Understanding Premium and Discount in Nifty Futures

This article will help newbie traders in understanding the difference in premium and discount in Nifty Futures and how to use them in trading.
Nifty Futures is a financial instrument in which futures contracts are done on the basis of CNX  Nifty index which is the benchmark of NSE. Nifty Futures keep moving in Premium and Discount compared to Nifty Spot price. We hear a lot of experts talking like NIFTY is available at Discount of 20 points? or Nifty Premium is increasing ? So what does they mean exactly.

What is Premium and Discount in Nifty?

Nifty Premium --If Nifty future is trading higher than nifty spot, then nifty future is trading with premium. The Highest Premium seen in Nifty was 70 points in 28 Feb 2012 expiry..

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