INDEX DERIVATIVES Index derivatives are derivative contracts which derive their value from an underlying index. The two most popular index derivatives are index futures and index options. Index derivatives have become very popular worldwide. Index derivatives offer various advantages and…
USE OF OPTIONS IN 17th CENTURY Options made their first major mark in financial history during the tulip bulb mania in 17th. century Holland. It was one of the most spectacular get rich quick binges in history. The first tulip…
FUTURES AND OPTIONS An interesting question to ask at this stage is, when would one use options instead of futures? Options are different from futures in several interesting senses. At a practical level, the option buyer faces an interesting situation.…
OPTION TERMINOLOGY INDEX OPTIONS: These options have the index as the underlying. Some options are European while others are American. Like index futures contracts, index options contracts are also cash settled. STOCK OPTIONS:Stock options are options on individual stocks. Options currently…
INTRODUCTION TO OPTIONS In this section, we look at the next derivative product to be traded on the -NSE, namely Options. Options are fundamentally different from forward and futures contracts. An option gives the holder of the option the right…
FUTURES TERMINOLOGY SPOT PRICE: The price at which an asset trades in the spot market. FUTURES PRICE: The price at which the futures contract trades in the futures market. CONTRACT CYCLE: The period over which a contract trades. The index…
DISTINCTION BETWEEN FUTURES AND FORWARDS CONTRACT. Forward contracts are often confused with futures contracts. The confusion is primarily because both serve essentially the same economic functions of allocating risk in the presence of future price uncertainty. However futures are a…
LIMITATIONS OF FORWARD MARKETS Forward Markets world-wide are afflicted by several problems like LACK OF CENTRALIZATION OF TRADING, LIQUIDITY and COUNTER PARTY RISK. In the first two of these, the basic probk much flexibility and generality. The forwc. estate…
INTRODUCTION TO FUTURES AND OPTIONS In recent years, derivatives market have become increasingly important in the field of finance. While futures and options are now actively traded on many exchanges, forward contract s are popular on the OTC market. In…
INDEX DERIVATIVES Index derivatives are derivative contracts which have the index as the underlying. The most popular index derivatives contracts the world over are index futures and index options. NSE’s market index, the S&P CNX NIFTY was scientifically designed to…