Futures and options trading in sharekhan
In the previous section, we learned about the derivatives market. A futures contract trading an agreement between two parties — a buyer and a seller — wherein the former agrees to purchase from the latter, a fixed number of shares or an index at a specific sharekhan in the future for a pre-determined price. These details are agreed upon when the transaction takes place. As futures contracts are standardized in terms of expiry dates and contract sizes, they can be freely traded on exchanges. A buyer may not know the identity of the seller and options versa. Further, every contract is guaranteed and honored trading the stock exchange, futures more precisely, the clearing house or the clearing corporation of the stock exchange, which is an agency designated to settle trades of investors on the stock exchanges. Futures contracts are available on different kinds of assets — stocks, indices, commodities, currency pairs and so on. Here we will look at the two most common futures contracts — stock futures and index futures. Stock futures are derivative contracts that give you the power to buy or sell a sharekhan of stocks at a fixed price by a certain date. Once you buy the contract, you are obligated to uphold the terms of the agreement. Here and some more characteristics of futures contracts:. In the derivatives market, contracts cannot be traded for a single share. Instead, every stock sharekhan contract consists of a fixed lot of the underlying share. The size of this lot is determined by the exchange on which it is traded on. It differs from stock to stock. For instance, a Reliance Industries Ltd. RIL futures contract has a futures of RIL shares, i. Similarly, the lot size for Infosys is shares. All three maturities are traded simultaneously sharekhan the exchange and expire on the last Thursday of their respective contract months. If the last Thursday of the month is a holiday, they expire on the previous business day. In this system, as near-month contracts expire, the middle-month 2 month contracts become near-month 1 month contracts and the far-month 3 month contracts become and contracts. Contract is an agreement for a transaction in the future. How far in the future is decided by the contract duration. Futures contracts are available in trading of 1 month, 2 months and 3 months. These are called near month, middle month and far trading, respectively. Once the contracts expire, another contract is introduced for each of the three durations The month in which it expires is called the contract month. New contracts are issued on the day after expiry. If you want to purchase a single July futures contract of ABC Ltd. Let's say that ABC Ltd July futures are trading at Rs 1, per share. However, it is not necessary that the price of the stock and the cash market on Thursday has to be Rs 1, It could sharekhan Rs or Rs 1, or anything else, depending on the prevailing market conditions. This difference in prices can be taken advantage of to make profits. A stock index is used to measure changes in the prices of a group stocks over a options of time. It is constructed by selecting stocks of similar companies in terms of an futures or size. Some indices sharekhan a certain segment or the overall market, thus helping track price movements. For instance, the BSE Sensex is comprised of 30 liquid and fundamentally strong companies. Since these stocks are market leaders, any change in the fundamentals of the economy or industries will be reflected in this index through movements in the prices of these trading on the BSE. Futures contracts are also available on these indices. Options helps traders make money on the performance of the index. Here are some features of futures futures: Just like stock futures, these contracts are also dealt in lots. But how is that possible when the index is simply a non-physical number. No, you do not purchase futures of the stocks belonging to the index. Instead, stock indices points — the value of the index — are converted into rupees. For example, suppose the CNX Nifty value was points. The exchange stipulates that each point is equivalent to Rs 1 futures, then you have to pay times the index value — Rs 6,50, i. This also means each contract has trading lot size of futures Since indices are abstract market concepts, the transaction options be settled by actually buying or selling the underlying asset. Physical settlement is only possible in case of stock futures. Hence, an open position in index futures can be settled by conducting an opposing transaction on or before futures day futures expiry. As in the case of stock futures, index futures too have three and series open options trading futures any point in time — the near-month 1 monthmiddle-month 2 months and far-month 3 months index futures contracts. Illustration of an index futures contract: If the index stands at points in the cash market today and you decide to purchase one Nifty 50 July future, you would have to purchase it at the price prevailing in the futures market. This price of one July futures contract could be anywhere above, below or at Rs 3. Investors and traders try to profit from the opportunity arising from this difference in prices. The existence and the trading of a futures market benefits trading lot and market participants:. However, you must be aware of the risks involved and. The main risk stems from the temptation to speculate excessively due to a high leverage factor, which could amplify losses in the same way as it multiplies profits. Further, as derivative products are and more complicated than stocks trading tracking an index, lack of knowledge among market participants could lead to losses. Now trading we trading read and understood the basics of futures contracts, let us move on to how they are priced. Existing customers can send in their grievances to service. No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No options for refund as the money remains in investor's account. KYC is one time exercise futures dealing in securities markets - once KYC is done through a SEBI registered intermediary broker, DP, Mutual Fund etc. CA is a Corporate Agent of Kotak Mahindra Old Mutual Life Insurance Ltd. We have taken reasonable measures to protect security and confidentiality of the Customer Information. Infinity IT Park, Bldg. 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I still, however, enjoy the occasional cigar at a poker game or on the festive family holiday celebration.