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WHAT ARE DERIVATIVES?

A derivative is the contract between two parties which derives its value from an underlying asset, which can be Index, Equity, Commodities, etc. This instrument provides a good leverage opportunity and is a great tool for speculation. It can be traded in index futures and index options, stock futures and stock options. Derivatives are usually in the form of a contract, where the buyer is under an obligation to buy or seller is under an obligation to sell the underlying asset at a specified price on a specified date in the future.

  • Futures

    Through TSLonline.com, you can now trade in index and stock futures on the NSE. In futures trading, you take buy/sell positions in index or stock(s) contracts having a longer contract period of up to 3 months. Trading in FUTURES is simple! If, during the course of the contract life, the price moves in your favor (i.e. rises in case you have a buy position or falls in case you have a sell position), you make a profit.

  • Options

    An option is a contract, which gives the buyer the right to buy or sell shares at a specific price, on or before a specific date. For this, the buyer has to pay to the seller some money, which is called premium. There is no obligation on the buyer to complete the transaction if the price is not favorable to him. To take the buy/sell position on index/stock options, you have to place certain % of order value as margin. With options trading, you can leverage on your trading limit by taking buy/sell positions much more than what you could have taken in cash segment.

    • Call Option has the Right but not the Obligation to Purchase the Underlying Asset at the specified strike price by paying a premium whereas the Seller of the Call has the obligation of selling the Underlying Asset at the specified Strike price.
    • Put Option has the Right but not the Obligation to Sell the Underlying Asset at the specified strike price by paying a premium whereas the Seller of the Put has the obligation of Buying the Underlying Asset at the specified Strike price.
    • By paying lesser amount of premium, you can create positions under OPTIONS and take advantage of more trading opportunities.

WHY INVEST IN DERIVATIVES?

Derivatives have traditionally been used by businesses to hedge against different types of risks, and have been in existence for decades. With well-planned strategies based on a thorough study of the markets, individual investors and traders can earn handsome returns through derivatives trading.

Investment in derivatives has the following advantages:

  • Hedging against risk

    Derivatives are used for hedging against risk in price fluctuations of the underlying asset. Since the buy (or sell) price at delivery is specified in advance, the buyer/seller can protect his investment from deviation in price trend.

  • Lower costs

    The investor needs to pay only for the contract, which is usually much less than the price of the underlying asset, thus offering a benefit of lower costs.

  • Leverage

    Trading in derivatives involves use of leverage through margin that is maintained with the broker. Hence, lesser cash is required to be paid at the time of trade

HOW TO INVEST IN DERIVATIVES?

Derivatives are generally short-term trading instruments, and are traded on the exchanges. Similar to stocks, to buy or sell derivatives on the exchange, you need to place orders with your broker, who then executes the order on your behalf.

Tata securities offering

TSL is one of the leading players in the broking space in India and offers broking services in equities, commodities, currencies as well as derivatives. We bring to the table more than 07 years of broking experience, backed by in-depth research from the strong in-house research team and an excellent customer support system. Clients can trade thru offline module and thru internet application.

Member Details
Member of :NSE BSE CDSL NSDL AMFI Registered with SEBI as PMS and Merchant Banker
BSE Cash: INB010664150. BSE Derivatives: INF011207954. NSE Cash: INB231288730. NSE Derivatives : INF231288730. NSE Currency Derivative : INE231288730. AMFI Registration No. - ARN 0021 PMS Regn. No. INP000003872. PMS Disclosure. Depository Participant of CDSL: IN-DP-CDSL-450-2008 Depository Participant of NSDL: IN-DP-NSDL-298-2008. Merchant Banker INM000011302;
Compliance officer : Bineet Jha (Bineet.jha@tatacapital.com) | Investor grievances : investcare@tatacapital.com and compliance.securities@tatacapital.com
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