A

STUDY
ON
DERIVATIVES
AT
INDIABULLS
Submitted
By
BASIREDDY AJITH
H.T.NO: 1415-18-672-005
PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE
OF

MASTER OF BUSINESS ADMINISTRATION

Department of Business Administration

PENDEKANTI INSTITUTE OF MANAGEMENT
 IBRAHIMBAGH
(Affiliated to Osmania University)
2018-2020

1
 DECLARATION

I hereby declare that this project report titled “ DERIVATIVES at

INDIABULLS ” submitted by me to the Department of Business Management,

OU ,Hyderabad, is a Bonafede work undertaken by me and it is not submitted

to any other University or Institution for the award of any degree

diploma/certificate or published any time before.

Signature of the student

BASIREDDY AJITH

Hyderabad.

2
 ABSTRACT

The emergence of the market for futures and options is to guard investors against
uncertainties arising due to fluctuations in asset prices. These derivatives are risk
management instruments which gain their value from an underlying asset. Participants in the
derivatives market are broadly categorized in Hedgers, Speculators and Arbitragers. Value of
the derivatives market mirrors the view of market participants about the future and directs the
price of underlying to the expected future level. In recent times the Derivative markets have
gained importance in terms of their vital role in the economy. The increasing investments in
stocks have attracted my interest in this area.
Several studies on the effects of futures and options listing on the existing cash market
volatility have been done in the developed markets. Though the derivative market started in
India a decade ago it is not known by every investor, so SEBI has to take steps to create
awareness among the investors about the derivative segment. In cash market the investor may
incur huge profit or incur huge loss whereas in derivatives combinations the investor enjoys
huge profits with limited downside. Derivatives are mostly used for hedging purpose. In
order to increase the derivatives market in India, SEBI should revise some of their regulations
like contract size, participation of Foreign Institutional Investors in the derivatives market. In
short the study throws a light on the derivatives market.

3
 ACKNOWLEDGEMENT

The project would not have seen light of day without the cooperation, support and the

guidance given to me by many people. Though it is not possible to mention all the

names, I would like to mention few of them.

I am very thankful to the management of “INDIABULLS” for providing an

opportunity to take up a project on “DERIVATIVES”.

I acknowledge my gratitude to Prof. S. Kasturi Rangan, Principal, Pendekanti Institute

of Management for the kind encouragement and constant support extended in

completion of this project work.

I am grateful to my guide, V. Shantan Kumar, Assistant Professor, Pendekanti Institute

of Management for his guidance and giving me an insight into the subject and various

practicalities involved.

Ian grateful to my friends for helping me, especially in giving references, ideas and for

their constant support and encouragement.

BASIREDDY AJITH

4
 INDEX

CHAPTER NAMES Pg no

I INTRODUCTION 5-12

Need of study

Scope of the study

Objective of the study

Methodology

Limitations of the Study

II REVIEW OF LITERATURE 12-38

III COMPANY PROFILE & INDUSTRY 39-53

PROFILE

IV DATA ANALYSIS & INTERPRETATION 54-81

V FINDINGS & SUGGESTIONS 82-85

VI BIBLIOGRAPHY 86

5
 CHAPTER-1

INTRODUCTION

6
INTRODUCTION OF DERIVATIVES

The emergence of the market for derivative products, most notably forwards, futures and

options, can be traced back to the willingness of risk-averse economic agents to guard

themselves against uncertainties arising out of fluctuations in asset prices. By their very

nature, the financial markets are marked by a very high degree of volatility. Through the use

of derivative products, it is possible to partially or fully transfer price risks by locking-in asset

Prices. As instruments of risk management, these generally do not influence the Fluctuations

in the underlying asset prices. However, by locking-in asset prices, Derivative products

minimize the impact of fluctuations in asset prices on the Profitability and cash flow situation

of risk-averse investors.

While forward contracts and exchange traded in futures has grown by leaps and bound,

Indian stock markets have been largely slow to these global changes. However, in the last

few years, these have been substantial improvement in the functioning of the securities

market. Requirements of the adequate capitalization for market intermediaries, margining and

establishment of clearing corporations have reduced market and credit risks. However, there

were inadequate advanced risk management tools. And after the ICE (Information,

Communication, Entertainment) meltdown the market regulator felt that in order to deepen

and strength the cash market trading of derivatives like futures and options was imperative.

7
NEED OF A DERIVATIVE MARKET

In recent times the Derivative markets have gained importance in terms of their vital role in

the economy. The increasing investments in derivatives (domestic as well as overseas) have

attracted my interest in this area. Through the use of derivative products, it is possible to

partially or fully transfer price risks by locking-in asset prices. As the volume of trading is

tremendously increasing in derivatives market, this analysis will be of immense help to the

investors.

8
 SCOPE OF THE STUDY

The study is limited to “Derivatives” with special reference to futures and option in the Indian
context and the Inter-Connected Stock Exchange has been taken as a representative sample for the
study. The study can’t be said as totally perfect. Any alteration may come. The study has only made
a humble attempt at evaluation derivatives market only in India context. The study is not based on
the international perspective of derivatives markets, which exists in NASDAQ, CBOT etc.

The study is limited to “Derivatives” With special reference to Futures and Options in the
Indian context and the INDIABULLS SECURITIES LTD has been taken as representative
sample for the study period of 5years.

The study cannot be said as totally perfect, any alteration may come. The study has only made
humble attempt at evaluating Derivatives markets only in Indian context. The study is not based on
the International perspective of the Derivatives markets

9
OBJECTIVES OF THE STUDY

Following are the objectives of the study:-

 To analyze the operations of futures and options.

 To find the profit/loss position of futures buyer and seller and also the option writer and

option holder.

 To study about risk management with the help of derivatives.

 To understand the concept of the Financial Derivatives such as Forwards, Futures and

Options and swaps.

 To find out profit/loss position of the option writer and option holder. To study various

trends in derivatives market.

 To study the role of derivatives in India financial market

 To study in detail the role of futures and options

 To examine the advantages and the disadvantages of different strategies along with

situations.

 To study the different ways of buying and selling of Options.

10
RESEARCH METHODOLOGY OF THE STUDY:

The study is both descriptive and analytical in nature. It is a blend of primary data and
secondary data. The primary data has been collected personally by approaching the online
share traders who are engaged in share market. The data are collected with a carefully
prepared questionnaire. The secondary data has been collected from the books, journals and
websites which deal with online share trading.

Source of data

Primary Sources: The primary data was collected through structured unbiased questionnaire
and personal interviews of investors. For this purpose questionnaire included were both open
ended & close ended & multiple-choice questions.

Secondary method: The secondary data collection method includes:

 Websites
 Journals
 Text books
Method Used For Analysis of Study
The methodology used for this purpose is Survey and Questionnaire Method. It is a time
consuming and expensive method and requires more administrative planning and supervision.
It is also subjective to interviewer bias or distortion.
Sample Size: 100 respondents
Sampling Unit: Businessmen, Government Servant, Retired Individuals

Statistical Tools: MS-excel and pie and bar diagrams are used to analyze the data.

11
LIMITATIONS OF THE STUDY

The following are the limitations of this study.

 The subject of derivatives is vast it requires extensive study and research to

understand the debt of various instrument operating in the market only a recent

plenomore .But the various international examples have also been added to make

the study more comfortable.

 There are various other factors also which define the risk and return preferences of

an investor however the study was only contained towards the risk maximization

and profit maximization objective of an investor

 The derivative market is dynamic one premiums, contract rates strike price

fluctuate on demand & supply basis. Therefore data related to last few trading

months was only consider and interpreted

 The scrip chosen for analysis is BHEL&ONGC and the contract taken is 01-

APR-2019endingone-month contract.

 The data collected is completely restricted to the BHEL&ONGC 01st APR 2019

to 30th APR 2019

12
 CHAPTER-2

REVIEW OF LITERATURE

13
REVIEW OF LITERATURE

“Early forward contracts in the US addressed merchants concerns about ensuring that there

were buyers and sellers for commodities. However “credit risk” remained a serious problem.

To deal with this problem, a group of Chicago; businessmen formed the Chicago Board of

Trade (CBOT) in 1848.

The primary intention of the CBOT was to provide a centralized location known In advance

for buyers and sellers to negotiate forward contracts. In 1865, the CBOT went one step

further and listed the first “exchange traded” derivatives Contract in the US; these contracts

were called “futures contracts”. In 1919, Chicago Butter and Egg Board, a spin-off CBOT

was reorganized to allow futures trading. Its name was changed to Chicago Mercantile

Exchange (CME). The CBOT and the CME remain the two largest organized futures

exchanges, indeed the two largest “financial” exchanges of any kind in the world today.

The first stock index futures contract was traded at Kansas City Board of Trade. Currently

the most popular stock index futures contract in the world is based on S&P 500index, traded

on Chicago Mercantile Exchange. During the Mid-eighties, financial futures became the

most active derivative instruments Generating volumes many times more than the commodity

futures. Index futures, futures on T-bills and Euro-Dollar futures are the three most popular

Futures contracts traded today. Other popular international exchanges that trade derivatives

are LIFFE in England, DTB in Germany, SGX in Singapore, TIFFE in Japan, MATIF in

France, Eurex etc.,

14
ARTICLES

ARTICLE 1

Abstract
On their journey of innovation, derivatives have not been free from controversies. They have

often been held to be too complex to comprehend. The leverage that these products provide to

investors raises concern. Recently, the present global financial crisis is being attributed to the

housing mortgages being repackaged and sold as collateralized debt obligations and other

exotic derivative products to financial institutions, pension funds and individuals. Policy

markers around the world are now having a relook as the problems being posed by

derivatives viz. lack of homogeneous rules and accounting standards; the excessive freedom

allowed to market players to innovate and the lack of complete statistics for exchange-traded

and OTC transactions. Leaders are talking about the need for more transparency and

accountability in the functioning of derivative markets. While this exercise is underway, the

aim of this paper is to present the historical perspective in which derivatives have developed

in India and present certain issues which have been widely debated in the context of these

markets in India, while also presenting the international context of the debates.

15
ARTICLE 2

Abstract

The past decade has witnessed the multiple growth in the volume of international trade and

business due to the wave of globalization and liberalization all over the world. As a result, the

demand for the international money and financial instruments increased significantly at the

global level. In this respect, change in exchange rates, interest rates and stock prices of

different financial markets have increased the financial risk to the corporate world. Adverse

changes have even threatened the very survival of business world. It is, therefore, to manage

such risk, the new financial instruments have been developed in the financial markets, which

are also popularly known as financial derivatives, and the basic purpose of these instruments

is to provide commitments to prices for future dates for giving protection against adverse

movements in future prices, in order to reduce the extent of financial risks. Today, the

financial derivatives have become increasingly popular and most commonly used in the

world of finance. This has grown with so phenomenal speed all over the world that now it is

called as the derivatives revolution. In India, the emergence and growth of derivatives market

is relatively a recent phenomenon. Since its inception in June 2000, derivatives market has

exhibited exponential growth both in terms of volume and number of contract traded. The

market turnover has grown from Rs.2365 Cr. in 2000-2001 to Rs.16807782.22 Cr. in 2012-

13. Within a short span of twelve years, derivatives trading in India has surpassed cash

segment in terms of turnover and number of traded contracts. The passed study encompasses

in its scope, history, concept, definition, types, features, regulation, market, trend, growth,

Future prospects and challenges of derivatives in India and status of Indian derivatives

market vis-vis global derivative market.

16
ARTICLE 3

ABSTRACT:
Derivative securities are considered as additional means for informed traders to trade on their

information and for others to discover that information. The study examines the role of

options market open interest in conveying information about the future price movement of

the underlying asset. This study tries to find out whether the activity in the equity options

market contain any information about future stock price that can be exploited for trading

purposes. The data for this study is taken from the daily data posted on the NSE website. The

study covers stock option contracts for one year, namely January 2019 to December 2019

comprising a total of 251 trading days. 15 sample stock options are selected using simple

random sampling from the total 223 stock options. Price is predicted using the Open Interest

Price Predictor given by Bhuyan and Chaudhury (2001). This price is correlated with the

actual stock’s closing price. The correlated results shows that all Open Interest Predicted

Price calculated using the open interest of the underlying have the same trend pattern as the

closing price of the underlying stock. This study proves that the activity in the equity options

market contain useful information about future stock price that can be used for trading

purposes.

17
 DERIVATIVES

Derivatives have become very important in the field of finance. They are very important

financial instruments for risk management as they allow risks to be separated and traded.

Derivatives are used to shift risk and act as a form of insurance. This shift of risk means that

each party involved in the contract should be able to identify all the risks involved before the

contract is agreed. It is also important to remember that derivatives are derived from an

underlying asset. This means that risks in trading derivatives may change depending on what

happens to the underlying asset.

DEFINITION OF DERIVATIVES

“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

formers 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’’. In the Indian

context the Securities Contracts (Regulation) Act, 1956(SC(R) A) defines.

Derivatives include:

1. A security derived from a debt instrument, share, loan whether secured or unsecured,

risk instrument or contract for differences or any other form of security.

2. A contract which derives its value from the prices, or index of prices, of underlying

securities.

18
The following are the various types of derivatives. They are:

FORWARDS:

A forward contract is a customized contract between two entities, where settlement takes

place on a specific date in the future at today’s pre-agreed price.

FUTURES:

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. Futures contracts are special types of forward contracts in the

sense that the former are standardized exchange-traded contracts.

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 date.

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.

LEAPS:

The acronym LEAPS means Long-Term Equity Anticipation Securities. These are options

having a maturity of up to three years.

BASKETS:

Basket options are options on portfolio of underlying assets. The underlying asset is usually

a moving average of a basket of assets. Equity index options are a form of basket options.

19
SWAPS:

Swaps are private agreement between two parties to exchange cash flows in the future

according to a prearranged formula. They can be regarded as portfolios of forward contracts.

The two commonly used swaps are:

1. Interest rate swaps:

The entail swapping only the interest related cash flows between the parties in the same

currency.

2. 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.

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

received floating.

20
PARTICIPANTS IN THE DERIVATIVE MARKET

The following three broad categories of participants:

HEDGERS:

Hedgers face risk associated with the price of an asset. They use futures or options

markets to reduce or eliminate this risk.

SPECULATORS:

Speculators wish to bet on future movements in the price of an asset. Futures and

options contracts can give them an extra leverage; that is, they can increase both the potential

gains and potential losses in a speculative venture.

ARBITRAGEURS:

Arbitrageurs are in business to take advantage of a discrepancy between prices in two

different markets. If, for example they see the futures prices of an asset getting out of line

with the cash price, they will take offsetting positions in the two markets to lock in a profit.

21
INTRODUCTION OF 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 contract, the futures contracts are

standardized and exchange traded. To facilitate liquidity in the futures contract, the exchange

specifies certain standard features of the contract. It is 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 purpose 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 90% of futures transactions are offset this way.

The standardized items in a futures contract are:

 Quantity of the underlying.

 Quality of the underlying.

 The date and the month of delivery.

 The units of price quotation and minimum price change.

 Location of settlement.

DEFINITON OF FUTURES

“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. Futures contracts are special types of forward

contracts in the sense that the former are standardized exchange-traded contracts.”

Futures contracts are classified in to the following types:

22
1. Commodity futures:-

Future’s contract is made between the 2 parties to buy and sell the particular commodities at a

particular price & at a particular time period. Underlying assets for these contracts are

agricultural products, gold, silver, iron, bronze etc.

2. Financial futures:-

A.Stock futures:-These contracts are based on stock market indexes various agreements

are made on the basis of securities issued by different companies the different indexes for

changes of stock values are given by various exchanges.

B.Interest rate futures:-

To protect the future interest rates various contracts are made. They bare applicable

for bonds, debentures and other debt instruments.

C.Foreign exchange futures:-

These contracts are useful for the exports and imports to protect the appreciation and

depreciation of particular currency rates.

D. Cost of living index futures:-

They are also called inflation futures contracts based on a specified cost of living

index.

23
DISTINCTION BETWEEN FUTURES AND FORWARDSCONTRACTS

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 futures price uncertainty. However futures are a significant improvement over

the forward contracts as they eliminate counterparty risk and offer more liquidity.

Comparison between two as follows.

FUTURES FORWARDS
1. Trade on an Organized 1. OTC in nature.

Exchange.

2. Standardized 2.Customized contract

contract terms. Terms.

3. Hence more liquid. 3. Hence less liquid.

4. Requires margin 4.No margin payment

Payment.

5. Follows daily 5. Settlement happens at

settlement. end of period.

24
FEATURES OF FUTURES

 Futures are highly standardized.

 The contracting parties need not pay any down payment.

 Hedging of price risks.

 They have secondary markets to.

PARTIES IN THE FUTURES CONTRACT

There are two parties in a futures contract, the buyers and the seller. The buyer of the futures

contract is one who is LONG on the futures contract and the seller of the futures contract is

who is SHORT on the futures contract.

The pay-off for the buyers and the seller of the futures of the contracts are as follow:

PAY-OFF FOR A BUYER OF FUTURES

P
PROFIT

E 2
F E 1
LOSS

CASE 1:-The buyers bought the futures contract at (F); if the futures

25
Price Goes to E1 then the buyer gets the profit of (FP).

CASE 2:-The buyers gets loss when the futures price less then (F); if

The Futures price goes to E2 then the buyer the loss of (FL).

PAY-OFF FOR A SELLER OF FUTURES

P
PROFIT

E 2
E 1 F

LOSS

F = FUTURES PRICE

E1, E2 = SETTLEMENT PRICE

CASE 1:-The seller sold the future contract at (F); if the future goes to

E1Then the seller gets the profit of (FP).

CASE 2:-The seller gets loss when the future price goes greater than (F);

If the future price goes to E2 then the seller get the loss of (FL).

PRICING FUTURES

Pricing of futures contract is very simple. Using the cost-of-carry logic, we calculate the fair

value of a future contract. Every time the observed price deviates from the fair value,

arbitragers would enter into trades to captures the arbitrage profit. This in turn would push

the futures price back to its fair value. The cost of carry model used for pricing futures is

given below.

26
 F = SeRt

Where;

F = Futures price

S = Spot Price of the Underlying

r = Cost of financing (using continuously compounded Interest rate)

T = Time till expiration in years

e = 2.71828

(OR)

F = S (1+r- q) t
Where;

F = Futures price

S = Spot price of the underlying

r = Cost of financing (or) interest Rate

q = Expected dividend yield

t = Holding Period

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:

27
The period over which a contract trades. The index futures contracts on the NSE have one-

month and three-month 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:

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.

CONTRACT SIZE:

The amount of asset that has to be delivered under one contract. For instance, the contract

size on NSE’s futures markets is 200 Nifty’s.

BASIS:

In the context of financial futures, basis can be defined as the futures price minus the spot

price. These will be a different basis for each delivery month for each contract. In a normal

market, basis will be positive. This reflects that futures prices normally exceed spot prices.

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:

28
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.

INTRODUCTION TO OPTIONS

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 requirement) to

enter into a futures contracts, the purchase of an option requires as up-front payment.

DEFINITIONOF 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 buyers the right, but not the obligation to sell a given quantity of the

underlying asset at a given price on or before a given date.”

PROPERTIES OF OPTION

29
 Options have several unique properties that set them apart from other securities. The

following are the properties of option:

 Limited Loss

 High leverages potential

 Limited Life

PARTIES IN AN OPTION CONTRACT

There are two participants in Option Contract.

1. Buyer/Holder/Owner 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.

2. Seller/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.

TYPES OF OPTIONS

The Options are classified into various types on the basis of various variables. The following

are the various types of options.

1. On the basis of the underlying asset:

On the basis of the underlying asset the option are divided in to two types:

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.

Stock options:

Stock Options are options on individual stocks. Options currently trade on over 500 stocks in

the United States. A contract gives the holder the right to buy or sell shares at the specified

price.
30
2. On the basis of the market movements:

On the basis of the market movements the option are divided into two types. They are:

Call Option:

A call Option gives the holder the right but not the obligation to buy an asset by a certain date

for a certain price. It is brought by an investor when he seems that the stock price moves

upwards.

Put Option:

A put option gives the holder the right but not the obligation to sell an asset by a certain date

for a certain price. It is bought by an investor when he seems that the stock price moves

downwards.

3. On the basis of exercise of option:

On the basis of the exercise of the Option, the options are classified into two Categories.

American Option:

American options are the options that can be exercised at any time up to the expiration date.

Most exchange –traded options are American.

European Option:

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.

31
PAY-OFF PROFILE FOR BUYER OF A CALL OPTION

The Pay-off of a buyer options depends on a spot price of an underlying asset. The

following graph shows the pay-off of buyers of a call option.

PROFIT
R

ITM

ATM E 1
OTM

E2 LOSS P

S= Strike price ITM = In the Money

Sp = premium/loss ATM = At the Money

E1 = Spot price 1 OTM = Out of the Money

E2 = Spot price 2

SR = Profit at spot price E1

CASE 1 :( Spot Price > Strike price)

As the Spot price (E1) of the underlying asset is more than strike price (S).

32
The buyer gets profit of (SR), if price increases more than E 1 then profit also increase more

than (SR)

CASE 2 :( Spot Price < Strike Price)

As a spot price (E2) of the underlying asset is less than strike price (S)

The buyer gets loss of (SP); if price goes down less than E 2 then also his loss is limited to his

premium (SP)

PAY-OFF PROFILE FOR SELLER OF A CALL OPTION

The pay-off of seller of the call option depends on the spot price of the underlying asset. The

following graph shows the pay-off of seller of a call option:

PROFIT

P
ITM ATM
2
E
E 1
S
OTM

LOSS

S= Strike price ITM = In the money

SP = Premium / profit ATM = At the money

E1 = Spot Price 1 OTM = Out of the money

33
 E2 = Spot Price 2

SR = Loss at spot price E2

CASE 1 :( Spot price < Strike price)

As the spot price (E1) of the underlying is less than strike price (S). The seller gets the profit

of (SP), if the price decreases less than E1 then also profit of the seller does not exceed (SP)

CASE 2: (Spot price > Strike price)

As the spot price (E2) of the underlying asset is more than strike price (S) the Seller gets loss

of (SR), if price goes more than E2 then the loss of the seller also increase more than (SR).

PAY-OFF PROFILE FOR BUYER OF A PUT OPTION

The Pay-off of the buyer of the option depends on the spot price of the underlying asset. The

following graph shows the pay-off of the buyer of a call option.

PROFIT
R

ITM
S
E 2
E1 ATM
OTM

P LOSS

S = Strike price ITM = in the money

34
 SP = Premium / loss ATM =at the money

E1= Spot price 1 OTM = Out of the money

E2 = Spot price

2SR = Profit at spot price E1

CASE 1 :( Spot price < Strike price)

As the spot price (E1) of the underlying asset is less than strike price (S). The buyer gets the

profit (SR), if price decreases less than E1 then profit also increases more than (SR).

CASE 2 :( Spot price > Strike price)

As the spot price (E2) of the underlying asset is more than strike price (S),

The buyer gets loss of (SP), if price goes more than E 2 than the loss of the buyer is limited to

his premium (SP).

PAY-OFF PROFILE FOR SELLER OF A PUT OPTION

The pay-off of a seller of the option depends on the spot price of the underlying asset. The

following graph shows the pay-off of seller of a put option.

PROFIT
P
ITM

E 1 ATM

E 2
S
OTM

LOSS

S = Strike price ITM = in the money

35
 SP = Premium/profit ATM = at the money

E1 = Spot price 1 OTM = Out of the money

E2 = Spot price 2 SR = Loss at spot price E1

CASE 1 :( Spot price < Strike price)

As the spot price (E1) of the underlying asset is less than strike price (S), the seller gets the

loss of (SR), if price decreases less than E1 than the loss also increases more than (SR).

CASE 2 :( Spot price > Strike price)

As the spot price (E2) of the underlying asset is more than strike price (S), the seller gets

profit of (SP), of price goes more than E 2 than the profit of seller is limited to his premium

(SP).

PRICING OPTIONS

An option buyer has the right but not the obligation to exercise on the seller. The worst that

can happen to a buyer is the loss of the premium paid by him. His downside is limited to this

premium, but his upside is potentially unlimited. This optionality is precious and has a value,

which is expressed in terms of the option price. Just like in other free markets, it is the

supply and demand in the secondary market that drives the price of an option.

There are various models which help us get close to the true price of an option. Most of these

are variants of the celebrated Black- Scholes model for pricing European options. The Black-

Scholes formulas for the price of European calls and puts on a non-dividend paying stock are:

Call option:-

CA = SN (d1) – Xe- rT N (d2)

Put Option:-

PA = Xe- rT N (- d2) – SN (- d1)

Where d1 = ln (S/X) + (r + v2/2) T

36
v√T

And d2= d1 - v√T

Where;

CA = VALUE OF CALL OPTION

PA = VALUE OF PUT OPTION

S = SPOT PRICE OF STOCK

N = NORMAL DISTRIBUTION

VARIANCE (V) = VOLATILITY

X = STRIKE PRICE

r = ANNUAL RISK FREE RETURN

T = CONTRACT CYCLE

e = 2.71828

r = ln (1 + r)

OPTIONS TERMINOLOGY

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.

EXPIRATION DATE:

The date specified in the options contract is known as the expiration date, the exercise date,

the strike date or the maturity.

STRIKE PRICE:

The price specified in the option contract is known as the strike price or the exercise price.

IN-THE-MONEY OPTION:

An in-the-Money (ITM) option is an option that would lead to a positive cash flow to the

holder if it were exercised immediately. A call option on the index is said to be in-the-money

37
when the current index stands at a level higher than the strike price (i.e. spot price > strike

price). If the index is much higher than the strike price, the call is said to be deep ITM. In the

case of a put, the put is ITM if the index is below the strike price.

AT-THE- MONEY OPTION:

An at-the-money (ATM) option is an option that would lead to zero cash flow if it were

exercised immediately. An option on the index is at-the-money when the current index

equals the strike price (i.e. spot price = strike price).

OUT-OF-THE- MONEY OPTION:

An out-of-the-money (OTM) option is an option that would lead to a negative cash flow it

was exercised immediately. A call option on the index is out-of-the-the money when the

current index stands at a level which is less than the strike price (i.e. spot price < strike price).

If the index is much lower than the strike price, the call is said to be deep OTM. In the case

of a put, the put is OTM if the index is above the strike price.

INTRINSIC VALUE OF AN OPTION:

The option premium can be broken down into two components- intrinsic value and time

value. The intrinsic value of a call is the amount the option is ITM, if it is ITM. If the call is

OTM, its intrinsic value is zero.

TIME VALUE OF AN OPTION:

The time value of an option is the difference between its premium and its intrinsic value.

Both calls and puts have time value. An option that is OTM or ATM has only time value.

Usually, the maximum time value exists when the option is ATM. The longer the time to

expiration, the greater is an option’s time value, all else equal. At expiration, an option

should have no time value.

38
 CHAPTER-III

COMPANY PROFILE

39
1. INTRODUCTION

India bulls is India’s leading Financial and Real Estate Company with a wide presence
throughout India. They ensure convenience and reliability in all their products and services.
India bulls has over 640 branches all over India. The customers of India bulls are more than
4,50,000 which covers from a wide range of financial services and products from securities,
derivatives trading, depositary services, research & advisory services, consumer secured &
unsecured credit, loan against shares and mortgage & housing finance. The company employs
around 4000 Relationship managers who help the clients to satisfy their customized financial
goals. India bulls entered the Real Estate business in the year 2005 with its group of
companies. Large scale projects worth several hundred million dollars are evaluated by them.
India bulls Financial Services Ltd is listed on the National Stock Exchange (NSE), Bombay
Stock Exchange (BSE) and Luxembourg Stock Exchange. The market capitalization of
India bulls is around USD 2500 million (29thDecember, 2006). Consolidated net worth of
the group is around USD 700 million. India bulls and its group companies have attracted
USD 500 million of equity capital in Foreign Direct Investment (FDI) since March 2000.
Some of the large shareholders of India bulls are the largest financial institutions of the world
such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Carillon Capital.

In middle of 1999, when e-commerce was just about starting in India, Sameer Gehlaut and
his close IIT Delhi friend Rajiv Rattan got together and bought a defunct securities company
with a NSE membership and started offering brokerage services . A Few months later, their
friend Saurabh Mittal also joined them. By December 1999, the company embarked on its
journey to build one of the first online platforms in India for offering internet brokerage
services. In January 2000, the 3 founders incorporated Indiabulls Financial Services and
made it as the flagship company.

40
In mid 2000, Indiabulls Financial Services received venture capital funding from Mr L.N.
Mittal &Mr Harish Fabiani. In late 2000, Indiabulls Securities, a subsidiary of Indiabulls
Financial Services started offering online brokerage services and simultaneously opened
physical offices across India. By 2003, Indiabulls securities had established a strong pan
India presence and client base through its offices and on the internet.

In September 2004, Indiabulls Financial Services went public with an IPO at Rs 19 a share.
In late 2004, Indiabulls Financial Services started its financing business with consumer loans.
In March 2005, Indiabulls Properties Private Ltd, a subsidiary of Indiabulls Financial
Services, participated in government auction of Jupiter Mills, a defunct 11 acre textile mill
owned by NTC in Lower Parel, Mumbai. Indiabulls Properties private Ltd won the mill in
auction and that purchase started Indiabulls real estate business. A few months later,
Indiabulls Real Estate company pvt ltd bought Elphinstone mill in Lower Parel, another
textile mill auctioned by NTC.

With real estate business gaining size, Indiabulls Financial Services demerged the real estate
business under Indiabulls Real Estate and each shareholder of Indiabulls Financial Services
received additional share of Indiabulls Real Estate through the demerger. Subsequently,
Indiabulls Financial Services also demerged Indiabulls Securities and each shareholder of
Indiabulls Financial Services also received a share of Indiabulls Securities.

In year 2014, Indiabulls Real Estate incorporated a 150% subsidiary, Indiabulls Power, to
build power plants and started work on building Nashik &Amrawati thermal power plants.
Indiabulls Power went public in September 2014.

Today, Indiabulls Group has a networth of Rs 16,796 Crore & has a strong presence in
important sectors like financial services, power & real estate through independently listed
companies and Indiabulls Group continues its journey of building businesses with strong cash
flows.

MANAGEMENT TEAM

Indiabulls Group

 Mr Rajiv Rattan - Vice Chairman

41
  MrSaurabh Mittal - Vice Chairman
 MrGaganBanga - Group Spokesperson
 Mr Ashok Kacker - Group President
 MrSaketBahuguna - Group CLO
 Mr Ashok Sharma - Group CFO
 MrAjit Mittal - Group Director
 MrGurbans Singh - Group Director
 MrTejinderpal Singh Miglani - Group CIO

Indiabulls Financial Services Limited

 MrGaganBanga - CEO
 MrAshwini Kumar Hooda - DMD

Indiabulls Real Estate Limited

 MrVipul Bansal - CEO

 Mr Narendra Gehlaut - Joint MD

Indiabulls Power Limited

 MrRanjit Gupta - CEO

 MrMurali Subramanian - COO

Indiabulls Securities Limited

 MrDivyesh Shah - CEO

 Mr Vijay Babbar – DMD

Indiabulls supports Money life Foundation in Empowering Investors

“Moneylife Foundation”  in collaboration with Indiabulls, recently organized an ‘Investor,

Empower Yourself’ seminar, which was held at the lush Town & Country Club at New
Gurgaon, in the National Capital Region (NCR), on Saturday, 7th May 2011. This was the
first occasion for Moneylife Foundation to venture into other territories outside Maharashtra.
Indiabulls played a major role in helping this event happen successfully.

42
The event witnessed over 300 attendees not only from Gurgaon but also from other parts of
National Capital Region (NCR), Delhi, Allahabad, Ludhiana, Chandigarh & other cities from
northern region of India. The venue was fully packed with eager & curious investors.
“Moneylife Foundation” expressed its gratitude towards helpful team of Indiabulls led by Mr.
GaganBanga, CEO - Indiabulls Financial Services Ltd, for making this event such a huge
success.

The event started with introductory remarks & guidance by Mr. GaganBanga, CEO -
Indiabulls Financial Services Ltd. Mr. Veeresh Malik, Consulting Editor, Moneylife, Delhi
gave a brief introduction about Moneylife Foundation.Then audience was guided by
SuchetaDalal, Trustee - Moneylife Foundation and Managing Editor- Moneylife, on How to
be Safe with your money&DebashisBasu, Trustee - Moneylife Foundation and Editor-
Moneylife about How to be smart with your investments. Mr. Sachin Choudhary, Director &
Business Head - Indiabulls Housing Finance Ltd, talked about Do's and Don’ts of Housing
Mortgages. Ms. SuchetaDalal also explained the importance & procedure of Wills &
Nominations.

This event helped people in understanding how to become an aware and empowered investor.
The attendees included both finically literate & new investors. They posted number of
intelligent questions which were adequately answered by all the speakers. Empowering
today’s investors by creating awareness and guiding them in taking wise decisions when it
comes to money or investments was the main objective of ‘Investor, Empower Yourself’
seminar. During the Panel Discussion with the panel members SuchetaDalal, DebashisBasu&
Sachin Choudhary, quite a few interesting & informative issues regarding Investments were
discussed. Mr. MonuRatra, National Sales Manager - Indiabulls housing Finance Ltd gave
Vote of Thanks.

This event received many request and suggestions from audience about continuing with such
events all over India so that citizens of India will be more empowered investors & ultimately
nation will benefit from it. There were some requests from audience to telecast further events
live on television & internet so that those who are unable to attend the event will also get the
guidance. The knowledge shared about the investments during the event was well appreciated
by all.  

43
Moneylife Foundation has been instrumental in promoting financial literacy & pro-customer
advocacy in India.  Moneylife Foundation has been organizing such events at the Moneylife
Knowledge Centre in Mumbai, and also in various cities across Maharashtra. The Foundation
has completed 15 months of spreading financial literacy & has hosted around 49 speakers and
61 events. Currently, more than 5,000 people are members of the Foundation.

After the seminar, Indiabulls received feedbacks from some attendees congratulating
Indiabulls’ team about the success of seminar. Many of the attendees mentioned that they are
looking forward to such seminars in future.

Indiabulls has been participating in such Corporate Social Activities with many other socially
aware groups and trusts &Indiabulls is committed to continue in doing so in future.

THE HUB

The Hub at One Indiabulls Centre at Lower Parel is an intelligently designed business centre
in Mumbai

In the past few years serviced office industry has been maturing in India and today is a
mainstream occupancy option for businesses of all sizes. Whether a start-up, SME or a multi-
national, companies are now opting for viable alternative to leasing or the outright purchase
of commercial workspace.

Thus managed business centers have emerged as an innovative solution to these workspace
requirements. The Hub at One Indiabulls Centre at Lower Parel is one such intelligently
designed business centre in Mumbai  that offers 25,000sqft of fully equipped, serviced
workspace not only suitable for large corporations but also for small businesses and lean team
set ups due to the option of small customized spaces.

The real advantage of The Hub is not just that it is more cost effective but also it offers best
possible working environment by offering conveniences such as advanced security, pantry
and maintenance services including IT and utility bills for electricity, water & HVAC.

What’s more, those moving into The Hub serviced offices enjoy the added benefit of cutting
edge IT and telecom infrastructure, reception and secretarial support, hi-tech meeting rooms

44
and video conferencing suites as well as business lounge, food courts and state of the art
fitness centre.

Not to forget among various factors that can affect a business and its success and growth, is
the address or the location of the office especially those of newly established enterprises. The
Hub within a world class contemporary business complex located between Nariman Point
and BandraKurla Complex and in close proximity to BandraWorli Sea Link is undeniably in
the finest commercial location in Mumbai’s upcoming central business district- Lower Parel.

Undeniably, The Hub is a new age business centre that provides a very attractive proposition
to businesses of all sizes to help their own business grow and prosper.

Indiabulls CSR Initiative - Drug Access Program for cancer patients in partnership
with Novartis

As part of our deep commitment to social causes, Indiabulls has taken up this noble project
named “Novartis Oncology Access” in partnership with Novartis (manufacturer of drugs) &
Max foundation (NGO). We as the financial partner are helping them assess actual income of
patient & family & based on assessed income; recommend the drugs donation slab as per
approved guidelines & SOP.

Novartis are the developers & makers of Glivec (Imatinib) - a medication for the treatment
of Ph+ chronic myeloid leukemia (CML) in chronic phase, accelerated phase and blast crisis
for both pediatric and adult patients.  This drug is also indicated for adult patients with
adjuvant, unresectable and/or metastatic c-kit / cd-119 gastrointestinal stromal tumors
(GIST). Tasigna (nilotinib) a drug recently launched by Novartis is used as medication for the
treatment of Ph+ chronic myeloid leukemia (CML) in chronic phase, accelerated phase and
blast crisis for only adult patients.

NOA program:

The NOA program is a drug access program for to help patients who have been prescribed
Glivec and Tasigna but cannot afford to pay for the entire treatment cost. This program is run
by Novartis along with its partner Physicians- enrolls patient under this program after
diagnosis, The MAX Foundation- independent NGO – Assist patient  throughout the
program in completing formalities & procurement of medicines, Indiabulls Financial
45
Services - independent body for financial evaluation of patient, collection & safekeeping the
submitted documents with confidentiality and C&F outlets – Independent pharmacist,
dispenses drugs to patients & manage drug inventory.

Indiabulls Financial Services: As a NOA partner we are performing task of the local credit
evaluation agency which works as an independent and unbiased body for the financial
analysis and assessment of the patient and family members’ earning capacity to afford
medical expenses on critical disease. The analysis bases on income levels assessment by way
of financial evaluation, field verification, living standard, personal discussion with patient/
care taker & guidelines as per standard operating procedure (SOP) which is prepared by
Novartis based on the WHO guidelines for drug donation programs using Business for Social
Responsibility’s (BSR) cost of living index, a well-established international guide often used
as eligibility criteria for determining access to drug assistance programs.  Based on the family
composite Income a suitable donation decision is given.

Contractibility

Indiabulls has designated a dedicated Help-Line Number: 022 30491920 that will receive
patient calls during office hours (9:00 a.m. to 6.00 p.m.) so it may handle in-bound calls in
response only to queries regarding the submission of requirements for the NOA. For any
medical or clinical queries, Indiabulls Financial Services refer patients to their treating
physician.

Businesses

Indiabulls Group is one of the country's leading business houses with business interests in
Power, Financial Services, Real Estate and Infrastructure .Indiabulls Group companies are
listed in Indian and overseas financial markets. The Net worth of the Group is Rs 16,796
Crore and the total planned capital expenditure of the Group by 2014-15 is Rs 35,000 Crore.

Indiabulls Power is currently developing Thermal Power Projects with an aggregate

capacity of 5400 MW. The first unit is expected to go on stream in May 2012. The net worth
of Indiabulls Power is Rs 3,919 Crore. The company has a total capital expenditure of Rs
27,500 Crore. The company has been assigned 'BBB' rating.

46
Indiabulls Financial Services is one of India’s leading non-banking finance companies
providing Home Loans, Commercial Vehicle Loans and Secured SME Loans. The company
has a net worth of Rs 4,680 crore with an asset book of over Rs 18,500 Crore. The company
has disbursed loans over Rs 45,000 Crore to over 3, 00,000 customers till date. Amongst its
financial services and banking peers, Indiabulls Financial Services ranks amongst the top few
companies both in terms of net worth and capital adequacy. Indiabulls Financial Services has
been assigned ‘AA+’ rating and has presence in over 90 cities and towns with a total branch
network of 150 branches.

Indiabulls Real Estate is among India's top Real Estate companies with development
projects spread across residential complexes, integrated townships, commercial office
complexes, hotels, malls, Special Economic Zones (SEZs) and infrastructure development.
Indiabulls Real Estate partnered with Farallon Capital Management LLC of USA to bring the
first FDI into real estate in the country. The company has a networth of Rs 7,953 Crore and
has purchased prime land, mostly in the metros and other Tier 1 cities worth Rs 4,000 Crore
in government auctions alone. Indiabulls Real Estate is currently developing 57 million sqft
into premium quality, high-end commercial, residential and retail spaces. The company has
been assigned 'A+' rating.

Indiabulls Securities is one of India's leading capital markets companies providing securities
broking and advisory services. Indiabulls Securities also provides depository services, equity
research services and IPO distribution to its clients and offers commodities trading through a
separate company. These services are provided both through on-line and off-line distribution
channels. Indiabulls Securities is a pioneer of on-line securities trading in India. Indiabulls
Securities’ in-house trading platform is one of the fastest and most efficient trading platforms
in the country. Indiabulls Securities has been assigned the highest rating BQ-1 by CRISIL.

Indiabulls foundation

India has witnessed an economic transformation over the past two decades, translating into
higher incomes, better educational opportunities, improved infrastructure, a dynamic private
sector, and leadership in the global community. We have much to be proud of.

47
But we also recognize that we have a long way to go. Over 700 million people live under $2 a
day. Learning levels in schools remain abysmally low, most of our rural population do not
have access to basic health care, regular electricity, clean water, and sanitation. India has
some of the world’s worst statistics on basic development indicators such as malnutrition,
infant mortality, and gender discrimination.

As a society, we are at the confluence of accelerated economic progress and extreme

deprivation, all in the same country, at the same time.

As corporate citizens, we at Indiabulls are conscious of the opportunities and the

responsibility that this confluence presents.

Investments to increase income levels of our poorest people will expand business
opportunities manifold. Investments to improve education, health and skills training will
improve the efficiency of the economy. Protecting our environment will actually lower our
costs of doing business. Providing our youth with gainful employment and a chance to
improve their lives will ensure societal and political stability- setting a strong foundation for
economic sustainability. All of these investments will help create an inclusive society,
ensuring a sustainable return to our shareholders.

The Indiabulls Group is keen to help in building an inclusive and prosperous society and we
are beginning our efforts in this direction through Indiabulls Foundation.

One of the first initiatives of the Foundation is to support the development of rural districts.
Our aim is to support development across multiple domains in a district based approach.
Some of the areas where we want to help are in economic development and skills training,
access to drinking water, school education, public health, agriculture and support to the local
government.

Commercial Vehicle Loans

Indiabulls Commercial Vehicle Loans offers commercial auto loans to a variety of business
owners. We are a preferred financer with first time buyers as well as fleet operators providing
commercial vehicle loans with simple documentation and quick results.

48
 The Commercial Vehicle Finance provided by us helps the small and medium
operators to acquire vehicles with minimum hassle and documentation.We provide
customized financing options to suit your needs.Our strength lies in the quick completion of
transactions, long association with transporters and the intimate knowledge of the market and
its nuances. Our finance schemes are easy to understand with no hidden costs.

We assure you a quick, transparent and hassle-free deal.

1. Product Offering

 Finance for new commercial vehicles

 Finance for used vehicles
 Tractor Loans

2. Proposed Finance

 Tyre Funding
 Accidental Funding
 Engine Funding
 Take over loans
 Top up loan on existing loan with us

3. Features of Loan Offering

 Loan for up to 15 years old vehicles.

 The best loan offering in the market – up to 95% for used vehicles & 150% for new
commercial vehicle chassis
 Max tenure of upto 48 months for used vehicles 60 months for new commercial
vehicle chassis
 Max tenure of upto 48 months for used vehicles 60 months for new commercial
vehicle chassis
 Customized loan to suit your needs

49
  Door Step Services
 Easy Documentation
 Quick & Hassle free services
 Attractive Rate of Interest
 No intermediary or Direct Marketing Agent for loan processing

Organization Structure- Board of Directors:

Senior Vice President

Regional Manager

Branch Manager
Senior Sales Manager

Support System Sales Function

RM/SRM
Back Office Local Compliance
Executive Officer

ARM

Dealer

50
Trading Products of Indiabulls Securities

Indiabulls Securities
Trading Products

51
 Cash Account Intraday Account Margin Trading

Indiabulls Securities provide three products for trading. They are

 Cash Account
 Intraday Account
 Margin Trading (Mantra)

Cash Account: It provides the client to buy 4 times of cash balance in his trading account.
Intraday Product: It provides the client to buy 8 times of his cash balance in the trading
account.
Mantra Account: Also called as margin trading, is a special account to buy on leverage for
a longer duration
Indiabulls Financial Services Ltd
Indiabulls Financial Services Ltd. was incorporated in the year 2005.The Auditors of
Indiabulls Financial Services Ltd. are Deloitte, Haskins & Sells. The main activity of this
company is in relation to securities and stock brokerage. It was also responsible for setting up
one of India’s first trading platforms.

The subsidiaries of Indiabulls Financial Services Ltd. include:

 Indiabulls Capital Services Ltd.
 Indiabulls Commodities Pvt. Ltd.
 Indiabulls Credit Services Ltd.
 Indiabulls Finance Co. Pvt. Ltd
 Indiabulls Housing Finance Ltd.
 Indiabulls Insurance Advisors Pvt. Ltd.
 Indiabulls Resources Ltd.

52
  Indiabulls Securities Ltd.

Projects Pipeline
Projects Launched in Q1 FY 14
1. BLU, Worli, Mumbai – 7‐Star luxury residential complex spread over 15 acres in South
Mumbai with breathtaking sea views
2. IB Golf City, Savroli, MMR – Premium residential township with 18‐hole golf course
spread over 350 acres of greens1 IB City Sonepat Haryana 150 Acres of integrated township
with plotted development commercialY 14
1. City, Sonepat, – development, and group housing
2. IB Enigma II, Sec 154, Gurgaon – Super premium residential complex with Villa’s and
high rise towers spread over 34 acres
3. IB Imperial, Sec 156, Gurgaon – 54 Acres of Integrated township with high end residential
apartments, villa’s, luxury retail and commercial
4. IB Commercial Centre, Sec 159, Gurgaon – Over 5 acres of commercial development on
the Dwarka Expressway
5. IB Greens, Chennai – Premium residential township with high rise towers near the IT
corridor spreadover 32 acres
6. IB Mint, Sec 154, Gurgaon – Iconic Commercial tower on the Dwarka Expressway
7. IB Greens, Indore ‐ 15 Acres of Integrated township with high end residential apartments,
retail andcommercial in the heart of the city
8. IB Mega Mall, Agra & Kanpur – Destination mall/multiplex in the heart of the city

The Bankers of Indiabulls Financial Services Ltd. are as follows:

 ABN-Amro Bank
 Andhra Bank
 Bank of Maharashtra
 Bank of Rajasthan Ltd.
 Canara Bank
 Citibank
 Corporation Bank
 Dena Bank

53
 Indiabulls securities ltd
 HSBC Ltd.
 INDIABULLS Ltd.
 IDBI Ltd
 Industrial Bank Ltd.
 ING Vysya Bank Ltd
 Karnataka Bank
 Punjab National Bank
 State Bank Of India
 Syndicate Bank
 Union Bank Of India
 UTI Bank Ltd.
 INDIABULLS STOCK BROKING Ltd.

54
 CHAPTER-4

DATA ANALYSIS

&

INTERPRETATION

DATA ANALYSIS

The Objective of this analysis is to evaluate the profit/loss position futures and options. This

analysis is based on sample data taken of BHEL&ONGC.Scrip. This analysis considered the

1st APRIL 2019 TO 30th APRIL 2019 contract of BHEL&ONGC. The lot Size of BHEL is

1000&ONGC is 1000. The time period in which this analysis done is from 01-04-2019 to 30-

04-2019.

55
The following table explains the DATE and FUTURE PRICES.

 The first column explains TRADING DATE.

 Second column explains the FUTURE MARKET PRICE in cash segment on that
date.

TABLE 4.1

BHEL FUTURE PRICE OF 1ST APR 2019 TO 30TH APR 2019

FUTURE

1-Apr-19 182.1

6-Apr-19 184.2

7-Apr-19 181.75

8-Apr-19 197.75

9-Apr-19 197.85

56
 10-Apr-19 182.75

14-Apr-19 198

16-Apr-19 198.25

19-Apr-19 198.45

21-Apr-19 180.25

23-Apr-19 199

24-Apr-19 182.9

25-Apr-19 183.05

26-Apr-19 186.3

28-Apr-19 191.4

29-Apr-19 189

GRAPH 4.1

GRAPH SHOWS MOVEMENT OF FUTURE PRICES

57
 FUTURE
200

195

190

185 FUTURE
180

175

170
9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9
pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1
-A -A -A -A -A -A -A -A -A -A -A -A -A -A -A -A
01 0 6 07 0 8 09 10 1 4 16 1 9 21 2 3 24 2 5 26 2 8 29

INTERPRETATION:-

In the above graph the future price curve shows a continuously fluctuating trend and at the

end of the month future prices closed at the price of Rs.192.19 with a Profit of Rs.10.05

(Rs.192.19-182.10).to the buyer(long)and the seller(short)will incurr a loss of Rs.10.05.

FUTURE MARKET:-

BUY

ER SELLER

58
 01/04/2019(BUYING) 182.1 182.1
30/04/2019(CLOSING PERIOD) 192.19 192.19
PROFIT 10.05 LOSS 10.05

PROFIT 10.05*1000= 10500/- LOSS 10.05*1000=10500/-

Because buyers Future Price increases so profits also increase. Seller future Price increases

so he will get loss. In case seller future price will decrease he will get profit.

The closing price of BHEL at the end of the contract period is192.19 and this is considered as

settlement price.

TABLE 4.2

BHEL SPOT PRICE 1ST APR 2019 TO 30TH APR 2019

DATE SPOT
1-Apr-19 182.5

59
 6-Apr-19 185.1
7-Apr-19 182.8
8-Apr-19 198.19
9-Apr-19 197.8
10-Apr-19 182.5
14-Apr-19 198.75
16-Apr-19 197.9
19-Apr-19 198.25
21-Apr-19 199.6
23-Apr-19 198.35
24-Apr-19 182.3
25-Apr-19 183.35
26-Apr-19 185.85
28-Apr-19 191.35
29-Apr-19 188.7

GRAPH4.2

GRAPH SHOWS MOVEMENT OF SPOT PRICES

60
 SPOT
200

195

190

185 SPOT
180

175

170
9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9
pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1
-A -A -A -A -A -A -A -A -A -A -A -A -A -A -A -A
01 06 07 0 8 0 9 10 1 4 1 6 1 9 2 1 2 3 2 4 2 5 2 6 2 8 2 9

INTERPRETATION:-

In the above graph the spot price curve shows an increasing trend and at the end of the month

Spot prices settled at the price of Rs.192.55 and buyer made a profit of Rs.10.05.

SPOT MARKET:-

BUYE SELLE

R R
01/04/2019(BUYING) 182.5 182.5
30/04/2019(CLOSING PERIOD) 192.55 192.55
LOSS 10.05 PROFIT 10.05

LOSS 10.5*1000= 10500/- PROFIT 10.5*1000=10500/-

4.3The following table explains the DATE and MARKET PRICES.

The first column explains TRADING DATE. Second column explains the FUTURE PRICE

in cash segment on that date. Third column explains the MARKET PRICES BHEL FUTURE

PRICE & SPOT PRICE COMPARISION

TABLE 4.3

61
 DATE FUTURE SPOT
1-Apr-19 182.1 182.5
3-Apr-19 184.2 185.1
5-Apr-19 181.75 182.8
7-Apr-19 197.75 198.19
9-Apr-19 197.85 197.8
11-Apr-19 182.75 182.5
13-Apr-19 198 198.75
15-Apr-19 198.25 197.9
19-Apr-19 198.45 198.25
19-Apr-19 180.25 199.6
21-Apr-19 199 198.35
23-Apr-19 182.9 182.3
25-Apr-19 183.05 183.35
26-Apr-19 186.3 185.85
28-Apr-19 191.4 191.35
29-Apr-19 189 188.7

GRAPH 4.3

GRAPH SHOWS MOVEMENT OF FUTURE PRICE & SPOT PRICES

400
350
300
250
200
SPOT
150
FUTURE
100
50
0
9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9
pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1
-A -A -A -A -A -A -A -A -A -A -A -A -A -A -A -A
01 0 3 0 5 07 0 9 1 1 13 1 5 1 9 1 9 2 1 2 3 2 5 2 6 2 8 2 9

62
INTERPRETATION:-

The above graph shows the price movements of futures and spot prices. The future prices

moves along with the spot prices as per the trend i.e, the opening prices of futures is Rs.182.1

and the spot price is Rs.182.5 and at the end of the month last Thursday the future price

closed or settled at the price or Rs.192.19 and the spot price settled at the price of Rs. 192.55

with a profit of Rs.10.05 and Rs.10.05 respectively on 30th APR 2019.

BHEL CALL PRICE FOR 180,185,190,195,200.

TABLE 4.4

PRICE PREMIUM

DATE FUTURE SPOT 180 185 190 195 200

1-Apr-19 182.1 182.5 8.1 5.75 4 2.8 1.95
6-Apr-19 184.2 185.1 8.9 6.25 4.3 3 2
7-Apr-19 181.75 182.8 7.25 5.19 3.5 2.1 1.65
8-Apr-19 197.75 198.19 5.55 3.8 2.5 1.65 1.19
9-Apr-19 197.85 197.8 5.5 3.45 2.45 1.55 1.1
10-Apr-19 182.75 182.5 7.65 5.2 3.55 2.19 1.4
14-Apr-19 198 198.75 4.8 3.05 1.95 1.2 0.8
16-Apr-19 198.25 197.9 4.6 2.9 1.8 1.05 0.75
19-Apr-19 198.45 198.25 4.3 2.55 1.55 0.9 0.6
21-Apr-19 180.25 199.6 4.75 2.8 1.65 0.95 0.6
23-Apr-19 199 198.35 3.9 2.25 1.25 0.7 0.4

63
24-Apr-19 182.9 182.3 5.7 3.2 1.75 0.85 0.55
25-Apr-19 183.05 183.35 5.35 2.85 1.45 0.65 0.45
26-Apr-19 186.3 185.85 7.25 3.9 1.75 0.8 0.4
28-Apr-19 191.4 191.35 11.35 6.5 3.2 1.2 0.45
29-Apr-19 189 188.7 9.2 4.3 1.4 0.35 0.19
30-Apr-19 192.19 192.55 11 5.75 1.9 0.19 0.05

GRAPH 4.4

GRAPH SHOWS MOVEMENT AT PREMIUM OF 180,185,190,195,200.

1000
900
800
700
600
500
400
300 PREMIUM
200
PRICE
100
0
TE -19 -19 -19 -19 -19 -19 -19 -19 -19 -19 -19 -19 -19 -19 -19 -19 -19
DA pr pr pr pr pr pr pr pr pr pr pr pr pr pr pr pr pr
-A -A -A -A -A -A -A -A -A -A -A -A -A -A -A -A -A
01 0 6 0 7 08 0 9 1 0 1 4 16 1 9 21 2 3 24 2 5 26 2 8 29 3 0

BUYERS PAY OFF:

He bought 1(1000) lot of BHEL at the strike price of 180 with a premium of Rs: 8.1 per

share.Settlement price is 192.55.

Strike price 180

Add: Premium 8.1

BEP 188.10
Less Spot price 192.55
PROFITS 4.45/-
PROFITS4.45*1000= 4450/-
64
Because it is positive so buyer gets profit. In case decrease in market price the buyer of the

call will lose the premium only i.e. 4.45*1000= 4450/-

SELLERS PAY OFF:

TABLE 4.5

PRICE PREMIUM

DATE FUTURE SPOT 195 190 165 160 195

1-Apr-19 182.1 182.5 3.7 2.5 1.45 0.85 0.35
6-Apr-19 184.2 185.1 3 1.9 1.1 0.85 0.35
7-Apr-19 181.75 182.8 4 2.25 0.85 0.75 0.35
8-Apr-19 197.75 198.19 5.2 3.35 2.2 1.25 0.35
9-Apr-19 197.85 197.8 5.19 3.4 1.85 1.25 0.35
10-Apr-19 182.75 182.5 3.1 1.95 1.19 0.7 0.35
14-Apr-19 198 198.75 4.3 2.65 1.65 1.05 0.35
16-Apr-19 198.25 197.9 4 2.3 1.7 0.7 0.35
19-Apr-19 198.45 198.25 3.4 1.95 1.05 0.75 0.35
21-Apr-19 180.25 199.6 2.5 1.4 0.75 0.55 0.35
23-Apr-19 199 198.35 2.8 1.5 0.7 0.65 0.35
24-Apr-19 182.9 182.3 1.5 0.8 0.3 0.25 0.35
25-Apr-19 183.05 183.35 1.1 0.6 0.2 0.25 0.35
26-Apr-19 186.3 185.85 0.55 0.3 0.2 0.1 0.35
28-Apr-19 191.4 191.35 0.2 0.19 0.1 0.05 0.35
29-Apr-19 189 188.7 0.19 0.1 0.05 0.05 0.35
30-Apr-19 192.19 192.55 0.05 0.05 0.05 0.05 0.35

As it is out f the money for seller: hence his loss s.

LOSS 4.45*1000=4450/-
Because it is negative, and the price in market continuously up so the seller will get loss.

BHEL PUT PRICE FOR 195,190,165,160,195.

GRAPH 4.5
GRAPH SHOWS MOVEMENT AT PREMIUM OF 195,190,165,160,195.

65
 1000
900
800
700
600
500
400
300
PREMIUM
200
100 PRICE
0
TE 9 9 9 9 9 9 9 9
DA pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1
-A -A -A -A -A -A -A -A
06 08 10 16 21 24 26 29

BUYERS PAY OFF:-

He bought 1(1000) lot of BHEL at the strike price of 195 with a premium of Rs: 3.7per share.

Settlement price is 192.55

Strike price 195

LESS: Premium 3.7

BEP 191.30

Less Spot price 192.55

LOSS -21.25

LOSS 3.7*1000= 3700/-

As it is in the money for seller: hence his loss is.

PROFIT:3.7*1000= 3700/-

Because it is negative, and the price in market continuously down so the seller will get loss.

4.6 The following table explains the DATE and MARKET PRICES.

66
The first column explains TRADING DATE.Second column explains the FUTURE PRICE
in cash segment on that date.Third column explains the MARKET PRICES in cash segment
on that date.

ONGC FUTURE PRICE OF 1ST APR 2019 TO 30TH APR 2019

TABLE 4.6

DATE FUTURE
1-Apr-19 309.95
6-Apr-19 318
7-Apr-19 311.05
8-Apr-19 308.5
9-Apr-19 314.9
10-Apr-19 313.55

67
 14-Apr-19 303.85
16-Apr-19 303.2
19-Apr-19 306.95
21-Apr-19 308.95
23-Apr-19 319.8
24-Apr-19 332.05
25-Apr-19 328.8
26-Apr-19 334.7
28-Apr-19 328.55
29-Apr-19 326.85

GRAPH 4.6

GRAPH SHOWS MOVEMENT ONGC FUTURE PRICE

68
 FUTURE
335
330
325
320
315
310 FUTURE
305
300
295
290
285
9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9
pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1
-A -A -A -A -A -A -A -A -A -A -A -A -A -A -A -A
01 0 6 07 0 8 09 10 1 4 16 1 9 21 2 3 24 2 5 26 2 8 29

INTERPRETATION:-

In the above graph the future price curve shows an continuous fluctuations and at the end

of the month future prices is closed at the price of Rs.326.35 with a profit of Rs.16.4 (309.95-

326.35).

FUTURE MARKET:-

BUY SELLER

69
 ER
01/04/2019(BUYING) 309.95 309.95
30/04/2019(CLOSING PERIOD) 326.35 326.35
PROFIT 16.4 LOSS 16.4

PROFIT 16.4*1000= 16400/- LOSS 16.4*1000=16400/-

Because Buyers Future Price increase so profit also increase. Seller future Price also increase

so he will get loss. Incase seller future will decrease he will get profits.

The closing price of ONGC at the end of the contract period is 326.35 and this is considered

as settlement price. The following table explains the DATE and MARKET PRICES.The first

column explains TRADING DATE. Second column explains the MARKET PRICE in cash

segment on that date.

ONGC SPOT PRICE FROM 1ST APR 2019 TO 30TH APR 2019

TABLE 4.7
DATE SPOT

70
 1-Apr-19 308.85
6-Apr-19 319.2
7-Apr-19 310.55
8-Apr-19 307.65
9-Apr-19 314.3
10-Apr-19 312.85
14-Apr-19 303.8
16-Apr-19 302.9
19-Apr-19 307.25
21-Apr-19 308.8
23-Apr-19 319
24-Apr-19 331.9
25-Apr-19 328.85
26-Apr-19 334.35
28-Apr-19 328.05
29-Apr-19 326.45

GRAPH SHOWS MOVEMENT ONGC SPOT PRICE

GRAPH 4.7

71
 SPOT
100%
90%
80%
70%
60%
50% SPOT
40%
30%
20%
10%
0%
9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9
pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1
-A -A -A -A -A -A -A -A -A -A -A -A -A -A -A -A
0 1 0 6 0 7 0 8 0 9 1 0 1 4 16 1 9 2 1 2 3 24 25 26 28 29

INTERPRETATION:

In the above graph the spot price curve shows an increasing trend and at the end of the month

Spot prices settled at the price of Rs.326.5 with a profit of Rs.19.6 (308.9-326.5)

SPOT MARKET:-

BUY

ER SELLER
01/04/2019(BUYING) 308.9 308.9
30/04/2019(CLOSING PERIOD) 326.5 326.5
profit 19.6 Loss 19.6

profit 19.6*1000=19600/- loss 19.6*1000=19600/-

4.8 The following table explains the DATE and MARKET PRICES.

The first column explains TRADING DATE. Second column explains the FUTURE PRICE

in cash segment on that date. Third column explains the SPOT PRICES in cash segment on

that date.

ONGC FUTURE & SPOT PRICE FROM 1ST APR 2019 TO 30TH APR 2019

TABLE 4.8
DATE FUTURE SPOT
1-Apr-19 309.95 308.85

72
 6-Apr-19 318 319.2
7-Apr-19 311.05 310.55
8-Apr-19 308.5 307.65
9-Apr-19 314.9 314.3
10-Apr-19 313.55 312.85
14-Apr-19 303.85 303.8
16-Apr-19 303.2 302.9
19-Apr-19 306.95 307.25
21-Apr-19 308.95 308.8
23-Apr-19 319.8 319
24-Apr-19 332.05 331.9
25-Apr-19 328.8 328.85
26-Apr-19 334.7 334.35
28-Apr-19 328.55 328.05
29-Apr-19 326.85 326.45

GRAPH 4.8

GRAPH SHOWS COMPARISION BETWEEN FUTURE PRICE & SPOT

PRICE

73
 100%
90%
80%
70%
60%
50%
40% SPOT
FUTURE
30%
20%
10%
0%
9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9
pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1 pr-1
-A -A -A -A -A -A -A -A -A -A -A -A -A -A -A -A
01 06 0 7 0 8 0 9 1 0 14 16 19 21 2 3 2 4 2 5 2 6 28 29

INTERPRETATION:-

The above graph shows the price movements of futures and spot prices. The future prices

moves along with the spot prices in increasing trend i.e, the opening prices of futures is

Rs.309.95 and the spot price is Rs.308.9

ONGC CALL PRICE FOR 300,310,320,330,340

TABLE 4.9

74
 PREMIUM
FUTUR

DATE E SPOT 300 310 320 330 340

1-Apr-19 309.95 308.85 14.8 9.4 5.4 3 1.65
6-Apr-19 318 319.2 20.19 12.9 7.85 4.3 2.35
7-Apr-19 311.05 310.55 14.55 8.45 5.19 2.65 1.4
8-Apr-19 308.5 307.65 12.5 7.55 4 2 1.1
9-Apr-19 314.9 314.3 19.65 11.05 6.25 3.35 1.65
10-Apr-19 313.55 312.85 19.9 10.19 5.55 2.85 1.35
14-Apr-19 303.85 303.8 10.45 5.75 3 1.55 0.8
16-Apr-19 303.2 302.9 9.45 5.05 2.55 1.19 0.75
19-Apr-19 306.95 307.25 10.9 5.8 2.85 1.35 0.7
21-Apr-19 308.95 308.8 11.8 6.19 3 1.2 0.6
23-Apr-19 319.8 319 20.05 12.95 6.8 3.3 1.45
24-Apr-19 332.05 331.9 32.2 22.5 14.45 7.85 3.7
25-Apr-19 328.8 328.85 30.1 21.95 12.55 5.85 2.25
26-Apr-19 334.7 334.35 34.05 24.75 19.55 8.05 3.19
28-Apr-19 328.55 328.05 28.4 22 9.4 3.19 0.9
29-Apr-19 326.85 326.45 22.5 13.2 7.2 1.7 0.19
30-Apr-19 326.35 326.5 22.5 19 5.9 0.19 0.05

75
GRAPH 4.9

GRAPH SHOWS MOVEMENT AT PREMIUM 300,310,320,330,340.

100%
90%
80%
70%
60%
50%
40%
30%
PREMIUM
20%
10% PRICE
0%
TE -19 -19 -19 -19 -19 -19 -19 -19
DA pr r r r r r r r
-A -Ap -Ap -Ap -Ap -Ap -Ap -Ap
0 6 0 8 1 0 1 6 2 1 2 4 2 6 2 9

BUYERS PAY OFF:-

He bought 1(1000) lot of ONGC at the strike price of 300 with a premium of Rs:14.80 per

share.Settlement price is Rs. 326.50

76
 Strike price 300
Add: Premium 14.80
BEP 314.80
Less Spot price 326.50
profit 11.70
Profit 11.70*1000= 11900/-

Because it is positive so buyer gets profit. In case decrease in market price the buyer of the

call will get the premium only i.e.. 11.70*1000= 11900/-

SELLERS PAY OFF:-

As it is out OF the money for seller: hence his loss is.

loss 11.70*1000=11900/-
Because it is negative, and the price in market continuously down so the seller will get loss.

77
TABLE4.10

ONGC PUT PRICE FOR 320,310,300,290,280.

PRICE PREMIUM

DATE FUTURE SPOT 320 310 300 290 280

1-Apr-19 309.95 308.85 19.5 9.05 5.05 2.6 1.2

6-Apr-19 318 319.2 9.8 5.45 2.65 1.55 0.65
7-Apr-19 311.05 310.55 13.55 7.85 3.65 1.85 0.85
8-Apr-19 308.5 307.65 19.65 9 4.8 2.25 1.05
9-Apr-19 314.9 314.3 11.7 6.4 3.2 1.4 0.65
10-Apr-19 313.55 312.85 11.85 6.6 3.25 1.55 0.7
14-Apr-19 303.85 303.8 19.3 11.7 6.4 3.1 1.4
16-Apr-19 303.2 302.9 19.6 10.75 6.25 3 1.25
19-Apr-19 306.95 307.25 19.35 8.6 3.95 1.65 0.8
21-Apr-19 308.95 308.8 13.45 7.25 3.05 1.25 0.7
23-Apr-19 319.8 319 6.95 3.1 1.19 0.5 0.35
24-Apr-19 332.05 331.9 2.7 1.05 0.5 0.35 0.2
25-Apr-19 328.8 328.85 3.19 1.2 0.5 0.3 0.2
26-Apr-19 334.7 334.35 1.2 0.35 0.1 0.19 0.05
28-Apr-19 328.55 328.05 1.25 0.2 0.19 0.19 0.05
29-Apr-19 326.85 326.45 0.6 0.1 0.05 0.05 0.05

78
GRAPH 4.10

GRAPH SHOWS MOVEMENT OF PUT PRICE AT PREMIUM OF

320,310,300,290,280.

100%
90%
80%
70%
60%
50%
40%
30% PREMIUM
20%
10% PRICE

0%
TE -19 -19 -19 -19 -19 -19 -19 -19
DA pr r r r r r r r
-A -Ap -Ap -Ap -Ap -Ap -Ap -Ap
06 08 10 16 21 24 26 29

BUYERS PAY OFF:-

He bought 1(1000) lot of ONGC at the strike price of 320 with a premium of Rs:19.50 per

share.Settlement price is Rs. 326.5

Strike price 320
Less: Premium 19.50
BEP 302.5
Less Spot price 326.5

LOSS 22

LOSS 24*1000=24000/-

79
 Because it is positive so buyer gets profit. In case decrease in market

price the buyer of the call will get the premium only i.e. 24*1000=

24000/-

SELLERS PAY OFF:-

As it is out of the money for seller: hence his loss is.

LOSS24*1000=24000/-
Because it is negative, and the price in market continuously down so the seller will get loss

80
 CHAPTER-5

FINDINGS, SUGGESTIONS, LIMITATIONS

&

CONCLUSIONS

81
 FINDINGS

 The future price of BHEL, ONGC is moving along with the market price.

 If the buying price of the future is less than the settlement price, than the buyer of a

future gets profit.

 If the selling price of the future is less than the settlement price, than the seller incur

losses.

 As above BHEL,ONGC given losses ,given profits

 Cost of carry model and Interest rate parity model are useful tools to find out standard
future price and also useful for comparing standard with actual future price. And it’s
also a very help full in Arbitraging.

 New concept of Exchange traded currency future trading is regulated by higher

authority and regulatory. The whole function of Exchange traded currency future is
regulated by SEBI/RBI, and they established rules and regulation so there is very safe
trading is emerged and counter party risk is minimized in currency Future trading.
And also time reduced in Clearing and Settlement process up to T+1 day’s basis.

 Larger exporter and importer has continued to deal in the OTC counter even exchange
traded currency future is available in markets because,

 There is a limit of USD 100 million on open interest applicable to trading member
who are banks. And the USD 25 million limit for other trading members so larger
exporter and importer might continue to deal in the OTC market where there is no
limit on hedges.

 In India RBI and SEBI has restricted other currency derivatives except Currency
future, at this time if any person wants to use other instrument of currency derivatives
in this case he has to use OTC.

82
 SUGGESTIONS

 The derivative market is newly started in India and it is not known by every

investor, so SEBI has to take steps to create awareness among the investors

about the derivative segment.

 In order to increase the derivatives market in India, SEBI should revise some

of their regulations like contract size, participation of FII in the derivatives

market.

 Contract size should be minimized because small investors cannot afford this

much of huge premiums.

 SEBI has to take further steps in the risk management mechanism.

 SEBI has to take measures to use effectively the derivatives segment as a tool

of hedging.

83
 CONCLUSION

 In bullish market the call option writer incurs more losses so the investor is suggested

to go for a call option to hold, whereas the put option holder suffers in a bullish

market, so he is suggested to write a put option.

 In bearish market the call option holder will incur more losses so the investor is

suggested to go for a call option to write, whereas the put option writer will get more

losses, so he is suggested to hold a put option.

 In the above analysis the market price of BHEL, ONGC is having high volatility, so

the call option writer enjoys more losses to holders.

84
 BIBILOGRAPHY

 BOOKS :-

 Financial Market and Services (2009)

- GORDAN & NATRAJAN

 Financial Management (2011)

- PRASNNA CHANDRA

 Risk management (2009)

-DR.G.KOTRESHWAR

 NEWS PAPERS :-

 Economic times

 Times of India

 Business Line

 MAGAZINES :-

 Business Today

 Business India

 WEBSITES :-

 www.derivativesindia.com

 www.nseindia.com

 www.bseindia.com

 www.sebi.gov.in

85
86