Derivatives Products

Kinds of Derivatives products

Forwards       -           Customized O.T.C. contracts

Futures           -           Standardized exchange traded 

            Options           -           Calls and puts with right out no obligations.

            Warrants        -           9 months and over maturity & O.T.C. contracts

            Leaps              -           Long term equity anticipation securities with maturity over

                                    Three years.

Baskets           -           Index options

Swaps             -           Private agreements for swapping the interest related to cash

                                    Flow called interest rate swaps or swapping the different

                                    Currencies with principal and interest.

Swaptions       -           Swaptions are options to buy or sell swaps that become

Operative at the expiry of option

              Functions of Derivative Markets

Derivative market is controlled, organized, market therefore it caters following functions:

1)         Derivative help in discovery of future as well as current price.

2)         It helps in transferring the risk.

3)         It gives higher trading volume acting as a catalyst in the capital/entrepreneurial activity.

4)         It increases savings and investment in long run.

              Participants in Derivative Markets

A)        Hedgers        : Face the risks associated with the price of assets by reducing or

                                    Eliminating it by futures or options.

B)        Speculators   : Bet or speculate on future movement in the price of assets

                                    By forming bullish or bearish opinion.

C)        Arbitrageurs: Take advantages of discrepancy between prices in two

                                      different markets

DERIVATIVES

              Introduction & Brief History

Derivatives have come into existence around 300 years before in the world in the commodities. It initially emerged as a hedging devises against fluctuations in commodity prices between growers & users of commodity such as wheat and mill owners of breads. Financial derivatives have come into existence during 1970s and became immensely popular from 1990 onwards.

17^th century Europe – Agricultural product speculators used future/forward contracts. In India. Badla ie carry forward transaction was in operation which was discontinued in 1993.

In the year 1969 options were discontinued but in 1995, prohibition was withdrawn. In the year 1999, derivatives were brought under “Securities” and in between 2000 to 2001: the trading in futures and options on indexes and individual securities were started.

 

         Factors driving the growth of Derivatives

i)          There is tremendous growth in derivatives in the last 35 years for the following

            reasons.

i)                      increased volatility for super profits (and off course super loss)

ii)                    Interrogation at national and international levels.

iii)                  Improved communication in lesser cost.

iv)                  Sharp fall in costs of transaction.

v)                    Large varieties of derivatives

                 

About Me

Few words about me.

The period during 1991 was a historic period in the history of share market. Late Harshad Mehta had virtually taken the share market to every household. Then there was a serious debacle in the market during 1992.

I was a witness to that period. I was an investor and a trader at that time. On seeing the plight of common investors and traders I felt it necessary to educate the traders and investors about the basics of share market. Therefore, I started an institute of technical analysis, having its head office at Dombivli and branch at Dadar (Mumbai-India). Apart from me, there were only a couple more analysts who used to teach technical analysis.

I am a passionate hardcore teacher having a knack of teaching in a very simple method which helps students understand easily. My teaching includes coaching and live projects.

Many students have passed through my institute. Majority of them were broking firms, individual brokers,  managerial personnel of firms, and some pure investors and traders.

Today, some of my students have opened their own consulting firms, portfolio management firms and some are still individual traders with high degree of accuracy.