contents derivatives futures. options. technical analysis. fundamental analysis. market
TRANSCRIPT
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ContentsContents
Derivatives Futures. Options.
Technical analysis.
Fundamental analysis.
Market .
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TATAMOTORSTATAMOTORSTataMotors FuturesJun 01, 2009 = 78000Jun 16, 2009 = 131640Profit = 53640.Returns in % = 68%.
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BHARTIBHARTIBHARTI FuturesOct 1, 2009 = 44000Oct 28, 2009 = 0.Loss.
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HULHULHUL OptionsJuly 13, 2009 = 500July 27, 2009 = 4000.Profit = Rs.3500
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RCOMRCOMRCOM OptionsOct 5, 2009 = 7700Oct 29, 2009 = 0Loss
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Uses of derivatives:Uses of derivatives:
Hedging
Arbitrage
Buy on Margin
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Cash MarketCash Market
Derivative Derivative MarketMarket
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DERIVATIVESDERIVATIVES
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Derivative Definition:Derivative Definition:‘derivative’ refers to an asset
that has no independent value, but ‘derives’
its value
from that of an underlying asset.
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ExamplesExamplesCurd, which is derivative of milk.Price of the curd depends on the
price of the milk.ADR like Satyam, Infosys etc.
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DERIVATIVES
FUTURES OPTIONS
LONGSHOR
TCALL PUT
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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.
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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.
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PremiumPremium
Future > Spot
5300 > 5250
Prm = 50
Future < Spot
5250 < 5300
Disc = 50
DiscountDiscount
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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
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DERIVATIVES
FUTURES OPTIONS
LONGSHOR
TCALL PUT
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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.”
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LONGLONGBuy now sell
later.
BUYBUY
SELLSELL5800
5000
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5000
5800
BUYBUY
SELLSELL
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DERIVATIVES
FUTURES OPTIONS
LONGSHOR
TCALL PUT
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Short Position in Short Position in FuturesFuturesBearish on stock or index.
Sell Future contract.
“To buy the contract on or before the expiration date.”
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SHORTSHORTSell now buy
later.
BUYBUY
SELLSELL 5800
5000
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BUYBUY
SELLSELL 5800
5000
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LONGLONGBuy now sell
later.Sell now buy
later.
SHORTSHORT
BUYBUY
SELLSELL
BUYBUY
SELLSELL5800
5000
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Futures TradingFutures TradingLot size = 75.Future Price = 2800.Margin = 23%
Total Amt required to pay = 75 * 2800 * 23% = Rs.
48,300
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Uses:Uses:
Hedging
Arbitrage
Buy on Margin
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DERIVATIVES
FUTURES OPTIONS
LONGSHOR
TCALL PUT
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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.
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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
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ArbitrageArbitrageThe simultaneous purchase and
sale of an asset in order to profit from a difference in the price.
"riskless profit“.
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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
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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
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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
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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