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As per the Traders, if Nifty spot is 5700 and Nifty Future is 5710, it is PREMIUM and if it is 5690, it is DISCOUNT. But that is not the fact.
To understand the REAL PREMIUM / DISCOUNT, you need to understand how to calculate FUTURE PRICE.
PS: On the Day of Expiry, FUTURE PRICE will become equal to SPOT PRICE. That is the reason why you can see lot of fluctuations in the last week of EXPIRY.
FUTURE PRICE = SPOT PRICE * EXPONENTIAL FUNCTION (RATE OF INTEREST * TIME TILL EXPIRY)
For Example, Lets take the SPOT PRICE = 5600
Lets take Rate of Interest = 10% = 0.1
Time till Expiry = 29 (Day of Expiry) -18 (Todays Date) = 11/365 = 0.03
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Now let us what should be the REAL Future Price.
Future Price = 5600 * EXP (0.1 * 11/365)
= 5600 * 1.003018
= 5616.902
Let us take the same thing when time till expiry is say 20 days.
Future Price = 5600 * EXP (0.1 * 20/365)
= 5600 * 1.005494
= 5630.769
Now do you see the difference. At the starting of the month, premiums are usually higher compared to the end since future price and spot price will become equal on the EXPIRY date.
As you see, there is so much of knowledge available for you to understand while trading, do not start RESEARCHING why you lost money after you have LOST all your hard earned money, INVEST your TIME and MONEY in learning the MARKET.
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