It’s 2:47 AM; the markets are closed, but your phone screen glows with red numbers. You bought 1 lot of Bank Nifty futures at 48,200 yesterday afternoon, nearly ₹14.5 lakh worth of the index with just ₹1.8 lakh margin. Now, global cues have turned ugly overnight, and your heart is pounding. One wrong move tomorrow and you could lose more than your monthly salary or wake up to a life-changing profit.
If you’re reading this, you’ve probably felt that same mix of excitement and fear. Whether you’re a complete beginner wondering “What even is a futures contract?” or an intermediate trader struggling with mark-to-market losses, this guide is written for you.
In this comprehensive 2026-updated guide, you’ll discover exactly how futures contracts work in India, from pricing formulas used on NSE and MCX to daily settlement, expiry rules (now on Tuesdays), physical delivery nightmares (and how to avoid them), and a complete step-by-step trading playbook.
A futures contract is a standardised, legally binding agreement to buy or sell an underlying asset (index, stock, commodity, or currency) at a predetermined price on a specific future date.
Key features that make futures unique in India:
Feature | Futures | Forwards | Options |
Standardization | Yes (exchange) | No (custom) | Yes |
Obligation | Yes (both sides) | Yes | No (buyer has the right) |
Settlement | Daily MTM + Final | Only at expiry | Premium-based |
Traded on | NSE / MCX | OTC | NSE / MCX |
Risk | High (leverage) | High (counterparty) | Limited to premium |
Regulator: Securities and Exchange Board of India (SEBI)
Major Exchanges:
Main Types of Futures in India (2026):
Expiry Rule (Important 2026 Update):
All NSE indices and stock derivatives now expire on the last Tuesday of the month (changed from Thursday, effective September 2025). If Tuesday is a holiday, it shifts to the previous trading day.
A futures price is not random; it follows the cost-of-carry model, and understanding this separates serious traders from gamblers.
Formula:
Where:
F = Fair futures price
S = Spot price of underlying
rf = Risk-free rate (use the latest RBI 91-day T-bill rate, currently ~6.5-7%)
x = Calendar days to expiry
d = Expected dividends (for stocks/index) or storage costs (for commodities)
Real Example:
Fair futures price = 24050 × (1 + 0.068 × (15/365)) – 38 = ~24,085.
If the actual futures price is 24,120→, it is trading at a premium (contango).
If it is 24,020 → trading at a discount (backwardation).
Factors Affecting Pricing:
Arbitrage Opportunity: When futures deviate significantly from fair value, smart traders execute cash-and-carry or reverse cash-and-carry trades.
Margins (2026):
Example (Bank Nifty April 2026):
Leverage: 6-8x typical for index futures.
Tip: Always check the live SPAN margin on your broker’s margin calculator before placing a trade.
This is what makes futures different from stocks.
Every day at the end of trading:
Example:
If your account balance falls below the maintenance margin → Margin Call will be issued. You must add funds immediately or risk a square-off.
Two Types of Final Settlement:
Contract Type | Settlement Type | What Happens on Expiry |
Index Futures | Cash Settled | Pure cash profit/loss |
Stock Futures | Physical Delivery | You take/give actual shares |
Most Commodity Futures | Physical/Cash | Depends on contract (MCX rules) |
SEBI mandates physical settlement. If you forget to square off:
Many brokers auto-square off positions 1-2 days before expiry to avoid delivery.
Final Settlement Price: Average of the last 30 minutes of trading on expiry day (or closing price as per the exchange).
Tip: Start with paper trading or 1-lot positions.
Contract | Exchange | Lot Size | Approx. Contract Value (April 2026) |
Nifty 50 | NSE | 65 | ₹15.6 lakh |
Bank Nifty | NSE | 30 | ₹14.5 lakh |
Finnifty | NSE | 60 | ~₹12-13 lakh |
Reliance Futures | NSE | 250 | ~₹6-7 lakh |
Crude Oil | MCX | 100 | Varies |
Gold | MCX | 1 kg | ~₹75 lakh+ |
Risk Management Rules:
Futures contracts can be one of the most powerful tools in the Indian market if you truly understand how they work.
You now know the pricing formula, daily MTM mechanics, 2026 expiry rules, physical settlement realities, and a complete trading process.
The right way to begin is starting small, paper trading for the first 3 months, and taking your first real futures position with strict risk rules. Open a trading account with AliceBlue today for low brokerage and excellent margin calculators and practice the cost-of-carry formula on today’s Nifty futures.
Attention Investors!
Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020. Update your mobile number & email Id with your stock broker/depository participant and receive OTP directly from the depository on your email id and/or mobile number to create a pledge. Pay 20% upfront margin of the transaction early to trade in the cash market segment. Investors may please refer to the Exchange’s Frequently Asked Questions (FAQs) issued vide circular reference NSE/INSP/45191 dated July 31, 2020, and NSE/INSP/45534 dated August 31, 2020, and other guidelines issued from time to time in this regard. Check your Securities /MF/ Bonds in the consolidated account statement issued by NSDL/CDSL every month.
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