Derivatives/Future and Options

The derivative market is very lucrative, allowing investors to make profits (or lose money) by paying a minimal sum of money as a margin. In the last few years, it has become apparent that the Future & Options segment has become a popular option to trade in the financial markets. Futures contracts can be purchased for Equities, Indices, Currency, and Commodities. RKFS, through its status as a trading and Clearing Member of the NSE F&O Segment and BSE Derivatives Segment, provides you with access to the thrilling world of derivative markets.

What are derivatives? What are Future and Options?

The derivatives market is where financial contracts like futures, options, advances, and swaps are exchanged.

I am Interested

A mind-boggling market is a subset of the securities exchange, commodity market, currency market, and others relying upon the fundamental asset that is a piece of the subordinate agreement. In investing, "Derivatives" is the name given to a contract determined by analyzing one or more of the underlying assets. The asset that is the basis for the derivative could be a stock, currency or commodity, or security (that is, security with interest). Sometimes, Derivatives can also be utilized for trading in certain areas like Treasury bills, foreign exchange, equity and electricity temperatures, weather etc. For instance, Derivatives for the energy market are referred to as Energy Derivatives.

What are derivatives?

Under the Securities Contract (Regulation) Act 1956, the term "derivative" comprises: A security derived from a debt instrument, shares, loans, secured or unsecured risk instrument, contract for difference or another type of security. A contract that gets its value from prices or index of underlying securities prices.

Different types of derivatives contracts:

Over time the kinds of derivatives contracts have changed. The four main available kinds are contracts, futures, options, and forwards and swaps.

Futures: Futures contracts are an exclusive type of forward contract that is the agreement by two parties to purchase and sell an item for the price of an upcoming date shortly.

Options: Options contracts are agreements between an options maker and a buyer. They grant the buyer the ability to purchase or sell the underlying asset, such as assets, derivatives, etc., at a specified price at a specific date. In this case, the buyer pays the premium for the option in cash to an options writer i.e.the person who sells the option. The option writer must comply if the buyer chooses to exercise the rights granted by the option contract.

Forwards: It is a contract that is customized with two parties in which the settlement takes place at a specified date, shortly at the price that was agreed on at the date of the contract

Swaps: Swaps are private contracts between two parties in which the exchange of cashflows from the financial instruments that both parties own occurs.

The two most utilized swaps are: Interest Rate Swaps This is the process of the exchange of cash flows that carry interest in the same currency.
Currency Swaps This permits swapping cash flows to pay principal and interest in various currencies.

Equity Derivatives: Equity is the portion of a company you as an investor, and this equity is what gives you to gain from the profits of the business. The name equity securities also refer to your shares.

However, on the other hand, a derivative is a type of security agreement signed by two or more parties to purchase and sell securities soon. Investors earn profits by pre-planning or forecasting the potential value of the asset.
Another investing which is a combination of these two concepts is Equity Derivatives.

How do Equity derivatives work?

The equity shares you hold may be the underlying asset that gives their value to financial instruments known as derivatives. Assets could also comprise bonds or commodities as well as securities. The worth of these financial assets is based on fluctuation in the share market, as well as the performance of companies.

Stock options are equity derivatives. The reason is that the price fluctuations of the stock in question determine its value or price. Investors utilize equity derivatives to protect themselves from the risk that comes with taking short and long-term positions or speculate on the fluctuation in the price of the base asset.

The definition of equity derivatives would be their financial instruments. Their value derives from the fluctuation in the asset price that is the base for the derivative, like shares of equity or stocks on secondary markets. Thus, their value derives from the equity in the base.

If you invest in equity, you are the owner of the equity portion. When you own the investment comes risk, and these investments yield dividends over the long run. For quick-term gains, equity derivatives are a better option.

If you purchase equity derivatives, you're just buying an investment in the base asset without taking ownership of any business shares. The chance of sustaining an investment loss is greatly reduced.

The process of dealing with equity derivatives is a challenging task. It requires a thorough study of the financial situation of a business and forecasts. Suppose you need more experience or education to invest in equity derivatives. In that case, we recommend you utilize the services of financial professionals such as RKFS, who will guide you through the process smoothly.



Do I need to provide financial proof to open a derivative account?

Yes. To open any derivative segment account, you must provide financial proof.

What is derivative trading?

The process of selling and buying derivative products is called derivative trading. Derivatives can be used to speculate about the future price movements of assets such as stocks or commodities without purchasing the asset. You can trade in two main derivatives on the stock market: options and futures.

Where can I trade financial derivatives?

Financial derivatives such as futures or options can be traded on stock exchanges like Bombay Stock Exchange or National Stock Exchange. You can also trade derivatives on commodity markets like the Multi Commodity Exchange and National Commodity and Derivatives Exchange.

Intraday trading: What are the timings?

Intraday trading is when you sell and buy shares of the same company in the same trading session. Intraday trading begins at 9.15AM and closes at 3.30PM. However, intraday trading can begin at 9.15AM and close at 3.30PM depending on the stockbroker.
Futures and options trading involves the purchase and sale of futures and options contracts. Future derivatives and options trading are extremely risky and should only be done by experienced traders.

Call Now
Call Now
× Let's Chat