contents derivatives futures. options. technical analysis. fundamental analysis. market
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ContentsContents
Derivatives Futures. Options.
Technical analysis.
Fundamental analysis.
Market .
TATAMOTORSTATAMOTORSTataMotors FuturesJun 01, 2009 = 78000Jun 16, 2009 = 131640Profit = 53640.Returns in % = 68%.
BHARTIBHARTIBHARTI FuturesOct 1, 2009 = 44000Oct 28, 2009 = 0.Loss.
HULHULHUL OptionsJuly 13, 2009 = 500July 27, 2009 = 4000.Profit = Rs.3500
RCOMRCOMRCOM OptionsOct 5, 2009 = 7700Oct 29, 2009 = 0Loss
Uses of derivatives:Uses of derivatives:
Hedging
Arbitrage
Buy on Margin
Cash MarketCash Market
Derivative Derivative MarketMarket
DERIVATIVESDERIVATIVES
Derivative Definition:Derivative Definition:‘derivative’ refers to an asset
that has no independent value, but ‘derives’
its value
from that of an underlying asset.
ExamplesExamplesCurd, which is derivative of milk.Price of the curd depends on the
price of the milk.ADR like Satyam, Infosys etc.
DERIVATIVES
FUTURES OPTIONS
LONGSHOR
TCALL PUT
FuturesFuturesFutures are exchange-traded
contracts to buy or sell an asset in future at a price agreed upon today.
The asset can be share, index, interest rate, bond, rupee-dollar exchange rate, sugar, crude oil, soybean, cotton, coffee etc.
Types of FuturesTypes of FuturesIndex Futures : are derivative
contracts, which have the index value (Nifty, Sensex etc) as the underlying asset.
Stock Futures : are derivative contracts that have an equity share as the underlying asset.
PremiumPremium
Future > Spot
5300 > 5250
Prm = 50
Future < Spot
5250 < 5300
Disc = 50
DiscountDiscount
Date Nifty Spot Nifty Fut Prm/Disc
1-Jan-08 6144 6161 16
2-Jan-08 6179 6223 44
3-Jan-08 6179 6175 3
4-Jan-08 6274 6255 19
7-Jan-08 6279 6288 9
8-Jan-08 6288 6269 19
9-Jan-08 6272 6260 12
10-Jan-08 6157 6162 5
DERIVATIVES
FUTURES OPTIONS
LONGSHOR
TCALL PUT
Long Position in Long Position in FuturesFuturesBullish on stock or index.
Buy position on Future contract.
“To sell the contract on or before the expiration date.”
LONGLONGBuy now sell
later.
BUYBUY
SELLSELL5800
5000
5000
5800
BUYBUY
SELLSELL
DERIVATIVES
FUTURES OPTIONS
LONGSHOR
TCALL PUT
Short Position in Short Position in FuturesFuturesBearish on stock or index.
Sell Future contract.
“To buy the contract on or before the expiration date.”
SHORTSHORTSell now buy
later.
BUYBUY
SELLSELL 5800
5000
BUYBUY
SELLSELL 5800
5000
LONGLONGBuy now sell
later.Sell now buy
later.
SHORTSHORT
BUYBUY
SELLSELL
BUYBUY
SELLSELL5800
5000
Futures TradingFutures TradingLot size = 75.Future Price = 2800.Margin = 23%
Total Amt required to pay = 75 * 2800 * 23% = Rs.
48,300
Uses:Uses:
Hedging
Arbitrage
Buy on Margin
DERIVATIVES
FUTURES OPTIONS
LONGSHOR
TCALL PUT
HedgingHedgingInsurance.
When people decide to hedge, they are insuring themselves against a negative event.
For example, if you buy house insurance, you are hedging yourself against fires, break-ins or other unforeseen disasters.
75 shares.
Buy Price = 2800.
75 shares.
Short Position at 2800.
Market Price = 2000.
75 shares.Buy Price =
2800.Loss = 2000 - 2800 = -
800
75 shares.Buy Price =
2800.Profit = 2800-2000 =
800
Spot / cash Market
Future market
ArbitrageArbitrageThe simultaneous purchase and
sale of an asset in order to profit from a difference in the price.
"riskless profit“.
75 shares.
Buy Price = 2800.
75 shares.Short Position at
3000.
Market Price = 2000.75 shares.Buy Price =
2800.Loss = 2000 - 2800 = -
800
75 shares.Buy Price =
2800.Profit = 3000-2000 =
1000
Spot / cash Market
Future market
Net Profit/Loss = (-800+1000)*75 = 15000
Net Profit/Loss per share = (-800+1000) =200
75 shares.
Buy Price = 2800.
75 shares.Short Position at
3000.
Market Price = 4000.75 shares.Buy Price =
2800.Loss = 4000 - 2800 =
1200
75 shares.Buy Price =
2800.Profit = 3000-4000 = -
1000
Spot / cash Market
Future market
Net Profit/Loss = (-800+1000)*75 = 15000
Net Profit/Loss per share = (-800+1000) =200
Buying on MarginBuying on MarginReliance Industries.No of shares = 75.Price per share = 2800.
Spot / cash Market
Future market
Total Amt Paid =75 * 2800 = 2,10,000
Total Amt Paid =75 * 2800 *
23% = 48,300
Margin
You have Rs.40000…….You have Rs.40000…….
2300*75*23% = 39675
= 40000 / 230017 shares
350 * 75 = 26250
350 * 17 = 5950
FUTURES SPOT / CASH
PRICE = 2300PRICE = 2300
PRICE = 2650PRICE = 2650