6 Basic's of Futures

Want to Invest in Futures ?

Here is the 6 basic terms that you should understand before investing in futures

1. Open Interest
2. Premium
3. Discount
4. Short covering
5. Stop Loss Order
6. Volumes

Open Interest : Number of open contracts that are active.

Premium : The positive difference b/w the price of the stock in futures contract for a month to that of actual price

Discount : The negative difference b/w the price of the stock in futures contract for a month to that of actual price

Short Covering : Closing the open position to cover for the losses or delivery

Stop Loss Order : A stop loss is an order to buy (or sell) a security once the price of the security climbed above (or dropped below) a specified stop price

Volumes : The total amount of contracts that changed hands in futures market in a trading day.

Price	Open Interest	Interpretation
Rising	Rising	Market is Strong
Rising	Falling	Market is Weakening
Falling	Rising	Market is Weak
Falling	Falling	Market is Strengthening

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