Deravitives and Intra Day Trading
Derivatives and Intra Day Trading
A Project by Roll no’s 31-35
DERIVATIVES
A product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index or reference rate ), in a contractual manner.
The underlying asset can be equity , forex commodity or any other asset.
Topics To Be Covered
•History Of Derivative Markets in India
•Basics
•OTC ( Over the Counter)
•Forwards
•Futures
•Options
•Swap
•Future Of Derivative Markets in India
•Intra Day Trading
Basic Purpose of Derivatives
• In Derivative Transactions, one party’s loss is always another party’s gain
• The main purpose of derivatives is to transfer risk from one person or firm to another, that is, to provide insurance
• If a farmer before planting can guarantee a certain price he will receive, he is more likely to plant
• Derivatives improve overall performance of the economy
Indian History of Derivatives
• The Bombay Cotton trade association started future Trading in 1875
• In 1952 the government banned cash settlement and Option Trading
• In 1995 a Prohibition of trading options was lifted
• In 1999, the Securities Contract (Regulation) Act of 1956 was amended and derivatives could be
• Declared “securities”
• NSE Started trade in future and option by 2005
Basic Terminologies
• Spot Contract: An agreement to buy or sell an asset today.
• Spot Price: The price at which the asset changes hands on the spot date.
• Spot date: The normal settlement day for a transaction done today.
• Long position: The party agreeing to buy the underlying asset in the future assumes a long position.
• Short position: The party agreeing to sell the asset in the future assumes a short position
• Delivery Price: The price agreed upon at the time the contract is entered into.
What is a Hedge
•To Be cautious or to protect against loss.
•In financial parlance, hedging is the act of reducing uncertainty about future price movements in a commodity, financial
A Project by Roll no’s 31-35
DERIVATIVES
A product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index or reference rate ), in a contractual manner.
The underlying asset can be equity , forex commodity or any other asset.
Topics To Be Covered
•History Of Derivative Markets in India
•Basics
•OTC ( Over the Counter)
•Forwards
•Futures
•Options
•Swap
•Future Of Derivative Markets in India
•Intra Day Trading
Basic Purpose of Derivatives
• In Derivative Transactions, one party’s loss is always another party’s gain
• The main purpose of derivatives is to transfer risk from one person or firm to another, that is, to provide insurance
• If a farmer before planting can guarantee a certain price he will receive, he is more likely to plant
• Derivatives improve overall performance of the economy
Indian History of Derivatives
• The Bombay Cotton trade association started future Trading in 1875
• In 1952 the government banned cash settlement and Option Trading
• In 1995 a Prohibition of trading options was lifted
• In 1999, the Securities Contract (Regulation) Act of 1956 was amended and derivatives could be
• Declared “securities”
• NSE Started trade in future and option by 2005
Basic Terminologies
• Spot Contract: An agreement to buy or sell an asset today.
• Spot Price: The price at which the asset changes hands on the spot date.
• Spot date: The normal settlement day for a transaction done today.
• Long position: The party agreeing to buy the underlying asset in the future assumes a long position.
• Short position: The party agreeing to sell the asset in the future assumes a short position
• Delivery Price: The price agreed upon at the time the contract is entered into.
What is a Hedge
•To Be cautious or to protect against loss.
•In financial parlance, hedging is the act of reducing uncertainty about future price movements in a commodity, financial