Derivatives are products, whose values are gained from one or more primary variables, named bases that include- underlying assets, index or reference rate, all these are worked on a contractual manner.
Derivatives are products,
whose values are gained from one or more primary variables, named bases that include- underlying assets, index or reference rate, all these are worked on a contractual manner.
The underlying assets largely include the following:
. Forex
. Equity
. Commodity or other assets.
To understand derivative’s Trading India better, here is an example-
Rice farmers may desire to sell their crop at a future date, to eradicate the gamble of change in price by that particular date.
In this case, the price of the derivative is driven by the spot price of rice which is “underlying”.
Financial derivatives have grown terriffically in the recent year,, expert’s say the reason is- the variety of instruments that are available, their complexities and turnover.
If considering equity derivatives, the world over futures and options have gained more popularity, in comparison to that of any other individual stock.
High correlation between the popular indexes, that have different indexes and ease of use, has made not only big institutional investors to participate and invest in derivatives, but also has encouraged small investors.
Below mentioned are the factors behind the growth of
Derivatives Trading India :
Rise in integration of national financial markets with that of international markets.
. Enhancement in active communication facilities and sharp decline in their cost.
. Risk management instruments are more sophisticated thus help agents in getting proper risk management strategies.
. Innovation in derivative markets, which has helped to merge risks and returns.
Derivatives Trading India products include the following:
Forward: It is a contract between two individuals where resolutions take place on a specific date in future at today’s pr-arranged price.
Futures: It is an agreement between two parties to buy and sell an asset in the potential at a certain time and sure price.
Options: It is a financial instrument that gives its owner the right, but not the obligation, to engage in some particular transaction on an asset. Options are of two types, alternative to buy something is called a call; an alternative to sell is called a put.
Swaps: They are the private agreements between two parties to exchange cash flows in the future, which are based on the pre- arranged formula.
Among these, Futures and options are the most common and beneficial derivatives used by many investors. For those investors, who are worried about in good returns through derivatives, should get aid from an experienced investing firm.
