Sandyluce SaysInvestment in Stocks/Equities for the Young Indians
Is $1000 not a bit on the low side?
Do you see $1000-1200 in the short term, or as a new base?
Actually it is just derived by the Gold (US) estimates and Re/Dollar estimates
Gold (US) Estimate = $ 1000 - 1200 / Troy Ounce
1 Troy ounce = 31. 1034 grams
Hence, Gold (US) Estimate = $321.51 - 385.81 / 10 Grams
Re.Estimate = 60 / $
Hence Gold (Indian) Estimate = Rs. 19000 - 23000 / Grams.
Actually it is just derived by the Gold (US) estimates and Re/Dollar estimates
Gold (US) Estimate = $ 1000 - 1200 / Troy Ounce
1 Troy ounce = 31. 1034 grams
Hence, Gold (US) Estimate = $321.51 - 385.81 / 10 Grams
Re.Estimate = 60 / $
Hence Gold (Indian) Estimate = Rs. 19000 - 23000 / Grams.
..............Crude getting to 89-90$/barrel(which in itself is quiet unlikely in near future) wont help much with rupee @65 level coz i guess crude is just about 30% of indian imports and with rupee @60-65 levels imports will cross the 500B$'s mark....Though,Ball is still in FINMIN court....Initiative is what is required.....!!!!
I like the analogy. Though a Future is actually more like betting.
A very simple example without any finance lingo
A farmer is unsure of how good his crop of tomatoes will be, so he sells it for Rs500, 2 months before the crop matures (as a promise on paper). The ketchup manufacturer thinks that 500 is a good price to buy since the price might rise later on. So he also agrees to buy the crop, 2 months in advance (on paper). After 2 months, farmer delivers the tomatoes and the manufacturer pays 500.
This is a Forward contract.
Problem is that if the actual market price 2 months later is 600, farmer may not honor his contract. Or if the price is 400, the manufacturer may buy from the market rather than from the farmer. So we have the "risk of default". Another problem is that farmer may want to sell 470 kg, but the manufacturer may want to buy 630 kg. Or that the crop might not be ready in exactly 2 months.
To overcome these problems, there is a solution...
Now, both of them went to a third person of good financial standing whom both respect (say, an exchange) to ensure that there is no going back on the promises, plus they standardized the quantity sold, dates and other things like that - say, contracts of 100 kg each to be delivered on 3rd thursday of the month. In addition, they introduced more standardization and security measures (in Finance lingo, clearing, MTM etc).
This kind of a contract would be called a Future.
Well here is some more intro to these...
Futures Definition | Investopedia
Futures contract - Wikipedia, the free encyclopedia
also what is forward and options?
Futures and Options :)
There are three types of derivative instruments used
Forwards : Long term contracts , let say you want to buy SBI shares , but right now you dont have the funds , so you think you will buy it at end of the month , but the risk is that SBI Share price might appreciate in the meantime , so what you do is try fix an contract with a seller that you will buy
" 100 shares of SBI at Price of 1700 on 30th Nov 2011" , so what you have done is you have hedged the market risk out of your trade , no matter what the price of SBI is at the end of the month you can buy at 1700
There are downsides to this as well , what if the SBI shares would have depreciated to 1600 , you would still have to buy at 1700 , so you may be at loss of rs 100 per share
Futures : Forwards and Future contracts are similar in context , differences are that Futures are exchange traded , where as Forwards are OTCs , Futures don't generally result in actually delivery of the stocks but trade can be settled on cash to cash basis
Options : Options are like this , You want to buy SBI shares in future so u get into a contract that is
" Buy 100 shares of SBI at Price of 1700 on 30th Nov 2011"
but what if SBI share price is 1600 on 30th Nov , now you would like to buy it from the market isnt it 😃 , Option allows you that choice , to cancel the contract and buy from the market . But offcourse any choice comes with a price , there is upfront fee in options ,which you have to pay to the seller , so in case you dont wish to honor the contract , the seller is compensated for some loss :)
I have explained a very small part of what F&O; is , taking example of only buying/selling of stocks , but we can do trades on currency , oil , metal , foodgrain , Stock Index itself 😃 , in US people even trade on weather :)
vibudhjain Saysalso what is forward and options?
vibudhjain Saysalso what is forward and options?
abhimukh19 SaysSomething i posted long time back should answer your query
again i dont get the point that why people choose these options of future contracts which may not hold any genuity!!!!!!
its like lottery..
and if u dont honour contract u can still get away with little penalty...then what is the fun of it??
its like govt open a new massive lottery scheme just to improve on its unemploment figures....
sorry if i havent understood it correctly but futures forwards options are way over my head......
nyways i have 1 more query
which is more advisable to do??
gold etf or e-gold??
There is no question of genuineness here. All forward, future, options contracts are enforceable and bound by law of the land as per the contract agreements. What little penalty do you talk of? Being banned from trading or being banned from an exchange or monetary penalties of millions of dollars or losing the 50% margin or losing the collateral posted is NOT a small thing.
Lottery would be a case where one person wins and others do not get anything. The inverse of a lottery is close to an insurance contract... something that works very neatly with the principles of probability and distributions.
Derivative contracts are more like a calculated bet. In fact, most investments are the same. Is investment in Gold not a bet that the gold price will rise? Similarly when one buys 10 shares of Infosys, one is "betting" that the price will go up.
Likewise, when you invest in a derivative strategy, say, a straddle or a butterfly composed of Infosys options, else a Nifty future, you are betting that the share price or Nifty will behave in a particular manner eg: be rangebound between 5000 and 5400 etc
As a product structurer, I can construct products to suit the needs of various customers (like corporates, MF, Institutions etc) as per the return parameters that they specify and help them meet their investment objectives. Plus lot of risk management / hedging needs of these institutions are met via derivatives.
Thus said, I not propose that derivatives are all "goody goody" material... they have been described as "Financial Weapons of mass destruction" by none other than the Omaha of Investment world - Warren Buffet. All types of investments would have their pros and cons and the responsibility lies on the user to understand and use them in such a manner that is not detrimental to the masses.
There have been many cases of misuse of derivatives, but I would need to write a book to elaborate on that. However, there have been innumerable cases of good use of derivatives where they have helped organizations and individuals plan, hedge and manage risk in a very effective manner.
If you are interested in further learning, I can have corporate / college trainings organized on specific areas of derivatives.
again i dont get the point that why people choose these options of future contracts which may not hold any genuity!!!!!!
its like lottery..
and if u dont honour contract u can still get away with little penalty...then what is the fun of it??
its like govt open a new massive lottery scheme just to improve on its unemploment figures....
sorry if i havent understood it correctly but futures forwards options are way over my head......
nyways i have 1 more query
which is more advisable to do??
gold etf or e-gold??
One would be surprised at the financial and technological innovation that has been witnessed in the agriculture sector. Farmers are very much aware of the "simple" forward contract.
It is only the complex derivatives that are used for "taking advantage" of investors. 😉 Someone mentioned weather derivatives... rainfall insurance.
Another example is the sale of structured products to school districts, for them to invest them huge surplus funds, by wily Investment Banks. There are many cases in the courts, still pending. There have been changes in the US law now to protect such investors but earlier the situation was different.
thank u for the lucid explanation
but why then enter into a contract when i believe almost all contracts will b disputed why not buy the goods on floating prices??
and do the farmers actually have the know how of how theses things work?
Facebook got listed on the Nasdaq today. Would you buy shares at $40 a share? If yes, why? If no, Why not?
I thought it would fail. Presently it is a $40, $2 over its listing price of $38.
Mundane Musings: The Great Facebook IPO
Half an hour of trading left and it has again dropped to the listing price of $38. What say puys? Where will it end?
Facebook got listed on the Nasdaq today. Would you buy shares at $40 a share? If yes, why? If no, Why not?
I thought it would fail. Presently it is a $40, $2 over its listing price of $38.
Mundane Musings: The Great Facebook IPO
Mark has gone mad and is charging exorbitant rates for ads on FB and the market is on a steep decline as far as ad revenue is concerned !!! 2. Revenue is on decline and Q1 results have been negative for FB,First time ever in the history of this company.
half a billion shares traded. 
But i think bottom-line is effected more due to the expenses made on promoting and launching the IPO
It has more than doubled the user base in India now to 51 million and india has become the third largest market for them after brazil , so some other things points a different picture
They are also launching a new facility of paid status messages etc which have been tested in NZ right now , so they are evolving new business models for revenue generation and are adapting
Mark has made a comment on how they cant take growth in Asian Markets for granted , so i am sure he is aware of the need for continuous innovation in the business :)
One would be surprised at the financial and technological innovation that has been witnessed in the agriculture sector. Farmers are very much aware of the "simple" forward contract.
It is only the complex derivatives that are used for "taking advantage" of investors. 😉 Someone mentioned weather derivatives... rainfall insurance.
Another example is the sale of structured products to school districts, for them to invest them huge surplus funds, by wily Investment Banks. There are many cases in the courts, still pending. There have been changes in the US law now to protect such investors but earlier the situation was different.
Facebook must prove itself; may be overvalued by a third - The Economic Times
A fair analysis 😃 what do you think?
Wrote an article on Currency devaluation a few months back with a friend , sharing it here as i guess relevance of this topic has increased quite a lot ..
Devaluation Of Currency: A Bane Or A Boon? | MBA Skool-Study.Learn.Share.
I like the analogy. Though a Future is actually more like betting.