Derivatives Blog | Dr Savita Satav
Derivatives Blog | Futures and Options covers topics related to Equity Derivatives, Futures & Options. It also covers Analysis of Equity Derivatives Market. Education in Derivatives – Basics, Futures & Options Trading, Options Trading Strategies, Futures & Options Courses.
Derivatives Blog
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What are Derivatives ?
A Derivative is a contract or a product whose value is obtained or derived from the value of an underlying asset. The underlying asset can be Equities, Indices, Commodities and Currencies.
1. Financial assets such as Equity Shares, Currencies and Bonds.
2. Energy resources such as Natural Gas, Crude Oil.
3. Metals such as Silver, Gold, Copper, Zinc, Lead, Aluminium.
4. Agri commodities such as Coffee, Wheat, Sugar, Pulses, Cotton.
Read more What are Derivatives, Types, Benefits and Risks
To know more about our Online Courses in Futures & Options go to Stock Market Courses
What is Open Interest ?
Open interest is the total number of contracts which are outstanding (yet to be settled) for an underlying asset. In Equity Derivatives the futures and Options contracts can be of equity shares or Index. Open interest is the total number of positions open in Futures and Options in the Derivatives market. For example while calculating the total open interest for Nifty futures we consider the total open positions in Nifty futures for a specific expiry.
To sum up Total number of long futures contracts plus short futures contracts which are yet to be settled in the market is equal to open interest.
Frequently Asked Questions [FAQs]
Open interest is the total number of contracts which are outstanding (yet to be settled) for an underlying asset.
In the futures market the profits and losses are settled on a day to day basis. The daily settlement of profits and losses is called Mark to Market (MTM) settlement. The exchange collects mark to market margins (MTM margins) from the loss making participants and pays mark to market margins to the profit making participants on a day to day basis (daily basis).
Options Strike price or Exercise price is the price at which the underlying asset can be purchased or sold by the options holder. There are 3 types of Options Strike Prices – In the Money Options (ITM), At the Money Options (ATM), Out of the Money Options (OTM).
Forwards , Futures , Options and Swaps are the various types of Derivatives in India.
The National Stock Exchange of India (NSE) started trading in Derivatives in Index futures in June 2000 and started trading in Index options in June 2001. Later trading in Stock Options started in July 2001 and trading in Stock Futures started in November 2001.
The Risks in Derivatives market are Price Risk, Counter party Risk (In case of Futures & Options counter party risk is guaranteed by Clearing Corporation of India), Liquidity Risk, Operational Risk, Legal or Regulatory Risk.
The Securities Exchange Board of India (SEBI) is the Regulator of the Derivatives market in India.
The players in the Derivatives market are Hedgers, Arbitrageurs and Traders (Speculators).
Futures & Options contracts expire on the last Thursday of every month. This is the last trading day of the futures & options contract. If the last Thursday of a month is a holiday then the futures contract will expire on the previous trading day.
A Derivative is a contract or a product whose value is obtained or derived from the value of an underlying asset. Examples of Derivatives are Equity Derivatives – Futures & Options, Commodity Derivatives – Crude Oil, Natural Gas, Metals – Copper, Lead, Zinc, Gold, Silver, Agri Commodities – Sugar, Wheat, Pulses, Currency Derivatives
To know about our Online Courses go to Stock Market Courses
Author : Dr Savita Satav
A Model Risk Disclosure Document is given by the broker to every client at the time of signing of an agreement while opening an account. This document must be carefully read and understood before trading in Derivatives.
Disclaimer: the above information is for educational & informational purpose only. It is not an advice to Buy or Sell Financial Securities.