00:01Welcome to Part 4 of the FNU Basics Learning Series
00:04What is Margin in Futures?
00:07How to take big positions with less money?
00:10If the value of a Futures Contract is 15 lakhs
00:14So do you need to have Rs 15 lakh to take positions in futures?
00:19if you think so
00:21So it is important for you to understand a very important concept of futures.
00:25And the name of that concept is Margin.
00:28But before understanding Margin, let's quickly remember it once
00:33What have we learned so far in our FNU Basics Learning Series?
00:38In Part 1 we understood what is FNU?
00:41What are derivatives?
00:42And what are Futures and Options?
00:44In Part 2, we understood futures.
00:47We learned that Futures is a Derivatives Contract
00:50Whose value is linked to the price movement of the underlying asset
00:55And we understood the Load Size with an example.
00:58What effect does market movement have on futures and positions?
01:03In Part 3 we understood what is Long and Short in Futures?
01:07Expectation Long for the market to go up, Expectation Sort for the market to go down
01:13And in Part 4 let us understand what is Margin in Futures?
01:17Let us first take a simple example.
01:20Suppose the price of Nifty Futures is around 24,000
01:24And in our example the load size is 65 units.
01:27So the total value of the Futures Contract will be 24,000 into 65 i.e. approximately 15,60,000
01:34So now the question is if the value of the Futures Contract is around 15,60,000
01:39So do you have to pay the full ₹15,60,000 to take Futures Positions?
01:45not necessary
01:46This is where the concept of margin comes in futures.
01:48In futures trading, generally the entire contract value does not have to be paid in advance.
01:53To take a subscription instead of that, a certain required amount has to be paid.
01:58This is what we call Margin in simple language.
02:02Now suppose the total value of a Futures Contract is Rs 15,00,000
02:08But the required margin for that contract is around Rs 1,00,000.
02:14So this could mean that you will have to pay the entire Contract Value upfront of around Rs.15,00,000.
02:21Wazaye
02:22Based on the margin of approximately 1,008,000, one may be allowed to take Position C in that Futures Contract.
02:28But this is where the biggest confusion begins.
02:32Many people think that if the margin is 1,008,000 then I have 1,008,000, that is, my
02:40Futures Trading Capital is 1,008,000
02:42But it is not right to think like this
02:45Remember, Contract Value is not equal to Margin and Margin is not for Trading Capital
02:51understand again
02:53Contract Value indicates the total value of the Futures Contract.
02:57Margin is the required amount that may be required to take Poisons
03:01But Trading Capital is the amount on the basis of which you can manage your entire risk.
03:08And it would be a mistake to consider these three things the same.
03:13Now think of a practical situation.
03:15Suppose you have bought Future Poisons with a margin of around Rs 1,8,000.
03:20But the market started going against your expectations.
03:24You started losing
03:25So now the question is not how much margin I paid to buy Poison
03:31The real question is how much loss can I handle?
03:36Because your Poison Loss may increase if the market turns negative.
03:40And in such a situation, additional funds or risk buffer may be required.
03:45Therefore, trade futures only by looking at the minimum margin.
03:50Practical Approach May Not Be Suitable for Every Trader
03:54Now here comes another important concept.
03:57Margin in futures allows you to invest with a relatively low upfront amount
04:03Exposure to large contract value is available
04:06And this is where leverage comes into play.
04:08But we will understand leverage in detail in the next video.
04:13For now, understand this much that low margin does not mean this
04:17Your risk has also reduced.
04:19But in many situations, due to low upfront amount
04:24People may underestimate the risk of large positions
04:29Understand with a simple example
04:31Suppose the value of the Futures Contract is 15,00,00
04:35And the Required Margin is approximately 1,00,00,00
04:38If the market goes in your favor
04:42So there can be theoretical profit on the position
04:45But on the other hand, if the market starts going against you
04:49So there can be theoretical loss also.
04:51So don't just look at the futures.
04:54How much is the margin
04:55Also see how many points the market can move
04:59What is the load size?
05:00What could be the potential profit or loss of my positions?
05:04And most importantly, can I reduce that potential loss?
05:08I can handle it comfortably
05:11So today's full video
05:12Remember it like a simple formula
05:15Contract Value tells
05:17Total Value of Futures Contract
05:19Margin can be the required amount
05:21On the basis of which positions can be taken
05:25But Trading Capital is not just Margin Amount
05:29While trading, one must also keep in mind the risk, loss and potential losses.
05:35Therefore Contract Value is equal to Note Margin
05:38and Margin is equal to Note Trading Capital
05:41So far in our F&O Basic Learning Series
05:43We understood what F&O is in Part 1.
05:46What are Futures in Part 2
05:48What is Long and Short in Futures in Part 3
05:51And today we are going to know what is Margin in Futures in Part 4.
05:55But now another very important question arises.
05:59If a large future position can be taken by paying a low margin
06:03So what does leverage mean?
06:06Does leverage only increase profits or can it also increase risk?
06:10We will explain this in very simple language in the next video.
06:14What is Leverage in Futures
06:16If you want to learn F&O from zero in a practical way
06:20So be sure to follow and subscribe to No Chart Finance now.
06:24And stay tuned for the entire F&O Basic Learning series
06:28Because here we treat trading not gambling
06:30Rather, it is understood as Knowledge, Discipline and Risk Management.
06:34No pretense, no false promises
06:36Only real market learning
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