Professional Documents
Culture Documents
Religare Securities: "Trading in Derivative Market"
Religare Securities: "Trading in Derivative Market"
ON
By
SUBHASH KUMAR ANURAGI
Roll no – D–50
For
RELIGARE SECURITIES
Of
PANKAJ PANDEY
I was in regular contact with the nominated guide and contacted from 2pm to5pm
for discussing the project.
Signature of Faculty
Name
The Present business scenario is totally consumer oriented. Every company faces
stiff competition from its competitors, each provides the best product at
competitive rates. As a result customers have lot of choices to get the best with the
least cost. To face this competition, it is very important to know customer’s
behavior, there needs, preference and also the motivation factors.
1 ACKNOWLEDGEMENT 6
2 OBJECTIVES 8
3 INDUSTRY PROFILE 10
7 RESEARCH METHODOLOGY 27
TABLE OF CONTENTS
ACKNOWLEDGEMENT
SUBHASH KR ANURAGI
PGDBM STUDENT
of NDIM, NEW DELHI
The Research project has been carried out to aid theReligare Securities in offering
services that the customerneeds, to improve on some of the existing services of the
firm, to study the customer behaviour towards theirbrokerage firms and for helping
Religare to increase its customer base.
OBJECTIVE OF PROJECT:
PRIMARY OBJECTIVE:
2. The other objective of doing this project is to understand the working and
dynamics of equity market.
SECONDARY OBJECTIVE:
This is to certify that Subhash Kumar Anuragi, a student of New Delhi Institution
of Management, New Delhi, undertook a project on “Trading in derivative market”
at Religare Securities Limited From 10th may 2010 to 30th June 2010. Ms
Monika Nijhawan has successfully completed the project under the guidance of
Mr. Pankaj Pandey, BM, Religare . He is a sincere and hard-working student with
pleasant manners.
(Name)
(Designation)
(Company Name)
INTRODUCTION
The first leaf of the clover represents Hope. The aspirations to succeed. The
dream of becoming. Of new possibilities. It is the beginning of every step and the
foundation on which a person reaches for the stars.
The second leaf of the clover represents Trust. The ability to place one’s own
faith in another. To have a relationship as partners in a team. To accomplish a
given goal with the balance that brings satisfaction to all, not in the binding, but in
the bond that is built.
The third leaf of the clover represents Care. The secret ingredient that is the
cement in every relationship. The truth of feeling that underlines sincerity and the
triumph of diligence in every aspect. From it springs true warmth of service and
the ability to adapt to evolving environments with consideration to all.
Hope. Trust. Care. Good Fortune. All elements perfectly combine in the
emblematic and rare, four-leaf clover to visually symbolize the values that bind
together and form the core of the Religare vision.
A new phase of securities market regulation began with the setting up of Securities
and Exchange Board of India in 1992. Over the period, several changes in the way
securities markets are organized and conducted in India. Major reforms that were
brought in the Indian securities markets since 1992 are summarized below:
The number of companies listed on the Bombay Stock Exchange has registered a
phenomenal increase from 992 in the year 1980 to about 4800 companies by the
end of July 2005 and their combined market capitalization rose from Rs. 5,421
crores to around Rs. 18, 00,000crores at end of July 2005.
Coverage: The equity shares of 200 selected companies from the specified and
non-specified lists of this Exchange have been considered for inclusion in the
sample for `BSE-200'. The selection of companies has primarily been done on the
basis of current market capitalization of the listed scripts on the exchange. Besides
market capitalization, the market activity of the companies as reflected by the
volumes of turnover and certain fundamental factors were considered for the final
selection of the 200 companies.
Choice of Base Year: The financial year 1989-90 has been chosen as the base year
for the price stability exhibited during that year and due to its proximity to the
current period.
250,000.00
200,000.00
150,000.00
Rs. in Billions
100,000.00
50,000.00
0.00
1
The above graph shows the turnover in BSE from the year 1996-97 to the year
2007-08. The graph easily shows that the turnover of BSE has increased in leaps
and bounds over the given period.
Against nearly 1,400 companies listed on the NSE, the BSE has nearly 4,800 listed
companies. Despite such a huge number of listed companies, the total market
capitalization of BSE is around Rs 20 lakh crore while on the other hand NSE has
a total market capitalization of Rs 19.7 lakh crore.
The most tracked index on NSE, CNX Nifty also has more number of stocks than
the BSE Sensex. Nifty represents 50 stocks while the Sensex represents only 30
stocks. The presence of more stocks on Nifty gives a better valuation than Sensex.
4,000,000
3,500,000
3,000,000
2,500,000
Rs. in Crore 2,000,000
1,500,000
1,000,000
500,000
0
1
The above graph depicts the turnover of BSE from 1994-05 to 2007-08,the graph
shows from a mare turnover of below 500,000 crore in the year 1994-05 how it has
increased to more than 3,500,000 crore in the year 2007-08, constant increase in
turnover itself proves the growth and attractiveness of this market.
INTRODUCTION TO DERIVATIVES
The emergence of the market for derivative products, most notably forwards,
Origin of derivatives
While trading in derivatives products has grown tremendously in recent times, the
earliest evidence of these types of instruments can be traced back to ancient
Greece. Even though derivatives have been in existence in some form or the other
since ancient times, the advent of modern day derivatives contracts is attributed to
farmers’ need to protect themselves against a decline in crop prices due to various
economic and environmental factors. Thus, derivativescontracts initially developed
in commodities. The first “futures” contracts can be traced to theYodoya rice
market in Osaka, Japan around 1650. The farmers were afraid of rice prices falling
in the future at the time of harvesting. To lock in a price (that is, to sell the rice at a
predetermined fixed price in the future), the farmers entered into contracts with the
buyers.These were evidently standardized contracts, much like today’s futures
contracts.
In 1848, the Chicago Board of Trade (CBOT) was established to facilitate trading
of forwardcontracts on various commodities. From then on, futures contracts on
commodities haveremained more or less in the same form, as we know them today.
Derivative is a product whose value is derived from the value of one or more
basic variables, called bases (underlying asset, index, or reference rate), in a
contractual manner. The underlying asset can be equity, forex, commodity or
any other asset. For example, wheat farmers may wish to sell their harvest at
a future date to eliminate the risk of a change in prices by that date. Such a
transaction is an example of a derivative. The price of this derivative is driven
by the spot price of wheat which is the "underlying".
asset at a certain time in the future at a certain price. Futures contracts are special
types of forward contracts in the sense that the former are standardized
exchange-traded contracts.
Options are instruments whereby the right is given by the option seller to the
option buyer to buy or sell a specific asset at a specific price on or before a specific
date.
· Option Seller/ Option Writer- In any contract there are two parties. In case of
an option there is a buyer to the
contract and also a seller. The seller of the contract is called the options writer. He
receives premium through the clearing house against which he is obliged to buy or
sell the underlying if the buyer of the contract so desires.
· Option Buyer - One who buys the option. He has the right to exercise the option
but not obligation & he has to pay a premium for having such right to be exercised.
· Call Option - A call option gives the buyer a right to buy the underlying that is
the index or stock at the specified price on or before the expiry date.
· Put Option - A put option on the other hand gives the right to sell at the specified
price on or before expiry
Swaps: Swaps are private agreements between two parties to exchange cash flows
in the future according to a prearranged formula. They can be regarded as
portfolios of forward contracts.
· Interest rate swaps: These entail swapping only the interest related cash
Swaptions: Swaptions are options to buy or sell a swap that will become
Operative at the expiry of the options. Thus a swaption is an option on a forward
Swap. Rather than have calls and puts, the swaptions market has receiver
swaptions and payer swaptions. A receiver swaption is an option to receive fixed
and pay floating. A payer swaption is an option to pay fixed and receive floating.
Based on the applications that derivatives are put to, these investors can be broadly
classified into three groups:
· Hedgers
· Speculators
· Arbitrageurs
These investors have a position (i.e., have bought stocks) in the underlying market
but are worried about a potential loss arising out of a change in the asset price in
the future. Hedgers participate in the derivatives market to lock the prices at which
they will be able to transact in the future. Thus, they try to avoid price risk through
holding a position in the derivatives market. Different hedgers take different
positions in the derivatives market based on their exposure in the underlying
market. A hedger normally takes an opposite position in the derivatives market to
what he has in the underlying market. Hedging in futures market can be done
through two positions, viz. short hedge and long hedge.
Speculators
A Speculator is one who bets on the derivatives market based on his views on the
potential movement of the underlying stock price. Speculators take large,
calculated risks as they trade based on anticipated future price movements. They
hope to make quick, large gains; but may not always be successful. They normally
have shorter holding time for their positions as compared to hedgers. If the price of
the underlying moves as per their expectation they can make large profits.
However, if the price moves in the opposite direction of their assessment,
the losses can also be enormous.
Arbitrageurs
.RESEARCH METHODOLOGY
The project study has been conducted by using both primary data as well as
secondary data. The major part was by collecting primary data through directly
calling up people From the database provided by the company.A pre determined
set of question were asked to know their preferences.
Most of the organization and individuals face financial risk. Changes in the stock
market prices, interest rates and exchange rates can have great significance.
Adverse changes may even threaten the survival of otherwise successful
businesses. It is therefore not surprising that financial instruments for the
management of such risk have developed. These instruments are
known as financial derivatives.By providing commitments to prices or rates for the
future dates or by giving protection against adverse movements, financial
derivatives can be used to reduce the extent of financial risk. Conversely they also
provide profit opportunities for those prepared to accept risk. Indeed, at least to
extent, they involve the transfer of risk from those
who wish to who willing to except it.
Derivatives have widely been used as they facilitate hedging, that enable fund
managers of an underlying assets portfolio to transfer some parts of the risk of
price changes to others who are willing to bear such risk. option are the specific
derivative instruments that give their owner the right to buy(call option holder)or
to sell(put option holder) a specific number of shares (assets)at a specified
prices(exercise prices)of a given underlying asset at or before a
specifieddate(expiration date).
Objectives:
NEW DELHI INSTITUTION OF MANAGEMENTPage 28
The basic objective of my study on DERIVATIVE is mainly as under-
RESEARCH DESIGN
Defining the population: The population taken for the research consists of
investors or prospective clients of only delhi & NCR region (both retail &
institutional)
Defining the sample: A random sample has been taken for the purpose of
extensive market survey.A structured set of question has been prepared & asked to
people by directly calling them & their feedback was analyzed for precise finding.
Size & type of samples : A random sample of size 100 people was taken for
surveying. of sales operations
.
Method to be used : A frequency count has been done for different
parameters/questions & the most important factors have suggested to the company
for betterment
Objectives of a questionnaire
1. It must translate the information needed into a set of specific questions that the
respondents can and will answer
2. It must uplift, motivate and encourage the respondent to become involved in the
interview, to cooperate, and to complete the interview. Incomplete interviews have
limited usefulness at best.
It was also important as researchers to respect the samples time and energy
hence the questionnaire was designed in such a way, that its administration
would not exceed 4-5 minutes. These questionnaires were personal administered.
Risk management
The most important purpose of the derivatives market is risk management. Risk
management for an investor comprises of the following three processes:
Identifying the desired level of risk that the investor is willing to take on his
investments;
Identifying and measuring the actual level of risk that the investor is carrying;
Market efficiency
Efficient markets are fair and competitive and do not allow an investor to make
risk free profits. Derivatives assist in improving the efficiency of the markets, by
providing a self-correcting mechanism. Arbitrageurs are one section of market
participants who trade whenever there is an opportunity to make risk free profits
till the opportunity ceases to exist. Risk free profits are not easy to make in more
efficient markets. When trading occurs, there is a possibility that some amount of
mispricing might occur in the markets. The arbitrageurs step in to take advantage
of this mispricing by buying from the cheaper market and selling in the higher
market. Their actions quickly narrow the prices and thereby reducing the
inefficiencies
Second, the prices of the futures contracts serve as prices that can be used to
get a sense of the market expectation of future prices. For example, say there is a
company that produces sugar and expects that the production of sugar will take two
months from today. As sugar prices fluctuate daily, the company does not know if
after two months the price of sugar will be higher or lower than it is today. How
does it predict where the price of sugar will be in future? It can do this by
monitoring prices of derivatives contract on sugar (say a Sugar Forward contract).
If the forward price of sugar is trading higher than the spot price that means that
the market is expecting the sugar spot price to go up in future. If there were no
derivatives price, it would have to wait for two months before knowing the market
price of sugar on that day. Based on derivatives price the management of the sugar
company can make strategic and tactical decisions of how much sugar to produce
and when.
Over the last three decades, the derivatives market has seen a phenomenal growth.
A large variety of derivative contracts have been launched at exchanges across the
world. Some of the factors driving the growth of financial derivatives are:
DERIVATIVE PRODUCTS
Derivative contracts have several variants. The most common variants are
forwards, futures, options and swaps. We take a brief look at various derivatives
contracts that have come to be used.
Options: Options are of two types - calls and puts. Calls give the buyer the right
but not the obligation to buy a given quantity of the underlying asset, at a given
price on or before a given future date. Puts give the buyer the right, but not the
obligation to sell a given quantity of the underlying asset at a given price on or
before a given dates.
Warrants: Options generally have lives of upto one year, the majority of options
traded on options exchanges having a maximum maturity of nine months. Longer-
dated options are called warrants and are generally traded over-the-counter.
Interest rate swaps: These entail swapping only the interest related cash
flows between the parties in the same currency.
Currency swaps: These entail swapping both principal and interest between
the parties, with the cash flows in one direction being in a different currency than
those in the opposite direction
FORWARD CONTRACTS
• If the party wishes to reverse the contract, it has to compulsorily go to the same
counter-party, which often results in high prices being charged. However forward
contracts in certain markets have become very standardized, as in the case of
foreign exchange, thereby reducing transaction costs and increasing transactions
volume.
INTRODUCTION TO FUTURES
Futures markets were designed to solve the problems that exist in forward markets.
A futures contract is an agreement between two parties to buy or sell an asset at a
certain time in the future at a certain price. But unlike forward contracts, the
futures contracts are standardized and exchange traded. To facilitate liquidity in the
futures contracts, the exchange specifies certain standard features of the contract. It
is a standardized contract with standard underlying instrument, a standard quantity
and quality of the underlying instrument that can be delivered, (or which can be
used for reference purposes in settlement) and a standard timing of such settlement.
A futures contract may be offset prior to maturity by entering into an equal and
opposite transaction. More than 99% of futures transactions are offset this way.
Forward contracts are often confused with futures contracts. The confusion is
primarily because both serve essentially the same economic functions of allocating
risk in the presence of future price uncertainty. However futures are a significant
improvement over the forward contracts as they eliminate counterparty risk and
offer more liquidity.
FUTURES TERMINOLOGY
Spot price: The price at which an asset trades in the spot market.
Futures price: The price at which the futures contract trades in the
futures market.
Contract cycle: The period over which a contract trades. The index futures
contracts on the NSE have one- month, two-months and threemonths expiry cycles
which expire on the last Thursday of the month. Thus a January expiration contract
expires on the last Thursday of January and a February expiration contract ceases
trading on the last Thursday of February. On the Friday following the last
Thursday, a new contract having a three- month expiry is introduced for trading.
Expiry date: It is the date specified in the futures contract. This is the last day
on which the contract will be traded, at the end of which it will cease to exist.
Cost of carry: The relationship between futures prices and spot prices can be
summarized in terms of what is known as the cost of carry. This measures the
storage cost plus the interest that is paid to finance the asset less the income earned
on the asset.
Initial margin: The amount that must be deposited in the margin account
at the time a futures contract is first entered into is known as initial margin.
Marking-to-market: In the futures market, at the end of each trading day, the
margin account is adjusted to reflect the investor's gain or loss depending upon the
futures closing price. This is called marking-to-market.
Maintenance margin: This is somewhat lower than the initial margin. This is
set to ensure that the balance in the margin account never becomes negative. If the
balance in the margin account falls below the maintenance margin, the investor
receives a margin call and is expected to top up the margin account to the initial
margin level before trading commences on the next day.
In this section, we look at the next derivative product to be traded on the NSE,
namely options. Options are fundamentally different from forward and futures
contracts. An option gives the holder of the option the right to do something. The
holder does not have to exercise this right. In contrast, in a forward or futures
contract, the two parties have committed themselves to doing something. Whereas
it costs nothing (except margin requirements) to enter into a futures contract, the
purchase of an option requires an up-front payment.
Like forwards and futures, options are derivative instruments that provide
the opportunity to buy or sell an underlying asset on a future date.
An option is a derivative contract between a buyer and a seller, where one party
(say First Party) gives to the other (say Second Party) the right, but not the
obligation, to buy from (or sell to) the First Party the underlying asset on or before
a specific day at an agreed-upon price. In return for granting the option, the party
granting the option collects a payment from the other party. This payment collected
is called the “premium” or price of the option. The right to buy or sell is held by
the “option buyer” (also called the option holder); the party granting the right is t
he “option seller” or “option writer”. Unlike forwards and futures contracts,
options require a cash payment (called the premium) upfront from the option buyer
to the option seller. This payment is called option premium or option price.
Options can be traded either on the stock exchange or in over the counter (OTC)
markets. Options traded on the exchanges are backed by the Clearing Corporation
thereby minimizing the risk arising due to
There are two types of options—call options and put options—which are
explained below.
Call option
A call option is an option granting the right to the buyer of the option to buy the
underlying asset on a specific day at an agreed upon price, but not the obligation to
do so. It is the seller who grants this right to the buyer of the option. It may be
noted that the person who has the right to buy the underlying asset is known as the
“buyer of the call option”. The price at which the buyer has the right to buy the
asset is agreed upon at the time of entering the contract.
This price is known as the strike price of the contract (call option strike price in
this case). Since the buyer of the call option has the right (but no obligation) to buy
the underlying asset, he will exercise his right to buy the underlying asset if and
only if the price of the underlying asset in the market is more than the strike
price on or before the expiry date of the contract. The buyer of the call option
does not have an obligation to buy if he does not want to.
Put option
A put option is a contract granting the right to the buyer of the option to sell the
underlying asset on or before a specific day at an agreed upon price, but not the
obligation to do so. It is the seller who grants this right to the buyer of the option.
The person who has the right to sell the underlying asset is known as the “buyer of
OPTION TERMINOLOGY
Index options: These options have the index as the underlying. Some
options are European while others are American. Like index futures contracts,
index options contracts are also cash settled.
Buyer of an option: The buyer of an option is the one who by paying the
option premium buys the right but not the obligation to exercise his option on the
seller/writer.
Writer of an option: The writer of a call/put option is the one who receives
the option premium and is thereby obliged to sell/buy the asset if the buyer
exercises on him.
Option price/premium: Option price is the price which the option buyer
pays to the option seller. It is also referred to as the option premium.
Strike price: The price specified in the options contract is known as the strike
price or the exercise price.
American options: American options are options that can be exercised at any
time upto the expiration date. Most exchange-traded options are American.
European options: European options are options that can be exercised only
on the expiration date itself. European options are easier to analyze than American
options, and properties of an American option are frequently deduced from those
of its European counterpart.
An interesting question to ask at this stage is - when would one use options instead
of futures? Options are different from futures in several interesting senses. At a
practical level, the option buyer faces an interesting situation. He pays for the
option in full at the time it is purchased. After this, he only has an upside. There is
no possibility of the options position generating any further losses to him (other
than the funds already paid for the option). This is different from futures, which is
free to enter into, but can generate very large losses. This characteristic makes
options attractive to many occasional market participants, who cannot put in the
time to closely monitor their futures positions. Buying put options is buying
insurance. To buy a put option on Nifty is to buy insurance which reimburses the
full extent to which Nifty drops below the strike price of the put option. This is
FUTURES OPTION
Exchange traded ,with novation Same as futures
Exchange defines the product Same as future
Price is zero ,strike price Strike price is fixed, price moved
moves
Price is zero Price is always positive
Linear payoff Non linear payoff
Both long and short at risk Only short at risk
The phenomenal growth of financial derivatives across the world is attributed the
fulfilment of needs of hedgers, speculators and arbitrageurs by these products. In
this chapter we first look at how trading futures differs from trading the underlying
spot. We then look at the payoff of these contracts, and finally at how these
contracts can be used by various entities in the economy.
A payoff is the likely profit/loss that would accrue to a market participant with
change in the price of the underlying asset. This is generally depicted in the form
of payoff diagrams which show the price of the underlying asset on the X-axis and
the profits/losses on the Y-axis.
The single stock futures market in India has been a great success story across the
world. NSE ranks first in the world in terms of number of contracts traded in single
stock future s. One of the reasons for the success could be the ease of trading and
settling these contracts.
Selling securities involves buying the security before selling it. Even in cases
where short selling is permitted, it is assumed that the securities broker owns the
security and then "lends" it to the trader so that he can sell it. Besides, even if
permitted, short sales on security can only be executed on an up-tick.
To trade futures, a customer must open a futures trading account with a derivatives
broker. Buying futures simply involves putting in the margin money. They enable
the futures traders to take a position in the underlying security without having to
open an account with a securities broker. With the purchase of futures on a
security, the holder essentially makes a legally binding promise or obligation to
buy the underlying security at some point in the future (the expiration date of the
FUTURES PAYOFFS
Futures contracts have linear payoffs. In simple words, it means that the losses as
well as profits for the buyer and the seller of a futures contract are unlimited. These
linear payoffs are fascinating as they can be combined with options and the
underlying to generate various complex payoffs
The figure shows the profits/losses for a short futures position. The investor sold
futures when the index was at 2220. If the index goes down, his futures position
starts making profit. If the Index rises, his futures position starts showing losses.
Understanding beta
The index model suggested by William Sharpe offers insights into portfolio
diversification. It express the excess return on a security or a portfolio as a function
of market factors and non market factors. Market factors are those factors that
affect all stocks and portfolios. These would include factors such as inflation,
interest rates, business cycles etc. Non-market factors would be those factors which
are specific to a company, and do not affect the entire market. For example, a fire
breakout in a factory, a new invention, the death of a key employee, a strike in the
factory, etc. The market factors affect all firms. The unexpected change in these
factors cause unexpected changes in 45 the rates of returns on the entire stock
market. Each stock however responds to these factors to different extents. Beta of a
stock measures the sensitivity of the stocks responsiveness to these market factors.
Similarly, Beta of a portfolio, measures the portfolios responsiveness to these
market movements. Given stock beta’s, calculating portfolio beta is simple. It is
nothing but the weighted average of the stock betas. The index has a beta of 1.
Hence the movements of returns on a portfolio with a beta of one will be like the
index. If the index moves up by ten percent, the value of a portfolio with a beta of
two will move up by twenty percent. If the index drops by ten percent, the value of
a portfolio with a beta of two, will fall by twenty percent. Similarly, if a portfolio
has a beta of 0.75, a ten percent movement in the index will cause a 7.5 percent
movement in the value of the portfolio. In short, beta is a measure of the systematic
risk or market risk of a portfolio. Using index futures contracts, it is possible to
hedge the systematic risk. With this basic understanding, we look at some
applications of index futures.
Warning: Hedging does not always make money. The best that can be achieved
using hedging is the removal of unwanted exposure, i.e. unnecessary risk. The
hedged position will make less profits than the unhedged position, half the time.
One should not enter into a hedging strategy hoping to make excess profits for
sure; all that can come out of hedging is reduced risk.
The figure shows the profits/losses for the buyer of a three-month Nifty 2250 put
option. As can be seen, as the spot Nifty falls, the put option is in-the-money. If
upon expiration, Nifty closes below the strike of 2250, the buyer would exercise
his option and profit to the extent of the difference between the strike price and
Nifty-close. The profits possible on this option can be as high as the strike price.
However if Nifty rises above the strike of 2250, he lets the option expire. His
losses are limited to the extent of the premium he paid for buying the option.
We look here at some applicat ions of options contracts. We refer to single stock
options here. However since the index is nothing but a security whose price or
level is a weighted average of securities constituting the index, all strategies that
can be implemented using stock futures can also be implemented using index
options.
Hedging: Have underlying buy puts
Owners of stocks or equity portfolios often experience discomfort about the overall
stock market movement. As an owner of stocks or an equity portfolio, sometimes
you may have a view that stock prices will fall in the near future. At other times
you may see that the market is in for a few days or weeks of 55 massive volatility,
and you do not have an appetite for this kind of volatility. The union budget is a
common and reliable source of such volatility: market volatility is always
enhanced for one week before and two weeks after a budget. Many investors
simply do not want the fluctuations of these three weeks. One way to protect your
portfolio from potential downside due to a market drop is to buy insurance using
put options. Index and stock options are a cheap and easily implementable way of
seeking this insurance. The idea is simple. To protect the value of your portfolio
from falling below a particular level, buy the right number of put options with the
right strike price. If you are only concerned about the value of a particular stock
that you hold, buy put options on that stock. If you are concerned about the overall
portfolio, buy put options on the index. When the stoc k price falls your stock will
lose value and the put options bought by you will gain, effectively ensuring that the
total value of your stock plus put does not fall below a particular level. This level
depends on the strike price of the stock options chosen by you. Similarly when the
Share
Mutual funds
Bonds
Derivative
savings
10
20
45 derivatives
bonds
mutual funds
shares
25
In above pie chart we can understand easily that mostly investor invests in share
then they are interested to invest in mutual fund. And in derivative market very few
investor are interested to invest in derivative market.
Yes
No
NO – 45%
YES- 55%
INTERPRETATION
In market survey we find that 55% of people are known about the religare Online
trading and 45% of people are not aware of online trading in religare.
Yes
NEW DELHI INSTITUTION OF MANAGEMENTPage 67
No
NO- 53%
YES- 47%
INTERPRETATION
HERE, 47% of people known about the facility which is provided by religare.but
53%of people are not aware of the facility of religare.They Are interested to
known about the facility which is provided by the religare to investor. But lack of
sources they don’t get the proper knowledge about the religare facility.
Religare
ICICI Direct
India bulls
Sharekhan
Others
27% 25%
RELIGARE
others
sharekhan
india bulls
ICICI Direct
10%
15%
23%
INTERPRETATION
HERE, to see the pie chart we understand easily that the ICICI Direct has
maximum proportion .Which shows that investors are more interested to invest in
ICICI Direct then others. Then in second no.religare comes religare have 25% of
the total survey. In third no.sharekhan company which has 23% of total market.
Then 15% in India Bulls. Then 10 %to other companies.
Up to 10%
Up to 25%
Up to 50%
Above 50%
15%
35% up to 10%
up to 25%
up to 50%
20% Above 50%
30%
INTERPRETATION
IN Market survey we known that how much invest by investor in share market. For
above pie chart its shows that how much the investor invests their earning in share
market.
ANNEXURE
QUESTIONNAIRE
PERSONAL DETAIL
NAME:………………………
AGE:………………………...
CONTACT NO:…………….
ADDRESS NO:……………..
Q.9 Do you survey the market risk before investing your money ?
Yes
No
Q.10 Are you satisfied with the kind of returns and features associated with
your investment ?
Yes
No
8.What more facilities do you think you require with your DEMAT account?
………………………………………………………………
………………………………………………………………
………………………………………………………………
In this project I have learned about the major types of derivatives and that the
derivative can be used as a risk management tool. one of the main reasons for the
popularity of derivatives is its risk hedging features.
One should however careful while using derivatives because wrong use of the
same can result in unlimited risk.there can be no doubt that derivatives are
powerful tools for risk management if used properly.however,derivatives can
produce disastrous results.there are several characteristics of derivatives,which
necessitate very careful management of exposures .first and foremost, derivative
instrument are highly ‘geared’. because of this, it is possible to lose far more than
one’s original capital in a derivative transaction. In a normal business deal, with a
capital of rs.10 million the maximum loss that can be suffered is rs.10 million or
there abouts.however, if rs.10 million is deployed in a transaction,it is quite
possible to lose rs.100 million that is, 10 times the value of the capital put in.this is
the single most important reason why derivative transaction require a much tighter
supervision and control mechanism.secaondly, derivative markets move at great
speed.the markets are open virtually on a 24 hour basis,due to the integration to
various exchanges across the world.Big price movements can occur
overnight.Every firm and individuals who uses derivatives must therefore exercise
considerable caution and care in handing its derivative exposures. There is no
question on the existence and need for derivatives as an instrument of risk
management,but a part this risk is manmade,and can be effectively controlled at
the macro level.the growing fierce competition in the derivative markets of today
certainly improves trading conveniences and lower transaction costs but at the
same time this may mean increasing number of frauds.the exchange is therefore
required to keep a tight control over to check such happenings.
http:// www.commoditymarket.com
http:// www.moneycontrol.com
http:// www.nseindia.com
http:// www.religaresecurities.in
http:// www.bseindia.com