1. Contents Derivatives Futures. Options. Technical analysis. Fundamental analysis. Market.

2. TATAMOTORS TataMotors Futures Jun 01, 2009 = 78000 Jun 16, 2009 = 131640 Profit = 53640. Returns in % = 68%.

3. BHARTI BHARTI Futures Oct 1, 2009 = 44000 Oct 28, 2009 = 0. Loss.

4. HUL HUL Options July 13, 2009 = 500 July 27, 2009 = 4000. Profit = Rs.3500

5. RCOM RCOM Options Oct 5, 2009 = 7700 Oct 29, 2009 = 0 Loss

6. Uses of derivatives: Hedging Arbitrage Buy on Margin

7. Cash Market Cash Market Derivative Market Derivative Market

8. DERIVATIVES

9. Derivative Definition: ‘derivative’ refers to an asset that has no independent value, but ‘derives’ its value from that of an underlying asset.

10. Examples Curd, which is derivative of milk. Price of the curd depends on the price of the milk. ADR like Satyam, Infosys etc.

11. DERIVATIVES FUTURES OPTIONS LONG SHORT CALL PUT

12. Futures Futures are exchange-traded contracts to buy or sell an asset in future at a price agreed upon today. The asset can be share, index, interest rate, bond, rupee-dollar exchange rate, sugar, crude oil, soybean, cotton, coffee etc.

13. Types of Futures Index Futures : are derivative contracts, which have the index value (Nifty, Sensex etc) as the underlying asset. Stock Futures : are derivative contracts that have an equity share as the underlying asset.

14. Premium Future > Spot 5300 > 5250 Prm = 50 Future < Spot 5250 < 5300 Disc = 50 Discount

15. DateNifty SpotNifty FutPrm/Disc 1-Jan-086144616116 2-Jan-086179622344 3-Jan-08617961753 4-Jan-086274625519 7-Jan-08627962889 8-Jan-086288626919 9-Jan-086272626012 10-Jan-08615761625

16. DERIVATIVES FUTURES OPTIONS LONG SHORT CALL PUT

17. Long Position in Futures Bullish on stock or index. Buy position on Future contract. “To sell the contract on or before the expiration date.”

18. LONG Buy now sell later. BUY SELL 5800 5000

19. 5800 BUY SELL

20. DERIVATIVES FUTURES OPTIONS LONG SHORT CALL PUT

21. Short Position in Futures Bearish on stock or index. Sell Future contract. “To buy the contract on or before the expiration date.”

22. SHORT Sell now buy later. BUY SELL 5800 5000

23. BUY SELL 5800 5000

24. LONG Buy now sell later. Sell now buy later. SHORT BUY SELL BUY SELL 5800 5000

25. Futures Trading Lot size = 75. Future Price = 2800. Margin = 23% Total Amt required to pay = 75 * 2800 * 23% = Rs. 48,300

26. Uses: Hedging Arbitrage Buy on Margin

27. DERIVATIVES FUTURES OPTIONS LONG SHORT CALL PUT

28. Hedging Insurance. When people decide to hedge, they are insuring themselves against a negative event. For example, if you buy house insurance, you are hedging yourself against fires, break-ins or other unforeseen disasters.

29. 75 shares. Buy Price = 2800. 75 shares. Short Position at 2800. Market Price = 2000. 75 shares. Buy Price = 2800. Loss = 2000 - 2800 = -800 75 shares. Buy Price = 2800. Profit = 2800-2000 = 800 Spot / cash MarketFuture market

30. Arbitrage The simultaneous purchase and sale of an asset in order to profit from a difference in the price. "riskless profit“.

31. 75 shares. Buy Price = 2800. 75 shares. Short Position at 3000. Market Price = 2000. 75 shares. Buy Price = 2800. Loss = 2000 - 2800 = -800 75 shares. Buy Price = 2800. Profit = 3000-2000 = 1000 Spot / cash MarketFuture market Net Profit/Loss = (-800+1000)*75 = 15000 Net Profit/Loss per share = (-800+1000) =200

32. 75 shares. Buy Price = 2800. 75 shares. Short Position at 3000. Market Price = 4000. 75 shares. Buy Price = 2800. Loss = 4000 - 2800 = 1200 75 shares. Buy Price = 2800. Profit = 3000-4000 = -1000 Spot / cash MarketFuture market Net Profit/Loss = (-800+1000)*75 = 15000 Net Profit/Loss per share = (-800+1000) =200

33. Buying on Margin Reliance Industries. No of shares = 75. Price per share = 2800. Spot / cash MarketFuture market Total Amt Paid =75 * 2800 = 2,10,000 Total Amt Paid =75 * 2800 * 23% = 48,300 Margin

34. You have Rs.40000……. 2300*75*23% = 39675 = 40000 / 2300 17 shares 350 * 75 = 26250 350 * 17 = 5950 FUTURESSPOT / CASH PRICE = 2300 PRICE = 2650