Module 05 · Intermediate

Futures

Contract mechanics, leverage, daily cash flows, basis, hedging and expiry.

8 chapters · Concepts, worked examples and self-checks

Study it. Test it. Write it down.

A small margin can hide a large obligation

Can you fund the path, not merely the final payoff?

A fictional contract is quoted at ₹500 with a 1,000-unit multiplier. Notional exposure is ₹5,00,000. A ₹20 adverse move creates a ₹20,000 price loss, before costs. A hypothetical ₹60,000 initial collateral requirement would not cap that loss. A hedger can be economically offset over time yet face daily cash requirements on the futures leg before the underlying sale produces cash.

Your research task

Copy quote unit, multiplier, expiry and settlement method from the current official contract document. Do not reuse a lot size from a screenshot.
Build a day-by-day ledger of hypothetical mark-to-market payments, collateral and available cash. Test a funding delay.
For a hedge, specify the actual commercial quantity, delivery date and price reference. Quantify the mismatch with the futures contract rather than assuming perfect cancellation.

What you should produce

Create an exposure sheet and a cash-flow calendar through exit or settlement, including an adverse gap and a failed rollover.

The trap to avoid: Treating “hedged” as equivalent to “no funding risk,” or initial margin as the amount that can be lost.

Original hypothetical study exercise. Pair it with the chapter sources below; verify current contract rules and product terms separately.

Advanced learning · Research before execution

Build a process you can test.

Study operating rules, portfolio risk and strategy validation. Then work through five playbooks with explicit triggers, invalidation, sizing and no-trade conditions.

Explore the advanced track →Download the paper-trade log ↓

Chapters in this module

0 of 8 completed on this browser

01Futures contracts, lots and notional exposureRead the contract specification before doing P&L arithmetic: underlying, expiry, quote unit, lot size, tick and settlement.3 min read 02Mark-to-market and daily cash flowsUnderstand why a futures position can require cash before expiry even if the eventual price returns to the entry level.3 min read 03Basis, cost of carry and convergenceUnderstand the relationship between spot and futures, financing, income, storage and the risk of assuming an automatic arbitrage.3 min read 04Hedging and basis riskStudy how an offsetting contract can reduce one exposure while introducing mismatch, timing and funding risks.3 min read 05Calendar spreads and rolling futuresSeparate the price of each leg, the change in their difference, roll costs and changing margin offsets.3 min read 06Expiry, physical settlement and delivery obligationsDistinguish closing a derivative from carrying it into settlement, especially stock and commodity contracts.3 min read 07Commodity balance sheets: crops, weather, inventory and locationExtend the bullion research method to agricultural and industrial commodities with units and timing kept explicit.2 min read 08From commodity prices to company earningsTrace how metal, oil and agricultural prices affect producers, consumers and hedged businesses differently.2 min read

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