Get Futures

I wld like to get answers more specific to trade in India. If possible pls give me few examples as I am totally new and wld like to trade in futures and options

First of all in India you will have to open an account with a broker like Geogit or JRG securities who has options trading division. Then probably they ask you to fill some forms and deposit some money with them. Probably some of them ask you to give a recommendation form your Bank manager regarding the soundness of your financial position with the Bank. Indian option tradig is non charecteristic of Amreician trading system in the sense you have many road blocks like premium fixed by the exchange on top of the price. This premium is determined by the standard deviation of the price movments of the stock in the pervious year. The trap here is if the standard deviation has varied much this year you have no escape route you will be forced to pay the premium plus the option price. If your calculation fails or if the premium is too high you can be wiped out.

The other hurdle is minimum fixed for trading. To my calculation if you don’t have atleast Rs.65000 available for each trade then you may not be able to participate. This happens due to the regulatory directive of fixing minimum number of contracts for each trade.
Once you are prepared to accept all this roadblocks then you are on your way to trade options in the Indian Market. Good luck. Usually the brokers arrange some seminars which you can attend or they will give you a lecture on how to play the options market. You can choose to attend this and gain more informaiton on this.

Do exchange traded futures and options have ISIN numbers?

Yes

OK…I spent more than 6 months reading on complex mathematical economical models, but because of that I totally lack the terminology behind the microecomics. One such thing is the futures/options hedging….

So, as far as I understand it – it sounds too good to be true, but do I miss something???
I understand it…like this example:

An investor buys 100,000 eur/usd units. The price is 1.4000.
However, the investor fears of lower price of 1.3900 and hence she puts call option on that price…or a future contract.
If the price reaches 1.3900 she(the investor) exercises the option and hence she is insured and doesn’t lose anything.
If the price goes up – she gains money.

Now, I read about delta hedging and this doesn’t sound that complex too, thuogh I need an hour or 2 to completely understand it.

I also see that you can get advantage from options/futures in many instruments. Such as:

Options,
CFD (illegal in USA)
Forex

But not commodities???

Pls. explain in 1-2 sentences your view…

Thanks alot in advance!

i don’t think you understand this at all. you probably need a simpler book.

"she puts call option" makes no sense at all. if you bought euros and feared a drop in value you might buy puts or you might sell euros in the futures market to hedge. you might hedge all of your euros or maybe only part of them or you might not want to hedge at all. there are many possibilities and some are complex. you need to understand basic hedging first.

I am new to future options trading and I was just wondering if future options are settled the same way as equity options at expiration. For example I sell 3 12,000 SPM8 Calls that expire in a month. Do the options expire worthless on expiration day as long as the future price is under 12,000?
Thank you.

I assume that you are talking about the 1200 call since the S&P 500 is a zero away from 12,000.

Index futures options are all "American-style". That is, you can exercise them on any day and be delivered the underlying index futures contract. So, yes, if the futures price is below the strike at maturity, you shouldn’t be exercised against and the option expires as worthless.

“A Star is Born” Personalized Baby Girl Blanket and Hat Set “A Star is Born” Personalized Baby Girl Blanket and Hat Set Your little sweetheart should be treated like the star she is and with the A Star is Born! snuggly soft baby girl blanket and hat set she can be lavished with the star treatment she deserves. An adorable corner logo on the pretty pink blanket features the cute sentiment A Star is Born! embroidered just above a big, bright yellow star. Just underneath the star you can have the blanket personalized with your little ones name. Your future celebrity will enjoy being wrapped up tight in the extra warm, super soft, ultra plush blanket crafted from polar fleece. This blanket, with matching personalized knitted hat, is the perfect way to bring home baby from the hospital, too. Mommy will love the super warm, high-quality fabric and baby will sleep softly in the cozy blanket while she dreams of her bright and shining future. The A Star is Born blanket and hat set is the perfect gift for a new baby girl; this is sure to be a gift that is used and appreciated on a daily basis as she begins her journey on the road to stardom. Details : Size: One size fits most. Materials: 100% Polar Fleece Embroidery Options : The “A Star is Born” Personalized Girl Boy Blanket & Hat Set may be embroidered with a baby name (max of 12 characters) in coordinating pink thread at No Additional Cost. Turnaround Time Usually 3-5 Business Days This Item Ships Via

(more…)

i asked a question about futures, options, and shorting earlier, and i just want some clarification.

with an option, you can buy or sell the stock, but if u dont you loose the money you payed when you signed the contract. With a future, you have to buy/sell the asset at a certain point, and loose/gain money depending on which direction the stock market went. Correct? but can u buy a future on an option, or is that the same thing as shorting? and can u buy an option on a future? or is that shorting also?

You have alot of it correct, but not 100!. An option is just that, you have an option to exercise the terms of the contract. In order to get that option, you have to pay for the contract. So a call option lets to buys some asset (stock for instance) at a set price within a certain time frame. A put option, lets you sell something at a set price within a certain time frame. Remember that you can also sell (also called write) an option, where you are obligated to deliver on the option. In the case of a call, you have to provide the stock if the buyer exercises his rights, while a writer of a put option is obligated to buy the stock. In return, you get the premium that is paid by the buyer. Writing options are fairly complicated, so make sure you know what you are doing before trying this. There is in theory unlimited loss potential when you write options, but only limited loss potential when you buy an option.

Futures are actual contracts for an asset. So in theory you must take deliver or provide the asset upon expiration. In practice, most options are settled before delivery with money that settles up the contract. For certain futures contracts, particularly financial, everything is settled up and there is no possibility for delivery. Again, this is very complicated, with a lot of leverage, and the potential to lose or make alot of money, so make sure you know what you are doing.

Lastly, there are options on futures, but no futures on options.

Ill try to explain with examples:

Options:
Lets say you bought 100 shares of XYZ at $10 each. You obviously hope for the price to rise. However, to hedge against too much loss (maybe you cant stomach loss greater that $2 per share), you can also buy a stock option to sell those 100 shares at $8. If stock price rises, you’re fine and make money. If it falls to below $8, lets say to $6, you can exercise your option and sell your shares at $8. In effect, you’ve limited your losses to a max of $2/share using options.

Similarly with futures and forward contracts:
You manufacture and sell machines for which you buy large quantitities of metal. You realize that in 6 months time, you’ll need 5 tons of metal for a large order. Since you dont want to buy it right now, but are afraid that metal prices may rise above todays rate, you can enter into a forward contract with a metal supplier fixing a metal price for a future transaction. If metal prices rise, you’re safe because you’ll only pay the contract rate.

Finally swaps (a little complicated here):
Lets say your business has issued (sold) a bond that requires it to pay a variable rate of interest every year (eg LIBOR + 80bp). You want to reduce your risk of paying too much interest if LIBOR rates rise so you enter into an agreement with another firm that states that you will pay them a fixed interest rate if they pay you LIBOR+80bp. In essence, they will now be financing your bond issue while you only have to pay a fixed rate = less risk.

Hope this helped

UK FINANCE LAW

thanks

There won’t be a short answer, so here goes!! (I don’t really know about futures though)

Derivatives and options are very similar items, and it’s probably best to consider them together.

An option is (as it suggests) the choice to sell something in the future at an agreed price. Typical example would be a farmer looking to sell his potatoes next year. He might agree a price with a local supermarket to take them all at a certain price. This would be his option, and generally the option allows you to choose to sell. If you are a buyer (i.e. the supermarket) then you have to buy. That’s just the way things work – I guess it wouldn’t work at all if you didn’t have to buy!!

Anyway, if the farmer then has a piece of paper that gives him the option to sell say 100,000 tonnes of potatoes at a set price, he could sell this piece of paper to another farmer. The value of this piece of paper is a derivative, as it’s value is derived from the price of something else (the potatoes).

Consider: if the price of potatoes is very low then the farmer would struggle to sell on the open market at a high price. If he has fixed his selling price then other people would be prepared to offer to buy "the right to sell at a certain price" so that they can sell their 100,00 tonnes of potatoes at a higher price.

Having heard the term "oil futures" I think futures are very similar to drivatives, as they give the right to buy or sell at a set price in the future too.

Credit default swaps sounds like swapping interest rates. Some companies find it beneficial to swap their loans with other companies where they want to change their terms but not suffer early repayment fees. E.g. one may want a fixed rate loan, but is paying a variable rate. If they can find a company with a fixed rate loan who wants a variable rate they could swap their loans.

Hope that helps and isn’t too complicated!!