Futures trading enables you to put your money in an underlying asset by paying a margin amount. Futures are binding derivative contracts that both the buyer and the seller are obligated to execute at a predetermined price and date.
Futures help you ride the rise and fall in the value of an underlying asset. However, the question is how much money do you need to trade futures in India? While there is no set figure, here is how you can calculate your expense while trading futures.
How Much Money is Required in Futures Trading?
In online futures trading, the parameters are prefixed except the price. There are no minimum or maximum price ranges for trading futures. The amount of money you need to trade futures will depend on the current price of the underlying asset and the lot size you select.
For example, imagine you want to invest in the stock futures of ABC company. The futures contract price is Rs 120 for the fixed lot size of 1000. The margin amount is 10%.
Thus, you will need = (Contract price 120 x Lot size 1000) – (Margin 10%)
= Rs 1,20,000 – 10% = Rs 12,000
This is the simplest calculation of how much money you need for trading futures for this particular trade. However, a trader must consider other expenses while trading futures. Let’s see what these changes are as below.
While you can open an account for free on most platforms, you might want to consider brokerage, transaction charges, GST, securities transaction tax (STT), SEBI turnover fees, and stamp duty depending on your order type.
For equity futures, you must pay transaction charges of 0.002% on NSE and an 18% GST on a combination of brokerage, SEBI turnover fee, and transaction charges. Additionally, the STT is 0.01% on the sell side and there is also a SEBI turnover fee of 0.0001% and 0.002% of stamp duty on buy orders. Brokerage varies from platform to platform.
Demat Account Fee
You don’t have to pay for creating a Demat account, but there are certain associated expenses such as a DP transaction fee of Rs 12.50 per transaction and pledge/unpledge/invocation charges of Rs 12.5 to consider.
Margin and Mark-to-Market
You need to pay an initial margin upfront to the broker while taking a position while trading futures. You also must pay mark-to-market margins every day to match the future’s market position as called by your broker.
Any online trading platform involves auto-square-off charges, interest charges, call and trade, payment gateway fees, etc. Do your research to understand when and how your platform charges during trading futures.
Once you factor in the aforementioned expenses, you will get a clear idea of how much money you need to trade futures of your choice in India.
Pro Tip: Use Brokerage and Margin Calculator
Many futuristic web trading platforms like Dhan provide the benefit of brokerage and margin calculators. They give you a deeper insight into the money you need to kickstart your futures trading journey.
Futures trading is a lucrative option for traders who do not want to invest directly in underlying securities. While there is no minimum or maximum amount required, you can consider certain expenses to ascertain how much you would need for online trading in the future.