FINOSUTRA

 Clearing Corporation  What is Clearing Corporation  Clearing Corporation/ Clearing House is responsible for clearing and settlement of all  trades executed on the F&O Segment of the Exchange. Clearing Corporation acts as a  legal counterparty to all trades on this segment and also guarantees their financial  settlement. The Clearing and Settlement process comprises of three main activities, viz.,  Clearing, Settlement and Risk Management.  Clearing and settlement activities in the F&O segment are undertaken by Clearing  Corporation with the help of the following entities: Clearing Members and Clearing  Banks.  *Clearing Members   There are 3 main type in clearing members. 1. Self clearing member : They clear and settle trades executed by them only, either  on their own account or on account of their clients.   2. Trading member–cum–clearing member: They clear and settle their own trades...

Basic Tools of contract. Tool of Derivative contract, The prices of both spot and F&O markets are published by many major business dailies  such as Economic Times, Mint, Business Standard, Financial Express, etc. They publish all  or some of the following details for the derivatives contracts being traded on the  exchanges. Date: This gives the Trade date.    Symbol : This gives the underlying index or stock e.g. NIFTY . Tool of Derivative contract Instrument: This gives the contract descriptor for the various instruments available in  the derivatives segment e.g. FUTSTK, OPTIDX, etc.  Expiry date: The date on which the contract expires  Option Type: This gives the type of option for the contract. (CE‐ Call European, PE‐ Put  European, CA‐ Call American, PA‐ Put American)   Corporate Action level: This is the Corporate Action Flag. This flag changes when there is  a corporate action ...

Trading System. what is trading system.. In this chapter we shall take a brief look at the trading system of futures and options on  exchanges, including various types of orders. However, the best way to develop an  understanding of the trading system is to actually watch the screen and observe trading.  As stated earlier, futures and options are standardized contracts and like shares, they  are traded on exchanges. Paper Trading   Markets around the world can be classified into two main  types based on the methods of booking a trade namely an “open outcry” marke t and  the  “electronic”  market.   Open  outcry  is  the  way  of  communication  between  professionals on an exchange, which involves shouting, or using hand signals to transfer  information about buy and sell orders. In an open outcry markets, usually the trading  takes place in a large hall known as “pit” wher...

Option contract.... What are option contract /  Call and Put Options Definitions and Examples. Option contract.                           Option is a contract that gives the right, but not an obligation, to buy or sell the  underlying asset on or before a stated date/day, at a stated price, for a price. The party  taking a long position i.e. buying the option is called buyer/ holder of the option and the  party taking a short position i.e. selling the option is called the seller/ writer of the  option.  The option buyer has the right but no obligation with regards to buying or selling the  underlying asset, while the option writer has the obligation in the contract. Therefore,  option buyer/ holder will exercise his option only when the situation is favourable to  him, but, when he decides to exercise, option  writer would be legally bound to honour  the con...

Future contract !!!!!!!!!!!!!!!!!! What are future contract Derivative. Futures markets were innovated to overcome the limitations of forwards. A futures  contract is an agreement made through an organized exchange to buy or sell a fixed  amount of a commodity or a financial asset on a future date at an agreed price. Simply,  futures  are  standardised  forward  contracts  that  are  traded  on  an  exchange.  The  clearinghouse associated with the exchange guarantees settlement of these trades. A  trader, who buys futures contract, takes a long position and the one, who sells futures,  takes a short position. The words buy and sell are figurative only because no money or  underlying asset changes hand, between buyer and seller, when the deal is signed Future Contract. It is important to understand what actually futures prices indicate?  If we say  May 2020 ind...

                      Forward contract  Forward contract. Forward contract is an agreement made directly between two parties to buy or sell an  asset on a specific date in the future, at the terms decided today. Forwards are widely  used in commodities, foreign exchange, equity and interest rate markets.  Let us understand with the help of an example.  Assume on May 9, 2020 you wanted to purchase gold  from a goldsmith. The market price for gold on May 9, 2020 was Rs. 30,425 for 10  gram and goldsmith agrees to sell you gold at market price. You paid him Rs. 30,425 for  10 gram of gold and took gold. This is a cash market transaction at a price (in this case  Rs. 30,425) referred to as spot price.  Now suppose you do not want to buy gold on May 9, 2020, but only after 1 month.  Goldsmith quotes you Rs. 30,450 for 10 grams of gold. You agree to the forward price...

Introduction to Index What is index Derivatives.   Index is a statistical indicator that measures changes in the economy in general or in  particular areas. In case of financial markets, an index is a portfolio of securities that  represent  a  particular  market  or  a  portion  of  a  market.  Each  Index  has  its  own  calculation methodology and usually is expressed in terms of a change from a base  value. The base value might be as recent as the previous day or many years in the past.  Thus, the percentage change is more important than the actual numeric value.  Financial  indices are created to measure price movement of stocks, bonds, T‐bills and other type  of financial securities. More specifically, a stock index is created to provide market  participants  with  the  information  regarding  average  share  price...