Stock futures are contracts that give you the power to buy or sell a set of stocks at a fixed price by a certain date. Once you buy the contract, you are compelled to uphold the terms of the agreement. For example: if trader wants to purchase a single march futures contract of some company he/she would have to do so at the price at which the march futures contracts are currently available in the derivatives market. Let us assume that company’s March futures are trading at Rs 100 per share. This interprets that the trader is agreeing to buy/sell at a fixed price of Rs 100 per share on the last Wednesday in March. However, it is not at all compulsory that the price of the stock in the cash market on Wednesday has to be Rs 100. It could be Rs 92 or Rs 105 or anything else, depending on the prevailing market conditions.
