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Equity Derivatives

A derivative is a security with a price that is dependent upon or derived from one or more underlyingassets.The most common underlying assets include stocks, bonds, commodities, currencies, interestrates and market indexes. Derivatives either be traded over-the- counter (OTC) or on an exchange.There are several different types of equity derivative; including options, warrants, futures, forwards,convertible bonds, and swaps. Each has its advantages, and each is often used in a particular situation.

Options

An option is a contract that gives an investor the right to trade shares of stock at a particular price (strike price).

Options can be used by investors who already own shares of stock (referred to as a covered option),but can also be used by investors who do not currently own stock. The option contract specifies whether the option is a call or put, the number of shares in question, the strike price, the contract’s expiration date, and any terms related to settling a closed position. The price of the option, referred to as the premium, varies according to the expiration date, the volatility of the stock and the strike price.This type of equity derivative can be used to hedge risk.

Futures

A future is a contract between two parties in which one party (the buyer) agrees to buy the underlying security at a future date and price. While similar to an option, purchasing a futures contract creates an obligation instead of a right. In other words, the buyer must purchase the stock when the futures contact reaches the agreed upon date. The buyer does not have the option of letting the contract expire without making the purchase. The seller also must sell the stock. Futures are traded on an exchange.

Advantage of trading in Equity Derivative

  • Since all transactions related to derivatives take place in future it provides individuals with better opportunities because an individual who want to short some stock for long time can do it only in futures or options hence the biggest benefit of this is that it gives numerous options to an investor or trader to execute all sorts of strategies.
  • It is a great risk management tool and if applied judiciously it can produce good results and benefit its user
  • In derivatives market people can transact huge transactions with small amounts and therefore it gives the benefit of leverage and hence even people who have less amount of money can enter into this market.
  • Intraday traders get the benefit of liquidity as these contracts are very liquid and also the costs such as basis expense, brokerage are less as compared to cash market.

Benefits of Trading through Mandot Securities in Equity Derivative Market

  • Trading with us is safe and simple as a cake walk.
  • We allow you to access ledger balances and account information through internet.
  • Profitable Monthly Option Trading Strategy for Expiry
  • Latest news feeds affecting the equity markets are made available
  • Transparency of work.
  • 24*7 back office support
  • Presence of help desk for all the queries regarding Equity Market

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