Download - Derivative in india final
![Page 1: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/1.jpg)
Professional Training Academy
DERIVATIVE IN INDIA
1
![Page 2: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/2.jpg)
Professional Training Academy
Increased volatility in asset prices
Integration of National &
International Market
Low Transaction Cost of Trading
Development of Risk Management
Tools
2
Why Derivatives in India
![Page 3: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/3.jpg)
Professional Training Academy
Origin
1.• First introduced in Chicago
Board of Trade in 1848 for forward contract in Commodities
2.• Derivative Introduce in
Indian Stock Exchanges in June 2000
3
![Page 4: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/4.jpg)
Professional Training Academy
Index FuturesIndex Options
Stock Futures Stock Options
4
Derivatives Trading on Exchanges
![Page 5: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/5.jpg)
Professional Training Academy
Business Growth of F&O Segment in India
5
![Page 6: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/6.jpg)
Professional Training Academy
Types of Market
Spot Market
Derivative Market
6
![Page 7: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/7.jpg)
Professional Training Academy 7
Spot Market
Assets Class Delivery
Equity Shares
Commodity Physical
Currency Physical
Immediate Delivery
Immediate Payment
![Page 8: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/8.jpg)
Professional Training Academy
Derivative Market
Forward Segment
Future Segment
Options Segment
8
![Page 9: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/9.jpg)
Professional Training Academy
Forwards
Contact Two Private Parties
Transaction at Expiry Date
(Forward Price)
Physical / Cash
Settlement
9
![Page 10: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/10.jpg)
Professional Training Academy
Participants in Forward Contract
Money
Buyer (Who takes a long position)
Seller (Who takes a
short position )
10
![Page 11: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/11.jpg)
Professional Training Academy
Future
Contract Between Two Parties
Traded in Recognized Stock Exchange
Future Date
Price Agreed Upon Today
11
![Page 12: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/12.jpg)
Professional Training Academy
Participants in Futures Contract
Future Buyer Future Seller
Payment
Sell Contract
Buy Contract
Payment
Clearing Corporation
12
![Page 13: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/13.jpg)
Professional Training Academy
Positions in a Futures Contract
• When a person buy a futures contract Long
• When a person sell a futures contract Short
13
![Page 14: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/14.jpg)
Professional Training Academy
Difference Between Future & Forward
Forward Future
Nature of Contracts Customized Standardized
Counterparty Any Party Clearing Corporation
Credit Risk Exist No Risk
Liquidity Very Low Very High
Margins Not Required Received / Paid on Daily Basis
Valuation Not Done Daily Basis
Delivery Physical / Cash No Delivery 14
![Page 15: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/15.jpg)
Professional Training Academy
A contract between two parties
Where Buyer of the option has the right and not obligation to fulfill the contract
Seller is under obligation to fulfill the Contract
Options
15
![Page 16: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/16.jpg)
Professional Training Academy
Options
Call Option
Put Option
16
Types of Options
![Page 17: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/17.jpg)
Professional Training Academy
Right to Buy
Call Options
17
![Page 18: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/18.jpg)
Professional Training Academy
Right to Sell
Put Options
18
![Page 19: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/19.jpg)
Professional Training Academy
Underlying Price Strike Price
Time to Expiration Risk Free Rate
Volatility
19
Factors impacting Option Prices
![Page 20: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/20.jpg)
Professional Training Academy
Derivative Terminology
Lot Size Expiry Date
Contract Size
Spot Price Strike Price
Initial Margin
Mark to Market Margin
Option Premium
Closing Price
20
![Page 21: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/21.jpg)
Professional Training Academy
Contact Specification
S. no Terminology Remark Index Future(Nifty)
Index Option (Nifty)
1 Lot Size Minimum Quantity traded in a lot decided by the exchanges
50 50
2 Spot Price Price prevailing in delivery market
5500 5500
3 Future/Strike Price
Price Prevailing in future market/price for which call or put option exercise
5550 5550
4 Option Premium Amount decided by the exchange on the basis of strike price and spot price
100
5 Expiry Date Last Thursday of a month Last Thursday Last Thursday
6 Contract Next Three Month Feb, March, April Feb, March, April21
![Page 22: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/22.jpg)
Professional Training Academy
Contact SpecificationS. no Terminology Remark Index Future
(Nifty)Index Option
(Nifty)
7 Initial Margin Minimum amount required to make position (Suppose 25% of contract Size)
Rs 69,375(25% of 2,77,500)
Option Premium * Lot Size
Rs 5,000(100*50)
8 Closing Price Closing Price at the end of day
5500
9 Mark to MarketMargin
Difference between Trade price & closing Price (Daily Settled )MTM=(Trade price – closing price)* Lot Size
Pay Rs 2,500
(5550-5500)*50
No MTM as we pay whole amount
Our Expectation is that index rise
22
![Page 23: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/23.jpg)
Professional Training Academy
Participant
Hedgers• Insuring an investment
against risk.
Speculators • Who bets on derivatives
markets
Arbitrageurs • Attempt to profit from
pricing inefficiencies
23
![Page 24: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/24.jpg)
Professional Training Academy 24
Play Grounds
![Page 25: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/25.jpg)
Professional Training Academy 25
![Page 26: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/26.jpg)
Professional Training Academy
www.nseindia.com
www.bseindia.com
26
Important Website
![Page 27: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/27.jpg)
Professional Training Academy
27
![Page 28: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/28.jpg)
Professional Training Academy
28
![Page 29: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/29.jpg)
Professional Training Academy
Particulars Income /Loss from Derivatives
Head “Income from Business & Profession’
Taxed According to the tax slab
Loss from Derivatives Adjusted under all Five Head Profit & Carry Forward to Next Year
29
Taxation
![Page 30: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/30.jpg)
Professional Training Academy
Sr. Taxes Rates Futures Options
Buy 1 Lot of Nifty at 6000 ,Contract Size ( 50shares* 6000) / Buy 6000 call option at 60 Rs premium(50shares*60)
3,00,000 3,000
1Brokerage 0.03 % On Contract
Size/2.5% on Option Premium (Both Side)
90 Rs (0.03% on 3,00,000) 75 Rs (2.5% on 3,000)
2Service Tax 10.36% on Brokerage
Amount(Both Side)
9.32 (10.36% on 90 Rs)
7.77(10.36% on 75 Rs)
3Securities Transaction Tax(STT)
0.017% on Contract Size (Only on Selling Side)
25.50(0.0085% on 3,00,000 Rs)
2.55(0.0085% on 3000Rs)
4Stamp Duty 0.004% on Contract
Size(Both Side)12(0.004% on 3,00,000 Rs) 1.2(0.004% *3,000Rs)
5 Education Cess 2% on Tax Amount 0.93(2% on 9.32+25.50+12) 0.23(2% * 7.77+2.55 +1.2)
6 Higher Edu Cess 1% on Education Cess 0.014 (1% on 0.93) 0.0028 (1% on 0.23)
Total Cost 137.76 86.75
30
Cost of Trading in Derivative
![Page 31: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/31.jpg)
Professional Training Academy
How does One Make Money in A Futures Contract?
• Trade according to the trends• Complete knowledge of Derivatives• Discipline Approach• Keep Stop loss on every trade
31
![Page 32: Derivative in india final](https://reader038.vdocument.in/reader038/viewer/2022110318/55d53c8bbb61eb39678b45d6/html5/thumbnails/32.jpg)
Professional Training Academy 32
Thank You