Futures and options are the major types of stock derivatives trading in a share market. These are contracts signed by two parties for trading a stock asset at a predetermined price on a later date. Such contracts try to hedge market risks involved in stock market trading by locking in the price beforehand.

  • : The spot market or cash market is a public financial market in which financial instruments or commodities are traded for immediate delivery. It contrasts with a futures market, in which delivery is due at a later date.Spot markets can operate wherever the infrastructure exists to conduct the transaction.
  • : The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments, and other groups a platform from which to sell securities to the investing public.
  • : MTM - MTM means Mark To Market. Margin- Margin refers to refundable amount paid to the broker in futures. Expiry Date - The maturity date/ the validity date mentioned in the contract. Lot size – Number of shared covered in the contract. Premium – The money paid to seller of the contract for signing the option contract. Strike Price- The agreed price printed in the option contract.
  • : A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price.An options contract gives the buyer the right to buy the asset at a fixed price. However, there is no obligation on the part of the buyer to go through with the purchase.
  • : In Call option,Buyer gets Right to buy and in Put option,Buyer gets Right to sell. In Call option, if prices rise,Buyer gains where as in Put option,if price falls Buyer gains. Seller gets the Premium amount for signing the call/put option contract, where the premium is traded between buyer and seller.
  • : A futures contract is a contract between two parties where both parties agree to buy and sell a particular asset of specific quantity and at a predetermined price, at a specified date in future.
  • : Futures/ call/put are required for traders to customize the trading. In the derivative market, the entire stock price is not required and only margin needs to be paid. And derivative markets reflects the price fluctuation on daily basis but in equity market, it can be realized only when the stocks are sold.
  • : To trade directly in the Nifty index two kinds of derivatives are available- futures and options. Nifty Futures:In a future contract, the buyer and seller agree to buy or sell the nifty contract on a future date. During the period of the contract, you can sell it and make a profit if you see that the price has gone up.
  • : Cash settlement is an arrangement under which the seller in a contract chooses to transfer the net cash position instead of delivering the underlying assets whereas in physical settlement can be defined as a method, under which the seller opts to go for the actual delivery of an underlying asset and that too on a pre-determined date and at the same time rejects the idea of cash settlement for the transaction.
  • : As trader we should satisfy with quick profits or hold long for bigger profits which is advisable sir ?
1 Comment
  1. Naresh 3 months ago

    Hi,
    In response to your question
    Your question 1 :: As trader we should satisfy with quick profits or hold long for bigger profits which is advisable sir ?
    If you have fundamentally strong companies in your portfolio then only you can hold for the long term. Check if you have companies with strong cash flows and strong balance sheets. If you have those companies you can hold it for the long term..

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