In the monetary markets, lots represents the standardized amount of a monetary instrument as started by associate exchange or similar restrictive body. For exchange-traded securities, lots might represent the minimum amount of that security which will be listed. In terms of stocks, the ton is that the range of shares you get in one dealings. In terms of choices, lots represents the quantity of contracts contained in one spin off security. To perform profitable trading traders needs Free Stock Trading Tips.
The exchange specifies a specific ton size for every form of derivatives. When you get or sell futures, you are doing that in ‘lots’.This ton size isn't dissociation. as an example – the ton size of reliance futures is 250 shares. So, taking one ton of reliance futures would involve 250 shares. therefore if Reliance shares area unit commercialism at Rs one thousand, then the worth of one ton is Rs 250,000.
The exchange specifies the ton size. ton size would diverge for various stocks/commodities.
Not all stocks listed within the exchange have equivalent derivative instrument. Stock area unit hand-picked on the premise criteria nominative by the SEBI The value of 1 ton would be the value of the share x ton size. In most cases, it's or so Rs 2-3 lakhs.
The thought of heaps permits the monetary markets to standardize worth quotes. as an example, equity choices area unit priced specified every contract (or lot) represents exercise rights for a hundred underlying shares of ordinary shares. With such standardization, investors continuously grasp specifically what percentage units they're shopping for with every contract and might simply assess what worth per unit they're paying. while not such standardization, valuing and commercialism choices would be needlessly cumbersome and time intense.
When you interchange Derivatives, you're not really shopping for shares, you're shopping for solely a contract to shop for shares. (thus the name derivatives). These contracts have associate expiration date, on or before that you have got to sell/close them. The contracts area unit futures and choices. These contracts area unit manufactured from particular range of shares of an organization or index.
For Nifty50, every contract is for 75x index.
For Infosys it's for five hundred shares.
In infosys, the ton size is five hundred. It means that every listed accept the Infosys stock consists five hundred shares of Infosys.
Let Maine get away the numbers clearly for you with example of Infosys.
Stock: Infosys,
Price: 1200
Lot Size: five hundred
Contract price = five hundred x 1200 = 600K.
Margin money: (you would like atleast this quantity in account to buy/sell the contract) is V-day of contract i,e, 90K.
You can get a contract by lockup simply V-day of its total value at rates quoted at that point, and once you sell the contract back (or settle the contract at the expiry), you'll go back to the distinction, (Current value - purchase value), and your latched cash are discharged.
You need solely ninety,000 to shop for shares value 600,000. If the shares go up by simply third, the contract to procure are value 618,000 associated you'll be able to earn a cool profit of 18K with an investment of 90K. thats 2 hundredth profit for a third gain available.
The reverse is additionally true, that if the stock drops five-hitter during a day, (everyday some stock falls five-hitter, a awfully traditional market event), and therefore the contract price is shrunken to 540,000. currently you wish to feature up the loss in money to hold the contract or sell it at a loss. The loss is thirty third of your initial investment of 90K, although it absolutely was simply five-hitter fall.
At some worst times you will need to hand over all the initial investment to shut the contract.Many little investors dont perceive the danger properly, and play it like lottery to win and loose cash.
To keep them away, NSE continuously makes positive that contract size is larger so little investors dont interchange derivatives.
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