i mean when i c things like castor seed or cotton or mustard on mcx i say to myself i can go to local kiryana shop fr that!!!!!!!! please forgive my stupidness
It is not Stupidity U are asking right questions cause answer to that qs is reason that why commodity derivatives are here .
1)You go to kirana shops because u want to take delivery of that there only with today's price (Spot) So why u would go to MCX for that .
2)So who will go to MCX ?
(A) Hedging
1)Farmer/Producer of commodity --Time till the commodity is deliverable (like crops take few months to grow) he is not sure about what the price would be in near future if thr are price fluctuations .So he is taking risk because he is not sure about his profit margins (rather his input costs for producing commodity).
2)Trader -- Same goes for trader of commodity too. He also wants to minimise risk by fixing price today only for future ,today only
If they enter in contracts mutually without exchange these are OTC contracts (Forward Contracts)
If they go to commodity exchange for that they are Exchange based Futures contracts .
(B)Speculating - If some wants to specualte only for future prices of commodity but not willing to take delivery. They close contracts by opposite contract and go for cash settlement
Normally Forwards are used for hedging and Futures are for speculating :)
Thank you for explaining things and answering weird questions One last thing In exonomic times how to read the table fr derivatives its difficult fr me
Thank you for explaining things and answering weird questions One last thing In exonomic times how to read the table fr derivatives its difficult fr me
I also dont know that first get theoretical concepts right (thats what i am and will do ) then move to practical markets
Delivery / Cash / closing out are settlement types, and this is independent of the intention of the trade which governs the type - Hedging / Speculation / Arbitraging.
Hence, a hedger may take delivery / close out or cash settle (sometimes this also depends on the type of contract eg: certain financial contracts are never delivered... only closed out or cash settled) Also, a speculator may close out / cash settle.
Delivery based trades have reduced a lot these days as a percentage.
It is not Stupidity U are asking right questions cause answer to that qs is reason that why commodity derivatives are here .
1)You go to kirana shops because u want to take delivery of that there only with today's price (Spot) So why u would go to MCX for that .
2)So who will go to MCX ?
(A) Hedging
1)Farmer/Producer of commodity --Time till the commodity is deliverable (like crops take few months to grow) he is not sure about what the price would be in near future if thr are price fluctuations .So he is taking risk because he is not sure about his profit margins (rather his input costs for producing commodity).
2)Trader -- Same goes for trader of commodity too. He also wants to minimise risk by fixing price today only for future ,today only
If they enter in contracts mutually without exchange these are OTC contracts (Forward Contracts)
If they go to commodity exchange for that they are Exchange based Futures contracts .
(B)Speculating - If some wants to specualte only for future prices of commodity but not willing to take delivery. They close contracts by opposite contract and go for cash settlement
Normally Forwards are used for hedging and Futures are for speculating :)
I have attached a screenshot of the ET Options page. Refer to this, read headings of the table and then read below.
Every Section will be for a Stock / Index etc
Every horizontal line will be for a particular contract within that section
First two characters indicate the type of option - CE for Call option, PE for Put option.
Then is the Strike Price for the contract - price at which the final trade for the underlying asset is set to take place.
Next is the Expiry of the Contract - only the month is specified. The date within the month is specific to the exchange and to the type of contract eg: it may be the last Thursday of the month or the third Friday of the month.
The premium is the money you pay to buy the contract or what you get when you go short. The Open, High, Low and Close is the movement of the premium during the day.
Open Interest - this is the number of contracts that are available for trading in the market for this particular contract.
Last figure is the number of contracts actually traded during the day.
So lets read the first line HDFC Bank Call with strike 500 expiring in May opened at 16.2 and was trading between 11.5 to 20.15 and closed at 12.8. The number of contracts traded during the day were 222 and the number of contracts existing in the market are 77000.
Similarly for the 500 Put HDFC Bank Put with strike 500 expiring in May opened at 8.0 and was trading between 6.55 to 13.2 and closed at 10.45. The number of contracts traded during the day were 179 and the number of contracts existing in the market are 104000.
Hope this helps
Thank you for explaining things and answering weird questions One last thing In exonomic times how to read the table fr derivatives its difficult fr me
I have attached a screenshot of the ET Options page. Refer to this, read headings of the table and then read below.
Every Section will be for a Stock / Index etc
Every horizontal line will be for a particular contract within that section
First two characters indicate the type of option - CE for Call option, PE for Put option.
Then is the Strike Price for the contract - price at which the final trade for the underlying asset is set to take place.
Next is the Expiry of the Contract - only the month is specified. The date within the month is specific to the exchange and to the type of contract eg: it may be the last Thursday of the month or the third Friday of the month.
The premium is the money you pay to buy the contract or what you get when you go short. The Open, High, Low and Close is the movement of the premium during the day.
Open Interest - this is the number of contracts that are available for trading in the market for this particular contract.
Last figure is the number of contracts actually traded during the day.
So lets read the first line HDFC Bank Call with strike 500 expiring in May opened at 16.2 and was trading between 11.5 to 20.15 and closed at 12.8. The number of contracts traded during the day were 222 and the number of contracts existing in the market are 77000.
Similarly for the 500 Put HDFC Bank Put with strike 500 expiring in May opened at 8.0 and was trading between 6.55 to 13.2 and closed at 10.45. The number of contracts traded during the day were 179 and the number of contracts existing in the market are 104000.
Hope this helps
Can we trade options via normal demat trading account ?
And while buying option we hav to pay option price only ?
Can we exercise these contracts anytime before maturity
Can we trade options via normal demat trading account ?
And while buying option we hav to pay option price only ?
Can we exercise these contracts anytime before maturity
Is thr any minimum no to be purchased ?
One option for one share right ?
mere bahut man kar raha hai speculate karne ka
1) Yes
2) Yes, for "buying" option, ur exposure is limited to the premium i.e price.
3) Yes. You can square off ur position by taking opposite position too.
4) Yes, minimum you have to purchase is 1 lot of underlying.
5) No, One option means one lot. For nifty , it is 50 units in 1 lot. For say, SBI it is 125 shares in 1 lot. These numbers are fixed. So for example if any Call option of SBI is quoting at say 100 Rs. Effectively, you have to pay Rs. 12500.
Futures & Options are subject to huge market risks. They can wipe out your portfolio in a very short period if not traded with discipline.
5) No, One option means one lot. For nifty , it is 50 units in 1 lot. For say, SBI it is 125 shares in 1 lot. These numbers are fixed. So for example if any Call option of SBI is quoting at say 100 Rs. Effectively, you have to pay Rs. 12500.
Futures & Options are subject to huge market risks. They can wipe out your portfolio in a very short period if not traded with discipline.
:shock: muze laga 1k-2k me mil sakta hai 12000 ki risk without knowing
No - these options are European (India scenario - far as I am aware), they can only be exercised at expiry, not before that. Yes - the position may be squared off by an opposite position trade.
3) Yes. You can square off ur position by taking opposite position too.
I believe there are some sites that allow you to trade on a dummy account in derivatives also. So that one can get a hang of it before diving in the deep waters.
:shock: muze laga 1k-2k me mil sakta hai 12000 ki risk without knowing
No - these options are European (India scenario - far as I am aware), they can only be exercised at expiry, not before that. Yes - the position may be squared off by an opposite position trade.
I remember, doing a transaction last to last year by exercising a stock option before the expiry. But that was in 2 years back. I believe, they have also brought Stock Options as per European Options from January last year.
You may be correct. Was it an individual stock option on BSE?
BSE had introduced american style option only on stocks, but do they still exist - not very sure? Probably someone can confirm. Index options are still European.
NSE has only European options.
I remember, doing a transaction last to last year by exercising a stock option before the expiry. But that was in 2 years back. I believe, they have also brought Stock Options as per European Options from January last year.
You may be correct. Was it an individual stock option on BSE?
BSE had introduced american style option only on stocks, but do they still exist - not very sure? Probably someone can confirm. Index options are still European.
Thanks for the link. Though I do not agree it was due to delivery or volatility risk reasons. Investor psychology is to pick the complexity and when he does not understand it, go for the simplest.
Now, India is yet to come to terms with the vanilla variety let alone others like asian, barriers, knock-ins/outs, rainbows etc.
Thanks for the link. Though I do not agree it was due to delivery or volatility risk reasons. Investor psychology is to pick the complexity and when he does not understand it, go for the simplest.
Now, India is yet to come to terms with the vanilla variety let alone others like asian, barriers, knock-ins/outs, rainbows etc.
u explained how to read the options very well but what is the underlying asset in that thumbnail image??? what is the derivative in this case??
My suggestion to you - read something in detail about derivatives. Try to read a book, NCFM material or on the net - anything. Theory is very important to get fundamentals clear. It's a good idea to be able to understand the practical side, but also very essential to be up on the basics.
Let me know if you need further help with that.
To answer your query - The underlying is the HDFC bank share and the derivative is the Call or the Put option on that share.
u explained how to read the options very well but what is the underlying asset in that thumbnail image??? what is the derivative in this case??
ok is it possible to invest in bse ,nse...other exchanges,mutual funds,gold etf,e gold......from a single demat account??
Going by your post , I think you need some more research before investing .. Jus trade virtually for sometime and then start open a demat account once you are comfortable with your understandings .
For your question, yes single demat a/c is enough for trading in BSE and NSE . By other exchanges what u mean ?
As leolazer said , read through basics of derivatives thoroughly before getting into practical side of derivatives. Derivatives are quite intense topic in finance (atleast for me).
first get theoretical concepts right (thats what i am and will do ) then move to practical markets 
