Derivatives

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.

Call and put options are two of the most common types of options contracts. A call option gives the holder the right, but not the obligation, to buy a specified asset at a specified price on or before a specified date. A put option gives the holder the right, but not the obligation, to sell a specified asset at a specified price on or before a specified date. Importantly, these rights do not require buying or selling the underlying asset at a pre-decided price within a specific timeframe. Read on to learn more about them.

You may have noticed that at the end of every month, the stock market becomes more volatile. News reports often say this is because of 'derivative expiry'. It sounds vague and unclear as to how the derivatives market affects stock prices and indices.