Can I short futures contracts without owning the underlying shares?
Absolutely. With FYERS, you can short futures contracts without the need to hold the underlying shares. This is because futures contracts are settled in cash, eliminating the requirement for physical possession of the securities in your Demat account.
When you short a futures contract, you're speculating that the price of the underlying asset will decrease. If the price does drop, you stand to gain. Conversely, if the price rises, you will incur a loss. This strategy can be a powerful tool in a trader’s arsenal, but it comes with the caveat of increased risk, as losses can exceed the initial margin if the market moves against the position.
It's crucial to ensure that you meet the margin requirements prescribed by the exchange to maintain your short position. The margin acts as a security against the credit risk associated with the futures contract.
In sum, shorting futures is a strategic decision that traders make based on their market outlook and risk appetite, and it can be done without the actual shares in your possession, courtesy of the cash settlement mechanism in futures trading.
Related Articles
What is rollover in futures trading?
In the realm of futures trading, a rollover involves transferring the exposure of a current position to a future contract period. This is typically done to avoid the delivery process or settlement that occurs at the expiry of a futures contract. The ...
How to avoid short delivery?
To avoid short delivery, one needs to be cautious and have a clear understanding of one's holdings and the market environment. Here's how you can steer clear of such situations: Verify Your Holdings: Before selling any shares, ensure that the exact ...
How does futures trading work?
Futures trading involves committing to a contract where you agree to purchase or sell an underlying asset at a pre-agreed price on a specified future date. When you enter into a futures contract, you're required to pay a 'margin', which is a fraction ...
What is short selling?
Short selling is a trading strategy where you borrow and sell a security you don't own, hoping to repurchase it later at a lower price, profiting from the price difference. For instance, if you borrow 100 shares of a company at ₹550 each, you'd ...
Can I sell my pledged shares without unpledging them at FYERS?
No, you cannot sell shares that are currently pledged. If you've pledged shares and received additional trading margins for Equity F&O, these shares are bound and cannot be sold as long as they remain pledged. To correctly sell your pledged shares, ...