This section deals with trading instruments . they are spot market and derivative market . spot market is also known as equity market . the deal is executed and cash is paid on the same day . short position cannot be created .only long position is created . Derivative market deals with future contract and options . future contract is where the deal is agreed on a particular date and payment to be made later at the end of the month . caution deposit is to be maintained in case of loss .
in call option , buyer gets the rights to buy but no obligations . under put option , buyer gets the rights to sell but no obligations . the premium is decided by the seller before executing the contract . when the price goes above it is a gain to the seller . when the price goes below it is a gain to the buyer .
, , Futures and Options, caution deposit strike price, derivative market, equity, FUTURES AND OPTIONS, MTM, spot market
Hi,
Answering to your question 1 :: can u explain more about MTM and its use ?
MTM (Mark to Market) – According the prize variations in the market the ledger balance will be neutralized to the buyers & sellers till the expiry date of the contract.
In daily basis the profit and loss is calculated in the contracts and the profit and loss is settled between the buyer and seller of the contract using the margin collected from the buyer and seller while signing the contract.
MTM is useful in avoiding counter party risk.
Answering to your question 2 :: is trading in this instruments a option or neccessity ?
Derivative instruments is a way of trading like spot market. Derivative instruments can be used to build a strategy to reduce risk in short term trading.