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Speculators in Stock futures

Speculators are those who do not have any position on which they enter in futures and options market. they only have a particular view on the market, stock commodity etc.

In short the speculators put their money at risk in the hope of profiting from an anticipated price change. They consider various factors such as demand supply, market positions, open interests, economic fundamentals and other data to take their positions.

For eg.

Abhay is a trader but has no time to track and analyze stocks. However, he fancies his chances in predicting the market trend. So instead of buying different stocks he buys Nifty futures.

At some day he buys 100 Nifty futures @ 2600 on expectations that the index will rise in future. After 15 days the Nifty rises to 2790 and at that time he sells an equal number of contracts to close out his position.

Selling price: 2790*50 = Rs. 139500

Less: Purchase Cost: 2600*50 = Rs. 130000

Net gain: Rs. 9500

 

Abhay has made a profit of Rs. 9500 by taking a call on the future value of the Nifty. However, if the Nifty had fallen he would have made a loss. Similarly, if he would have been bearish he could have sold Nifty futures and made a profit from a falling Nifty. In index futures players can have a long - term view of the market up to at least 3 months.

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