The contracts are traded on a . The party agreeing to take delivery of the underlying stock in the future, the “buyer” of the contract, is said to be “long”, and the party agreeing to deliver the stock in the future, the “seller” of the contract, is said to be “short”.
The theoretical is sum of the current spot price and cost of carry. However, the very much depends upon the demand and supply of the underlying stock. Generally, the futures prices are higher than the spot prices of the underlying stocks.
Futures Price = Spot Price + Cost of Carry
Cost of carry is the interest cost of a similar position in and carried to maturity of the futures contract less any dividend expected till the expiry of the contract.
Spot Price of Infosys = 1600, Interest Rate = 7% p.a. Futures Price of 1 month contract=1600 + 1600*0.07*30/365 = 1600 + 11.51 = 1611.51.
South Africa currently hosts the largest single-stock futures market in the world, trading on average 700,000 contracts daily.
The profits and losses would depend upon the difference between the price at which the position is opened and the price at which it is closed. Let an investor have a long position of one November Stock “A” @ 430. If the investor square up his position by selling November Stock “A” futures @ 450, the profit would be Rs. 20 per share. In case, the investor squares up his position by selling November Stock “A” futures @ 400, the loss would be Rs. 30 per share.