What a day today? It was budget and the market gave enough opportunities to day trade but I picked up one which was really a good one. Let us talk about it a bit. I am specifically talking about the Nifty futures. It was about 9 points gap down today. Not a very big one as compared to some days. However, the market is always volatile on the budget day and you can see that from the chart. Once the speech started, the market started moving and at one point and time Nifty futures for March expiry touched the low of 6833 but in the same 5 mins, it recovered about 91 points to close at 6924. I knew that the market has a good chance to recover for such a strong up move. For most of the people, who wouldn’t know a word of what I am talking, don’t worry as I will be explaining this in detail today.
There was a trade which came at 6942 which according to me had a good chance to go close to the day’s opening which was 7052 and hence took the big bet of 100 points and it was achieved in 20 minutes. Converting this into rupees for all of you is Rs. 7500 for 1 lot of nifty traded. If you trade with Angel (where I am a Authorized Person), one can trade 5 lots for a margin of Rs. 1,00,000. Which means that if someone was trading at 5 lots today, the person would have made Rs. 37500 on an investment of Rs. 1,00,000, i.e. 37.5% in a day! Here is the wonderful chart:
Explaining Index futures further…
Let us first understand, as to what is an index? In lay man’s terms, an index is a representation of the stocks listed on the exchange. Basically, the exchange selects a basket of stocks that can represent the entire list of companies which are available and listed on the exchange. The benchmark index in India is SENSEX, which includes select 30 stocks listed on Bombay Stock Exchange. The National Stock Exchange follows the NIFTY which has 50 stocks in it. There are many ways in which this index is calculated but do not worry too much about it. You just have to know that today the SENSEX closed at 23002 and Nifty at 6987.
Continuing our discussion from my post “What are futures?”, as we understood the concept of stock futures, similarly people invest and trade in index futures. For trading 1 lot of futures the margin money that is required is almost Rs. 65625 (Calculated as 12.5% of 7000*75). However, every broker has his/her own method of calculating risk and can give you higher margin which means, you can also trade 1 lot of Nifty for Rs. 20,000. Just to clarify further, a lot of Nifty Future has 75 nifty index units in it. I have explained them in my first post in detail.
To conclude, the extra day of the year was all in all a good day. Had a good trade. The budget had a few surprises but the best thing that happened was LEO won. Finally!!!