List of Derivatives Articles

The financial lives of every individual has become complex as there are multiple incomes and a number of expenses. Such scenario calls for the need to keep the finances in order so as to avoid challenges in future. Every individual has a unique set of financial goals and challenges, which needs customized personal financial planning.

Options are not only liquid but they are many times larger than the cash market and the futures market in terms of daily volumes.

The difference between underlying securities current spot price and strike price represents the profit/loss that the trader makes upon sale or exercise of the option.

The essential difference between call option and put option arises from the fact that one is an option to buy an underlying asset and the other an option to sell the asset.

Investing is one of the best ways to utilise your disposable income. However, it is always best to go with investment tools that offer high security and guaranteed returns when you first start investing.

In the stock markets, pricing of any asset class is based on expectations. For example, the future price is the expected spot price and the spot price is nothing by the present value of the expected spot price.

Whether you trade in stocks, commodities or any other financial instrument, it can take place across a number of different platforms and in a number of different ways. However, some commonly employed trading methods have

Investors are comfortable with the trading techniques they know will help them diversify. Once they know they have achieved their profit goals from equities, they move to other asset classes that have the potential to offer significant profits.

Derivative trading is one of the most rewarding asset classes for investors who have allocated some capital into equities. Professional investors choose Options contracts within derivatives to ensure they remain liquid and make profits in almost every market situation.

A short call is an options trading strategy for bearish traders. Essentially, short call traders are bet on a share price fall and benefits from a fall in prices.

A vertical spread also called a credit spread, involves buying and selling Options of the same class (Call or Put) but different strike prices. Vertical spreads can be bullish or bearish

A Short Straddle is a complex Options strategy that consists of selling both a Call option and a Put option, with the same strike price and expiration date.

An Iron Butterfly Strategy or Iron Fly Strategy is an options trading strategy that combines multiple call and put options to devise a market neutral strategy.

When investing in the Indian financial market, one thing to be certain: Risk. Market risk is the most common and universal within every asset class in the financial market.

A Long Call Condor, similar to a long butterfly strategy, is a neutral market-view strategy that offers limited risk and profit.

There are numerous professional investors that earn almost all of their profits from Options trading.

Professional investors understand every factor that can affect the Indian financial market.

A Long Combo strategy is a well-known Bullish trading strategy. This options strategy is generally used when there is a degree of certainty about the rise of market prices.

Investors choose derivative trading for its high potential of diversification and limiting their exposure to the fall of a specific asset class.

Options trading is a lucrative yet risky investment avenue. The risk, as well as rewards involved in Options, tend to be higher.

The Indian financial market is full of numerous investment opportunities that can offer higher returns with low-risk exposure.

tock exchanges are an excessively volatile arena, which means the market swings constantly. The most common way to profit from market swings is Options. T

Currency derivatives are positions that obtain their value from the underlying currency.

A bullish options strategy can be an effective way to increase your investment profits while reducing the amount of risk at any given time.

The credit spread Options strategy is a simple yet popular trading strategy. It involves buying and selling Call or Put Options with the same underlying asset and expiration date.

Options trading is one of the most sought-after asset classes that traders and investors leverage to make low risk and steady profits.

Almost all investors start their investing journey through the stock market. The idea is simple, you buy the shares at a low price and sell them when the prices are high, thereby making a profit.

When talking to an investor, you get to know that they lost all of their capital while trading. Thinking that they too would lose their capital, they pass on their idea of investing, thereby losing on huge wealth multiplication and profits.

Minimum margin or maintenance margin is the number of stocks investors must maintain in their margin account.

Calendar spread, as the name suggests is a spread strategy wherein you trade on the gap between two similar contracts rather than betting on the price.

The global capital markets are not just a place where directional trades are taken. By default, spread trading meaning is to trade the spread or difference between prices.

What do we understand by squaring off a futures transaction? To understand how to square off futures position, remember that futures position can be either long or short.

In the options market you often come across terms like the intrinsic value, the time value etc. In addition, you also hear the popular Black & Scholes model.

Any trading in the capital markets is risky and there is no getting away from it. The best you can do is to smartly and prudently manage this risk.

In any business, you pay margin money to show your commitment and this gets adjusted to the final price.

If the derivatives contract expire on the last Thursday of the month, then what happens after that? That is what is called the derivatives settlement cycle.

Stock market indicators are essentially quantitative tools applied by traders and investors to interpret financial data. The broad intent is to forecast stock market movements and make profits out of the same.

If you’re planning to become a successful trader, it’s important to learn how to spot sideways markets and find ways to make the most of them.

The Indian stock market is as simple as it gets: you buy stocks at a low price and sell them when the price is higher and make profits based on the price difference.

One of the most common term you get to year in the derivatives market is the term “Underlying Asset”.

Swaptions (Swap + options) is a derivative financial instrument with a swap as the underlying. One party called the writer or seller of the option gives another party called the holder or buyer of the option the right to exchange interest rates.

A legal agreement involving the sale and purchase of a certain commodity, asset, or security at a predetermined price at some point in the future is known as a future contract. To facilitate their trade on the futures exchange

The Indian financial market is termed the ‘Market for Everyone’, as it includes financial instruments that can cater to the financial needs of every type of investor.

OTC options or over the counter options essentially represents options that are privately entered into and are not traded in a standard form in any stock exchange.

Time plays a crucial role in trading and traders want to buy and sell assets at the ‘right time’ to make more profit.

A popular adage is, “you cannot time the markets”. However, options provide a way for investors to decide whether to buy or sell the underlying in a given timeframe. Traders use them to hedge their positions and protect against downside risk (losses) or enhance their gains (profits).

Consider you have a barrel of wheat that you want to sell three months from now, but you fear that the prices might fall in the future.

Most of us who invest in stocks of a company know what is an IPO (initial public offering). An IPO is the first sale of a stock or share by a company to the public.

Equity is the share of a company that you, as an investor, own. Such equity, in turn, allows you access to the gains of the company.

A European option can be exercised only at the expiration date, whereas the American Option can be exercised at any time on or before the expiration date. The right of the option buyer is a lot more powerful in an American option.

To understand settlement of options you need to break up the buy side and the sell side of the option distinctly. When a person buys a call or put option, the maximum loss is the premium paid. Hence the settlement of options on buy side begins with premium settlement and then you are done till the position is closed or expires. However, options settlement for sell side is more complex.

In the financial markets, leverage is used extensively to increase the potential return on investment. Leverage involves using borrowed capital or securities to fund a financial asset.

One of the most popular and widely used words in the lexicon of F&O trading is open interest. As the name suggests, open interest represents the open futures and options positions in the market that are yet to be closed out or exercised or expired.

Share derivatives priced between Rs201 to Rs400 would have a lot of 1,000 units; between Rs101 and Rs200 in lots of 2,000 units; Rs51 to Rs100 at 4,000 units and Rs25 to Rs50 in lots of 8,000.

During the last week of every month, we tend to hear the words like derivatives settlement and derivatives expiry on all the business and news channels.

If you have opened the Nifty screen on the NSE website, you will find the link to an Option Chain on the top. Of course, this option chain is also available on your trading terminal but the NSE Nifty option chain is available to everybody on a real time basis on the website of NSE. What exactly is an Option Chain? It is the complete […]

The stock market has proven to be the preferred investment avenue for many investors, beginner or experienced.

If you want to trade futures, you start with opening your trading account with a SEBI registered broker like India Infoline Securities.

A futures contract is a right and obligation to buy or sell a contract at a future date at a price that is determined and agreed upon today.

If you are an investor looking for short-term financial instruments, Options is a great option. It is a derivative contract that gives the owner the right to buy or sell securities at an agreed-upon price within a certain period.

Is it really possible to have strategies in futures? After all, futures are plain vanilla products just like the cash market? The truth is that there are futures strategies that are possible in the market.

For financial planners, options could be a great tool to tide over turbulence in markets when things are uncertain, Vatsal Ramaiya says

Just as you understand futures trading, it is also important to understand the future contract settlement and especially the future contract settlement process.

Even when a broker claims that trading in futures and options is free of cost, it is not free. Even the low-cost brokerage houses make cash trading in delivery free of cost but brokerage on futures is charged.

Rollover may sound like a complex and high flying esoteric word but in reality it is quite simple. You must have heard the word rollover quite often concerning futures. Traders often refer to rollover in the stock market as long rollover or short rollover.

In financial markets we all understand volatility as something very unstable and very bad.

To understand settlement of options you need to break up the buy side and the sell side of the option distinctly.

when you hold naked options, you actually hold an option without holding the underlying security or the commodity.

The cost of carry model is based on the premise that the futures price of an asset is the spot price plus the cost of carrying. This cost of carrying is an absolute number but the cost of carrying model presents it in percentage terms.

A future contract is a right and an obligation to buy or to sell an asset. Remember when we talk of types of futures contracts, there are futures across asset classes.

Currency options are a low upfront cost method of participating in the currency derivatives market. Like currency futures, currency options are also available on pairs like the USDINR, EURINR, GBPINR etc.

If you are in the capital market, then volatility is part and parcen of the game. Of course, by volatility we mean that the markets fluctuate and add to your risk.

Options strategies are basically combinations. We shall look at various types of options strategies along the way and also now to apply such option trading strategies along the way.

To understand options, one needs to understand options features and option contract features.These options features and option contract features refer to the basic DNA of an option contract.

Generally, new investors tend to put their money in stocks as they are one of the most sought after and straightforward asset classes.

What do we understand by the term “Hedge”. The word hedge means protection or covering your risk.

An option is a right to buy without the obligation to buy or a right to sell without the obligation to sell. The former is the buyer of a call option and the latter is the buyer of a put option.

While commodity futures may appear to be a modern concept, their roots in India extend far into the past. As early as 1875, there existed a cotton futures exchange. However, futures trading in essential commodities ceased in the 1960s due to concerns about speculative practices and hoarding. It wasn’t until 2002 that futures in commodities made a comeback in India. Read on to learn more […]

Traders typically engage in investments with the expectation of a rising market, and occasionally, they make some investments hoping for a downward price movement. However, it’s common for prices to remain relatively stable. Wouldn’t it be appealing if you could generate profits even when the markets are not showing significant movement? Well, you can achieve this through options trading, particularly by employing the strategy known […]

Iron butterfly strategy aims to create a market-neutral strategy by combing call and put options with identical expiration dates which consolidate at a middle strike price.

Options trading involves various permutations and combinations of Call and Put options.

A ratio spread is a neutral options trading strategy in which an options trader holds an unequal number of long (purchased) and short (written) options contracts.

A bull call spread strategy is an Options trading strategy that uses two Call Options with different strike prices to create a range.

Commodity options are structured like any other option on an index or stock in that the buyer has limited risk and the seller of the option has unlimited risk.

A common belief in the Indian financial market is: the more complex the strategy, the higher is the potential for profits. The same goes with Options trading and its numerous complex strategies.

One of the unique features of exchange traded futures in India is that they are standardized. One of the methods of standardizing futures and options contracts is through the prescription of minimum lot sizes.

A Bear Call Ladder is a three-legged options strategy that is usually set up for a ‘net credit’ of premium.However, to understand the strategy, the first step is to understand some common jargon related to Options Trading.

A bull put spread is an options trading strategy in which the trader buys and sells the same number of put options of different strike prices with the same underlying asset and expiration date.

A bear call spread is a two-legged options trading technique that involves selling a call option with a lower strike price to collect an upfront premium and simultaneously buy a new call option with a higher strike price.

For traders who rely on technical analysis for devising trading strategies, price movements and past trends aid in decision making.

In the Indian market, the equity and commodity markets used words like Badla and Undha Badla. These are more popularly known as Contango and Backwardation in market parlance.

We all pay option premium when we buy options and receive option premium when we sell options. Have you wondered about the option premium meaning and its significance. Why do options command premium, what exactly this premium and who determines this premium amount?

Equity investing is a great way to generate returns. However, there can be other rationales for investing in securities like leveraging a position or hedging risk.

When you think about the basic idea behind investing, it seems to be fairly simple: you buy securities at a lower price and sell them when the price is high. However, all prospective investors need to realise and understand that

Derivatives, especially options contracts, have provided tremendous profits to experienced investors who understand the technicality of the derivative contract.

A Short Straddle is a complex Options strategy that consists of selling both a Call option and a Put option, with the same strike price and expiration date.

Derivatives are standardised financial contracts traded in stock exchanges in a regulated manner.

A swap is an agreement that allows users to exchange the cash flows or liabilities from two different financial instruments.

A derivative is a financial instrument that derives its value from an underlying asset. The underlying asset can be equity, currency, commodities, or interest rate.

Basis in derivatives is the difference between the spot price (current price) and the strike price (predefined price) of the futures contract.

Theta options are defined as an options greek that measures the rate at which the option loses its time value as the expiration date draws near.

A basic principle in the stock market is the occurrence of both the market trends (Bear and Bull) at regular intervals. In the case of a bear cycle, the prices of the securities collapse, forcing investors to lose a chunk of their capital.

The Indian financial market and its numerous investment instruments come with their risks and rewards. While investors can reap the rewards with the right amount of research and an ideal trading strategy, the risks can seem harder to manage and minimise if

Derivatives are standardised financial contracts traded in stock exchanges in a regulated manner.

When you first begin investing, you realise that there are numerous terms you are required to learn to mitigate losses and ensure you are profitable. Although the wide range of financial instruments available for investing in the Indian market provides a plethora of profit-making opportunities, you can end up making losses if you are not well versed with each of them.