Introduction to futures and options markets pdf
I can remember deleting at least two drafts because they got too unwieldy, and complex. Here is the first part with some very basic and easily digestible information on futures and options. There are two types of Derivatives commonly traded in the market — Futures and Options, and within Options there is further a Call option and a Put option. The price of these derivatives is based on an underlying asset, and the price of the derivative usually moves in tandem with the price of the underlying.
The underlying is usually a stock or an index in the context of investing in a stock market. So, that means the price of Infosys futures or Infosys options will depend on the price of the Infosys shares. While there are other reasons, I think two big reasons are leverage and taking short positions.
Derivative (finance) - Wikipedia
Options and Futures give you a lot of leverage and you can make or blow up a large amount of money in a short period of time with the same amount of capital than you can with a regular cash position. The second reason is to take short positions, or profit from declines in the price of a share or commodity. But you can sell a future, call option or buy a put option to take a short position in the stock or index. The notional values of derivatives is often too high, and the expiry periods too short to act as an efficient hedge for small investors.
I think the big difference between buying derivatives and buying a share in the cash market is that your investment can go to zero a lot more frequently in the derivatives market than in the cash market, and only those people who have a high risk appetite and who can stomach losing a lot of money should invest in derivatives. That being said, they can be quite profitable as well because they give you the ability to profit from short positions and add leverage.
I think the bottom line is that you should only invest that amount of money in derivatives that you are comfortable in losing. This post is from the Suggest a Topic page.
That would have been helpful. My idea is that at the end of this series there should be 8 or 10 posts, and each about words and on a specific topic. Sir article seems to be half finished.
You have not spoken about option side. It may be the PART-I also.
My suggestion to investors is that always take a long position in future trade because you know the down side. As for example , you have have a long derivative position at Rs.
Now you can not lose at the most more than 1 lakh but if you have a short position , then you can can not assess your would be loss as upside is unlimited. If you really one want have short position , then take some long position in the same stock to minimise the loss if any.
More over if you want to have trade derivative , then commodity market is a better place because their price is rangebound.
I observed in the last two yeas r that commodity like zinc,Aluminium,Lead are trading in the range Rs Rs. There is great demand at lower price and supply will beat the higher price.
As you knoe the price-bandwidth, commodity derivative trading is a better option. Where do you trade them at MCX?
And what all can be traded there — gold, silver, crude? I trade in commodity in MCX. But i will enter with long position when it will be back to 48 kind of level. In fact i gave farewel to short trading in deravitive of any kind In all cases above my brooker is religare.
I think you are true saying that commodity future market is better in trading point of view,as prices have a great support around the production value and is a good buying opportunity if anyone takes informed decisions about it…Of course sometimes these levels are not honored as what happened in Although, Derivatives should be used for arbitrage and hedging purposes, but many people in India are using them as a tool to gamble where they take positions more than what they can digest.
If I purchased shares of Glenmark under Future Options at Rs. Notify me of followup comments via e-mail. Some fascinating facts about the Instagram sale. Introduction to Futures and Options by Manshu on April 12, in Investments. More from my site Part 3: Futures and Options — How do Options work? Futures and Options — How do Futures work?
Diversification with respect to asset prices Dow Jones Industrial Averages: In fact i gave farewel to short trading in deravitive of any kind In all cases above my brooker is religare Reply.
Santonu Do you also do arbitraging in Currency Futures?
Great topic to start a series on. Looking forward to the future posts. Although, Derivatives should be used for arbitrage and hedging purposes, but many people in India are using them as a tool to gamble where they take positions more than what they can digest Reply.
How loss can be 15 lakh Reply. Cancel reply Leave a Comment. Some fascinating facts about the Instagram sale Next post: Beginners Guide to Investing in the Stock Market. CDSL IPO Review — Should You Invest or Not Rs.
Ag Decision Maker - Crops Storage & Markets
India Grid Trust InvIT IPO Review — Subscribe or Not Rs. Music Broadcast Limited MBL IPO Review — Subscribe or Not Rs. How to Buy a Car Insurance in India? A Checklist to Help You Reliance Mutual Fund Link to CPSE ETF Allotment Status CPSE ETF FFO Allotment Status SREI Infrastructure Finance 9.
Redmi Note 4 — 4 GB RAM, 64 GB ROM Launched Rs.