Category Archives: Futures & Options

Market Wide Position

CLIENT LEVEL POSITION LIMITS The gross open position for each client, across all the derivative contracts on an underlying, should not exceed 1 % of the free float market capitalization (in terms of number of shares) or 5% of the open interest in all derivative contracts in the same underlying stock (in terms of number of shares) whichever is higher. MARKET WIDE POSITION LIMITS The market wide limit of open position (in terms of the number of underlying plus

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Trading Member Position

FORMS OF COLLATERALS ACCEPTARLE AT NSCCL Members and dealers, authorised dealer have to fulfill certain requirements and provide colleteral deposits to become members of the Future and Options segment. All colleteral deposits are segregated into cash component and non-cash component. Cash component means cash, bank guarantee, fixed deposit receipts. T-Bills and dated government securities. Non cash component means all other forms of colleteral deposits

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Derivatives Trading

REGULATORY FRAME WORK The trading of derivatives is governed by the provisions contained in the SC(R)A, the SEBI Act, the regulations framed the reunder and the rules and bye-laws of stock exchanges. In this chapter we look at the broad regulatory frame work for derivatives trading and the requirements to become a member and an authorized dealer of the Futures and Options segment and the position limits

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Stock Market Questions And Answers

QUESTIONS AND ANSWERS ON CHAPTER Q. In Futures Trading, the profits are received or losses or paid 1.     In the delivery month 2.      On daily settlement 3.      On the day of expiry of the contract 4.      On a weekly settlement basis. A. The correct AnswerNO.2. Q. Which of the following prices is used to compute MTM of a futures contract is case it is not traded on a given

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Types of Margins

TYPES OF MARGINS The Margin system for Futures and Options segment of NSE is explained below: INITIALMARGIN: Initial margin in Futures and Options segment is computed by NSCCL upto client level for open positions of CMs/Tms. These are required to be paid upfront on gross basis at individual client level for client positions and on net basis for proprietary positions. NSCCL collects initial margin for

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Risk Management

RISK MANAGEMENT NSCCL has developed a comprehensive risk containment mechanism for the Futures and Options segment. The salient features of risk containment mechanism on the Futures and options segment are:    The financial soundness of the members is the key to risk management. Therefore, the requirements for membership in terms of capital adequacy (net worth, security deposits) are quite stringent.   NSCCL charges an upfront

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Option Trading Exercise

EXERCISE SETTLEMENT Although most option buyers and sellers close out their options positions by an offsetting closing transaction, an understanding of exercise can help an option buyer determine whether exercise might be more advantageous than an offsetting sale of the option. There is always a possibility of the option seller being assigned an exercise in  stock market. Once an exercise of an option has

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Stock Market Profit/Losses

SETTLEMENT OF FUTURES CONTRACTS All futures contracts for each member are marked-to- market (MTM) to the daily settlement price of the relevant nifty future contract at the end of each day. The profit/losses are computed as the difference between: 1.      The trade price and the day’s settlement price for contracts executed during the day but not squared up. 2.      The previous day’s settlement price and the current day’s settlement price

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Trading Position

CLEARING MECHANISM The clearing Mechanism essentially involves working out open positions and obligations of clearing (Self clearing/trading-cum-clearing/professional clearing) members. This position is considered for exposure and daily margin purposes. The open positions of CMs are arrived at by aggregating the open positions of all the TMs and al l custodial participants clearing through him, in contracts in which they have traded. A TMs open

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Trades in the Futures And Options

CLEARING BANKS Funds Settlement takes place through clearing Banks. For the purpose of settlement all clearing members are required to open a separate ban k account with NSCCL designated clearing bank for Futures and Options segment. The clearing and settlement process comprises of the following three main activities. CLEARING SETTLEMENT RISK MANAGEMENT. TABLE 1: PROPRIETARY POSITION OF TRADING MEMBER MADANBHAI ON DAY 1. Trading

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