiry. The difference between forward and futures contracts has its own guide.
New to futures in the stock market? Start with the beginner's guide. This page covers what the contract specifies and how it settles.
Key Features of a Futures Contract in India
The exchange sets the lot size, the units in one contract, and revises it periodically. NSE cut the Nifty 50 lot from 75 to 65 for contracts from January 2026, so check the current figure first.
Feature | What NSE specifies (as of October 2026) |
Contract value | Price × lot. Index futures stay within ₹15 lakh to ₹20 lakh at review; stock futures start at ₹5 lakh |
Expiry | Last Tuesday of the month (previous trading day if a holiday) |
Margin | Initial margin upfront, plus an extreme loss margin (an extra buffer) of 2% (index) or 3.5% (stock) of contract value |
Daily settlement | Positions reset daily to a price based on the last 30 minutes of trading |
Margin gives futures their leverage: you deposit a fraction of the contract value but carry the gain or loss on all of it, so losses can exceed your margin.
Types of Futures Contracts in India
The underlying also decides what happens at expiry. The guide on stock index futures covers index contracts in detail.
Type | Settlement at expiry | What it means for you |
Index (Nifty 50, Nifty Bank) | Cash | Only the profit or loss moves |
Stock (200+ SEBI-approved stocks) | Physical delivery | Buyer pays full contract value; both sides pay Securities Transaction Tax (STT) at the delivery rate |
Currency (USD-INR and other INR pairs) | Cash, at the RBI reference rate | One USD-INR contract covers USD 1,000 |
Commodity (gold, silver, base metals) | Per contract; many, including gold, are compulsory delivery | Holding into delivery can oblige you to give or take the commodity |
Delivery rules vary most in the last row; the guide to commodity futures explains them for MCX. Daily settlement, though, works the same way for every type.
How a Futures Contract Works: Daily Settlement in Rupees
Say you buy one index futures lot at an illustrative 25,000, not a current level, with 65 units per lot. The contract value is ₹16,25,000. Assume initial margin of ₹1,95,000 (an illustrative 12%) plus the 2% extreme loss margin of ₹32,500, so ₹2,27,500 is blocked.
Day | Settlement price | Move | Paid in or out |
1 | 25,100 | +100 | +₹6,500 |
2 | 24,800 | −300 | −₹19,500 |
3 | 24,550 | −250 | −₹16,250 |
The index fell just 1.8%, yet you have lost ₹29,250, about 13% of your margin. That gap is leverage, and it works in the same proportion when the price moves your way. If losses erode your margin, you must add funds, or your broker may square off (close) the position at a loss.
Exiting adds costs: STT of 0.05% (from 1 April 2026) on the ₹15,95,750 sale is about ₹798. Indiabulls Securities charges 2.5% or ₹11 per executed order, whichever is lower, across NSE (CM, FO, CD), BSE (CM, FO) and MCX: ₹22 for the round trip. With exchange charges, SEBI fees, GST and stamp duty, costs total roughly ₹930.
Check your contract's live requirement on the margin calculator. Price your own round trip with the brokerage calculator.
Uses of Futures Contracts, and When They Go Wrong
Hedgers protect an existing exposure: an importer paying in dollars can buy USD-INR futures, so a rising dollar is offset by gains on the contract. The hedge also forgoes gains if the dollar falls, and a wrongly sized one covers only part; the guide to hedging explains sizing.
Speculators buy expecting a rise or sell expecting a fall. As the rupee example shows, a small adverse move can eat a large share of their margin.
Arbitrage traders buy in the cash market and sell futures when the price gap looks wide; costs can absorb it.
SEBI's FY26 study, released on 20 August 2026, found that 87.7% of individual equity derivatives traders made net losses, totalling ₹91,685 crore. It covers futures and options together. Futures do not suit you if you cannot fund several days of losses.
Also Read: Traders interested in systematic approaches to derivatives can also explore the growing role of FnO in Algorithmic Trading and how automated strategies are applied in this segment.
Conclusion
A futures contract fixes a price, but it settles every day on the full contract value. Run five checks before you trade:
1. Read the NSE specification: underlying, lot and expiry.
2. Multiply price by lot to see your real exposure.
3. Confirm whether it settles in cash, shares or the commodity.
4. Check the live margin requirement.
5. Decide the largest daily loss you could fund in cash.
If all five pass, approach futures and options trading with that plan. If not, futures are not right for you yet.
