Benefits of trading futures

Trading Futures can serve a wide array of benefits to a trader or investor.

Compared to trading stocks, the exchange generally offers more exposure (margin); therefore, they are more highly leveraged and the trader does not have to put up as much initial margin to place a trade. This results in allowing the trader to trade in larger amounts.

Futures can also serve as a hedge in case a trader wants to lock in a certain price of a financial product today, or a certain profit in the case of arbitrage. For example, a trader can short an Equity Future and purchase the Equity (Cash) for equivalent amounts and thus protect himself from market wide movements.

Nifty and certain Equity Futures are usually very liquid; therefore, through liquidity there is a a good chance that the trader will capture the price he seeks.

With Futures, you do not have to worry about closing your position at the end of the day, while with Cash Trading you need to be mindful of closing intraday positions if you are taking margin.

Generally speaking, costs are lower in Futures trading. The Securities Transaction Tax (STT) on the sell side trading on

Futures is 0.01%, while intraday Cash Trading charges 0.025% on sell side trading and 0.1% on both buy and sell side trading for delivery transactions.

That being said, the margin benefits of Futures can also serve as a disadvantage. Just as it might appear to be easier to earn by trading Futures instead of Cash, you can also just as easily lose more by trading Futures instead of Cash.