Derivatives on option trading strategy

Abstract

India has vibrant securities market with strong retail participation that has rolled over the years. Derivatives are risk management instruments, which derive their value from an underlying asset. The underlying asset can be bullion, index, share, bonds, currency, interest etc. Banks, securities firms, companies and investors to hedge risks, to gain access to cheaper money and to make profit, use derivatives. Derivatives are likely to grow even at a faster rate in future. Option contracts are not marked-to-market, and the cash settlement is done when the contracts are expired. The liquidation value is equal the value of the option. Options are also subjected to price movement risk. The total option margin then consists of two margin components, the value of the option and a change cost to cover price movement. The main objective of the study is to analyze the derivatives market in India and to analyze the operations of options. Analysis is to evaluate the profit/loss position options. Derivates market is an innovation to cash market. Approximately its daily turnover reaches to the equal stage of cash market