00:04Welcome to Part 6 of the FNU Basics Learning Series
00:08How is profit and loss calculated in futures?
00:12In the previous video, we learned what futures are.
00:17What is Loan and Sore
00:19What is margin?
00:21And how leverage is linked to greater market exposure
00:25But now the most important and practical discussion
00:28If we have taken positions in Nifty Futures
00:32And the market moved up or down a few points
00:35So what will be the profit and loss in our account?
00:39Let us understand this in a very easy way today through this video.
00:44Assume you have bought Nifty Futures at 24,000
00:48And Nifty increased to 24,100
00:52That means there is a moment of 100 points.
00:54This means the market moves 100 points in your favor.
00:58Now, one more thing is important to understand here.
01:01Load Size of Nifty Futures
01:03We assume Load Size as 65 in the package example.
01:07Whatever is going on in the current market
01:09So the profit will be 100 points into 65 quantity i.e. profit of 65
01:14This is the basic way to understand the Profits and Lows of Futures.
01:19But now let's look at the same thing in reverse.
01:22That means 100 points go against you if the market
01:25You have booked futures at 24,000
01:28But instead of the market rising, it falls by 100 points to 23,900.
01:33So in such a situation you get 100 points into 65 i.e. a low of 65.
01:41Please note that the market only ran for 100 points.
01:44But your entire futures position resulted in a profit of Rs 65 or less.
01:50Now let's make it even easier
01:53If Nifty Futures moves by 10 points
01:56So in such a situation, if there is a movement of 10 into 65 i.e. Rs 650/50 Points
02:03So if there is a movement of 50 into 65, that is Rs 3250/100 Points
02:10So 100 into 65 is a movement of 600.
02:13So it is not enough to just look into the futures.
02:16How many points did the market run?
02:19You also need to check the quantity of poison you have taken.
02:25What is the load size and has the market gone in your favor or against you?
02:32Now an important thing
02:34If you are long on futures
02:37So, if the price increases, the profit and loss can be positive.
02:40And if the price falls, the profit and loss can be negative.
02:44On the other hand, if you are short in futures, then the profit and loss can be positive if the price falls.
02:50And if the price increases, the profit and loss can be negative.
02:53This means that your direction is equally important to understand future profit and loss.
02:59And here also remember the point about leverage from Part 5.
03:03Leverage allows you to gain greater market exposure at a lower upfront margin.
03:10But while calculating profit and loss, profit or loss is not calculated by just looking at the margin.
03:17You also need to see how many points the market moved.
03:21What is the quantity of your position and whether your position is long or short
03:27The easiest way to remember
03:30Long Position in Futures, Profit and Loss, Profit Potential if Price Increases, Loss Potential if Price Falls
03:38Differences in Short Position: Profit Potential if Price Falls, Loss Potential if Price Increases
03:43And under Basic Calculation, Profit and Loss is equal to Points Movement into Quantity
03:50But in Bastivi Trading Result, Brokeries, Taxes, Charges and Unapplicable Posts
03:57Can also affect your final net profit and loss
04:01Now a question, what if the market goes against you not just by 100 points but by 300 or 500 points?
04:07So what could be the potential loss on your futures quotes?
04:12This is where the importance of risk management and position sizing becomes clear.
04:17Therefore, just knowing the calculation of profit in futures is not enough.
04:23You should also know how much loss I can comfortably handle.
04:30This is the importance of knowledge, discipline and risk management in futures trading.
04:36Now let us understand this inside Quick Summary
04:39Market Movement into Quantity is equal to Basic Profit and Loss
04:43Profit and loss vary depending on the direction, whether long or short.
04:48And Bigger Position is equal to Bigger Profit and Loss Impact
04:52Therefore, before taking a position, do not just ask how much profit you can make.
04:58You also need to know how much loss you could incur if the market goes against you.
05:07This question takes you from just taking a trade to understanding the risk.
05:37Do subscribe and follow NoChat Finance and learn F&O from zero in a practical way
05:43Also, let me disclaimer that this video is only for educational purposes.
05:47This is not financial investment or trading advice of any kind.
05:52Futures and Derivatives Carry Significant Risk
05:55Before taking any trading decision, understand your risk capacity and applicable rules and regulations.
06:02Thank you for watching
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