Derivatives

As a trader, you would choose to purchase an index call option if you expect the price movement of the index to rise in the near future, rather than that of a particular share. Indices on which you can trade include the CNX Nifty 50, CNX IT and Bank Nifty on the NSE and the 30-share Sensex on the BSE.

To buy and sell futures contracts, one needs to open a trading account with a broker, deposit margin money, select a futures contract, place an order specifying contract details and quantity, monitor market movements, and exit the contract by offsetting the position before the expiration date or settling it in cash. Read the article to know more.

The National Stock Exchange of India (NSE) has announced a significant change in the expiry day of index and stock derivatives contracts. This revision, set to take effect from April 04, 2025, aims to streamline trading operations and enhance market efficiency.

Options trading can be complex, with many interplaying factors impacting pricing and profitability. Two of the most important concepts for put option traders to understand are time decay and charm decay.

The Bermuda option is a useful tool for new traders to trade binary options. The term “Digital option" is also used to refer to the Bermuda option. Experienced traders rarely use the Bermuda option because it's only for beginners. This detailed guide will explore the definition and meaning of the Bermuda option more.

Swaps are derivatives contracts where two parties swap cash flow or liabilities from one financial instrument to another. Even though the instrument can be nearly anything, most swaps involve cash flows based on a notional principal amount, such as a loan or bond. Read on to learn and understand the definition and meaning of swap derivatives.

Trading in options differs significantly from trading in equities. A key distinction between equities and options lies in ownership – equities provide a fractional ownership in the company, whereas options are contractual agreements granting the right to buy or sell a stock at a specific price (Strike Price) on a designated date (Expiry Date). In the case of a call option purchase, you possess the right (but not the obligation) to acquire a stock/index at the strike price before the option expires. Conversely, with a put option purchase, you have the right (but not the obligation) to sell a stock/index at the strike price before the expiration date.

The futures pricing formula is a mathematical equation that can be used to determine the theoretical fair value of a futures contract.

Margin money is the amount of money that an investor must deposit with a broker in order to purchase securities on margin. Margin trading allows investors to purchase more securities than they could otherwise afford with their own cash.

Equity and derivatives are two different types of financial instruments. Equity represents ownership in a company, while derivatives are contracts that derive their value from an underlying asset, such as a stock, bond, or commodity.