Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

Friday, January 6, 2017

Options Contracts in Stock Markets

Stock Options Contracts




Options are of two types -calls and puts . A call gives a buyer the right to buy an underlier at a fixed price in future. A put gives a buyer the right to sell an underlier similarly.

1. Who buys a call and a put?

A person bullish on an asset buys a call option on it, like Nifty or dollar -rupee call. A per son bearish an asset buys a put on it.

2. What is the cost to buy one ?

Say you're bullish on Nifty. You think Nifty , which closed at 8139 on Friday will hit 8200 this Friday will hit 8200 this week, you buy an 8200 Nifty call at `3,825 (price per share of 75 lot is `51). That is to take exposure to 1 Nifty lot (75 shares) worth `6.15 lakh you got to put a margin of less than 1%.


If Nifty jumps by 61 points to 8200, you make `4,575 gross return on investment of `3,825 as premium (price of option). But say by December 29, when the current series of options expire, if Nifty re mains below 8200, you could forfeit the entire premium.

3. Who sells you the options?

The seller is a rich investor or a broker or even an FPI. The counterparty is anonymous.The seller collects premium from you and gains when the premium erodes.


4. Can you get delivery in options?

Options traded in exchanges in India are normally cash settled, with buyer having the right but not obligation to give or take delivery.


5. An Example?

Say I have 100 shares of `10 each.

I am worried `10 could become say `8. So, I buy a put option that allows me to sell 100 shares at `10 each.If the price declines to `8 by expiry , the put seller is obliged to buy the shares from me at `10. So, I make a gain of `2 per share if the share declines thus.


Similarly , if I feel a share will rise from `100, I buy a call option on the share which lets me buy it at `100 on expiry of the contract even if it rises to `105. In that case, the call seller is obliged to sell me the share at `100. I buy the share from him for `100 and sell it in the market for `105 making `5 in the bargain. In reality , only the difference is exchanged here.Also, the buyer could forfeit the premia in case the asset goes the other way .







------------------------------------
Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds

Top 4 Tax Saver Mutual Funds for 2017 - 2018

Best 4 ELSS Mutual Funds to invest in India for 2017

1. DSP BlackRock Tax Saver Fund

2. Invesco India Tax Plan

3. Tata India Tax Savings Fund

4. BNP Paribas Long Term Equity Fund



Invest in Best Performing 2017 Tax Saver Mutual Funds Online

Invest Best Tax Saver Mutual Funds Online

Download Top Tax Saver Mutual Funds Application Forms


For further information contact Prajna Capital on 94 8300 8300

------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Call us on 94 8300 8300

------------------------------------

 

Post a Comment
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now
Related Posts Plugin for WordPress, Blogger...

Popular Posts

Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now