ENTITIES IN THE TRADING SYSTEM There are four entities in the trading system. Trading Members, Clearing Members, Professional Clearing Members and Participants. 1. TRADING MEMBERS: Trading Members are members of NSE. They can trade either on their own account or…
TRADING FUTURES AND OPTION TRADING SYSTEM In this chapter we shall take a brief look at the trading system for nse india futures and options market. However, the best way to get a feel of the trading system is to actual ly…
QUESTIONS AND ANSWERS ON CHAPTER 4 Q. On 15th January, Mr.Arvind Sethi bought a january Nifty futures contract which cost him Rs.2,40,000. Each Nifty futures contract is for delivery of 100 Nifties. On 25th January, the index closed at 2460.…
SPECULATION: BEARISH SECURITY. SELL CALLS OR BUY PUTS Do you sometimes think that the nse india is going to drop? That you could make a profit by adopting a position on the market? Due to poor corporate results, or the instability of the…
SPECULATION: BULLISH SECURITY BUY CALLS OR SELL PUTS There are times when investors believe that security prices are going to rise. For instance, after a good budget, or good corporate results, or the onset of a stable government. How does…
HEDGING: HAVE UNDERLYING DUY PUTS Owners of stocks or equity portfolios often experience discomfort about the overall stock market movement. As an owner of stocks or an equity portfolio, sometimes you may have a view that stock prices will fall…
PRICING OPTIONS An option buyer has the right but not the obligation to exercise on the seller. The worst that can happen to a buyer is the loss of the premium paid by him. His downside is limited to this…
PAYOFF PROFILE FOR BUYER OF CALL OPTIONS: LONG CALL A call option gives the buyer the right to buy the underlying asset at the strike price specified in the option. The profit/loss that the buyer makes on the option depends…
OPTIONS PAYOFFS The optionality characteristic of options results in a nonlinear payoff for options. In simple words, it means that the losses for the buyer of an option are limited, however the profits are potentially unlimited. For a writer, the…
ARBITRAGE: UNDER-PRICED FUTURES. BUY FUTURES. SELL SPDT Whenever the futures price deviates substantially from its fair value, arbitrage opportunities arise. It could be the case that you notice the futures on a security you hold seem under-priced. How can you…