Basics of Derivatives, Part -1 | Future | Option | Forward | Hedging | MasterClass by 5paisa cover

Basics of Derivatives, Part -1 | Future | Option | Forward | Hedging | MasterClass by 5paisa

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Instructor: Mr. Shomesh Kumar

Language: Hinglish

Validity Period: Lifetime

 

Derivatives have many uses beyond simply making big banks money. They can make you money, too! Derivatives are complex financial instruments which can prove to be a lucrative opportunity to those that use them judiciously! Watch this session with Market Expert, Mr. Shomesh Kumar, to learn the basics of Derivatives and how to apply derivatives strategies to counter high risk and take advantage of the benefits! Discussion pointers: - Derivative Defined (in simple language) - Futures & Options Defined - Difference between Futures & Forwards - Important terms (Open Interest, Cost of Carry, Rollover, Stop Loss, Volatility, Futures Price, Option Price/Premium, Strike Price, ATM, ITM, OTM, Historical Volatility, Implied Volatility) - Factors affecting options premium - Select strategies viz. Bull Call Spread, Bear Put Spread, Covered Call, Protective Put, Straddles and Strangles. What are Derivatives? In simple term the derivative means you predict and betting on future weather this will happen or not on the bases of current situation and your own interest. Derivatives are securities whose value is derived from the underlying security. Examples of security: Such as bonds, stocks, currencies, commodities, an index or temperature. Types of Derivatives: Ø Forward Ø Future Ø Options Ø Warrants Necessity of Derivatives: Ø Counterparty Ø Common Asset Ø Market Ø Contractual Agreement Future Contract- Future contract is an obligation to buy or sell a specific quantity and quality of a commodity or security at a certain price on a specified future date. They are standardized, and exchange traded. Some futures contracts may call for physical delivery of the asset, while most are settled in cash. Option Contract - An option is a type of derivative where the buyer has the right, but not the obligation, to buy (call option) or sell (put option) a commodity or financial asset at a specified price (the strike price) during a specified period of time in future.

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