What is the meaning of futuristic obligation in stock market trading in NSE India?


What is the meaning of futuristic obligation in stock market trading in NSE India

    What is the meaning of futuristic obligation in stock market trading?

    The F&O commitment amount is the net amount added to or removed from the general ledger for your futures and options positions on a specific date. Option transactions are settled on the basis of outstanding or payable net premiums. The amount of liabilities is calculated at the designated market price (M2M), namely:

    1. If you trade futures and do not close your position within a day, the difference between the transaction price and the closing price will be credited to your account. 
    2. If your futures position has changed since yesterday and you continue to hold it, the difference between the previous day's closing price and today's closing price will be calculated in your account. 
    3. If your futures position has changed since yesterday and is frozen, the difference between the closing price of the previous day and your net price will be calculated in your account. The amount of the obligation does not include all expenses on the day, which can be found in the notes to the contract.

    Example of the relationship between F&O’s liability amount and its profit and loss:

    You have purchased one lot (500 shares) of Reliance futures at Rs. 1400 on Monday but you did not square off your position. At the end of the day, the closing settlement price of Reliance futures is Rs. 1410. In this case, Rs. 5000 (i.e. 1410-1400 x 500 shares) reduced by applicable charges will be added to your ledger. 

    On Tuesday, you did not trade at all and your Reliance position continued to be carried forward. The closing settlement price of Reliance futures is Rs. 1405. In this case, Rs. 2500 (i.e. 1405-1410 x 500 shares) will be deducted from your ledger. 

    On Wednesday, you decided to sell Reliance at Rs. 1404. In this case, Rs. 500 (i.e. 1404-1405 x 500 shares) along with the transaction charges will be further reduced from your account. 

    Your profit for this trade is Rs. 1404 (selling price) - Rs. 1400 (buying price) which equals to Rs. 2000 (i.e. 4 x 500 shares). This will be equal to the sum of all credits and debits in your account for the Reliance trade since Monday (i.e. Rs. 5000 - Rs. 2500 - Rs. 500 = Rs. 2000). Accordingly, even though the M2M settlement takes place daily, your overall profits will always reconcile.


    It's not that hard to understand the above answer, If you still need any answers please comment below.

    Post a Comment

    Comments are welcomed and encouraged on Stuffsearth Website, but there are some instances where comments will be edited or deleted as follows:

    Comments deemed to be spam or solely promotional in nature will be deleted. Including a link to relevant content is permitted, but comments should be relevant to the post topic.
    Comments including profanity will be deleted.
    Comments containing language or concepts that could be deemed offensive will be deleted. Note this may include abusive, threatening, pornographic, offensive, misleading or libelous language.
    Comments that attack an individual directly will be deleted.
    Comments that harass other posters will be deleted. Please be respectful toward other contributors.
    Anonymous comments will be deleted. We only accept comments from posters who identify themselves.
    The owner of this Website reserves the right to edit or delete any comments submitted to the 'Website's Post/Content' without prior notice. This comment policy is subject to change at any time. If you have any questions about the commenting policy, please let us know by using our 'Contact Us' form .

    To Top