The Contract That Multiplies

A farmer agrees today to sell his wheat harvest six months from now, at a price locked in today.

He doesn't hand over any wheat today. He doesn't receive full payment today. He puts down a deposit that says he's serious, and settles the difference as the price moves, day by day, until the contract closes.

Every futures contract on NSE or MCX is that same handshake, just with a stock index, a stock, gold, or crude oil standing in for the wheat — and the 'deposit' is a small fraction of what the contract is actually worth.

Why futures are leveraged by design, not by choice

Unlike MTF, where leverage is optional — you can always just buy shares in cash — futures contracts are inherently leveraged. You never pay the full contract value. You pay margin, calculated the same SPAN + exposure way covered in the previous chapter, and that margin is typically a fraction — often in the range of 10-20% of contract value depending on the underlying's volatility, though it varies significantly by instrument and market conditions.

A NIFTY futures contract representing, say, ₹15-20 lakh of notional index value might require margin in the ballpark of ₹1.5-2 lakh. You're controlling ten times what you've put down, whether you intended a 10x trade or just wanted 'a futures position.'

Mark-to-market: the part that surprises new futures traders

Unlike a share you bought outright, a futures position is marked to market every single trading day. Gains and losses aren't just numbers on a screen you'll deal with when you exit — they're settled into or out of your account daily, in cash. A bad day doesn't wait for you to decide to exit; it debits your account balance overnight.

This is why a futures account can face a margin call from ordinary daily volatility that a cash equity investor holding the same underlying would barely notice. The leverage doesn't just multiply your final P&L — it multiplies the day-to-day cash swings you have to be able to fund.

Lot size turns 'a small move' into a large rupee number

Futures trade in fixed lot sizes, not single shares. A stock futures contract might have a lot size of a few hundred or a few thousand shares bundled into one contract. A ₹10 move in the stock isn't a ₹10 event to you — it's ₹10 multiplied by the entire lot size, in a single contract, funded by a margin that's a fraction of that lot's value.

This is the single most common way new futures traders miscalculate their real risk: they think in 'how much did the price move' when the number that actually hits their account is 'price move × lot size,' funded by a margin many multiples smaller.

MCX commodities — the same mechanics, a different underlying

Gold, silver, and crude oil futures on MCX work on identical leverage mechanics to equity index futures — margin as a fraction of contract value, daily mark-to-market, lot-based sizing. What changes is the underlying's own volatility character: crude oil in particular can move sharply on news with almost no warning, and its margin requirements are set accordingly higher than a comparatively calmer instrument. Leverage on a volatile underlying isn't just leverage — it's leverage stacked on top of an underlying that already moves harder.