Different types of instruments.

  • : Spot market - The spot market is where financial instruments, such as commodities and securities, are traded for immediate delivery. Delivery is the exchange of cash for the financial instrument.
  • : Role of exchange in derivative instruments - Standardization - The exchange has standardized terms and specifications for each derivative contract, making it easy for the investor to determine how many contracts can be bought or sold. Each individual contract is also of a size that is not daunting for the small investor. Elimination of default risk - The derivatives exchange itself acts as the counterparty for each transaction involving an exchange traded derivative, effectively becoming the seller for every buyer, and the buyer for every seller. This eliminates the risk that the counterparty to the derivative transaction may default on its obligations.
  • : MARGIN - Margin is the difference between the total value of securities held in an investor's account and the loan amount from a broker. Buying on margin is the act of borrowing money to buy securities. MTM - In futures trading, (MTM) Marking To Market is also known as "Daily Settlement". PREMIUM - An option premium is an income received by a trader who sells an option contract to the other party. It also refers to the current price of any contract which hasn’t expired yet. STRIKE PRICE - The Strike Price is the price at which the underlying stocks can be bought or sold as per the contract. It is often referred as exercise. EXPIRY DATE - Expiry date is the date, as the name suggests, on which a particular contract (usually a derivative contract) expires. LOT SIZE - lot size refers to the number of shares you buy in one transaction.
  • : OBLIGATION - In Option contract there is no obligation for buyer. In Future contract buyer has obligation to execute the contract. EXECUTION OF CONTRACT - In Option contract anytime the expiry of the agreed date. In Future contract on the agreed date. RISK High in future contract. Limited in option contract. ADVANCE PAYMENT In Option contract paid in the form of premiums. In Future contract no advance payment.
  • : CALL OPTION - Call options are an agreement that give the option buyer the right, but not the obligation, to buy a stock at a specified price within a specific time period. PUT OPTION - A put option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
  • : FUTURES CONTRACT - is a binding agreement, for buying and selling of a financial instrument at a predetermined price at a future specified date.
  • : To get unlimited profit with the calculated risk.
  • : YES, we can trade in NIFTY futures and option.
  • : PHYSICAL SETTLEMENT - In case of derivative contracts of Futures or Options, on the settlement date, the seller of the contract will either deliver the actual underlying of the asset which is called as Physical Derivative of the underlying asset for which the derivative contract has been undertaken. CASH SETTLEMENT - In case the cash position is transferred from the buyer to the seller on the settlement date.
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