Futures Or Options ?

[sanjoy_roy]

Hi Friends,

I do not understand FnO market as such. I have read a lot but that has been of US markets.

Can someone brief me about the logistics of the Indian market. FnO seems pretty risky but very fruitful and interesting at the same time.

I would like to know the following:

1. Diffrence between F and O.
2. What is the typical lot size in F and O (each lot has how many shares)
3. What is the kind of investment required in F and O.
4. Which is riskier F or O.

more queries to come

do answer them as that will help me in taking a decision.

Thanx,
Sanjoy

 

[chetan_ghatole]

Hello Friends,

Can somebody guide me about the margin requirements for futures and options. I know it is around 10-25% for index and stocks. I particularly want to know what is the margin required in following cases:

1. Go long on the future
2. Hold on the long future (mark to market margin)
3. Go short on the future
4. Hold on the short future (mark to market margin)
5. Go long on the Call Options
6. Go short on the Call Options (I will get the money by writing the calls, so do I need to maintain the margin with broker or should it be in my account)
7. Go long on the Put Options
8. Go short on the Put Options.

Pardon me if I am asking very basic things, but it will be really helpful to understand the derivatives if somebody can explain me.

Thanks,
Chetan

 

[vince]

Hello Friends,

Can somebody guide me about the margin requirements for futures and options. I know it is around 10-25% for index and stocks. I particularly want to know what is the margin required in following cases:

1. Go long on the future
2. Hold on the long future (mark to market margin)
3. Go short on the future
4. Hold on the short future (mark to market margin)
5. Go long on the Call Options
6. Go short on the Call Options (I will get the money by writing the calls, so do I need to maintain the margin with broker or should it be in my account)
7. Go long on the Put Options
8. Go short on the Put Options.

Pardon me if I am asking very basic things, but it will be really helpful to understand the derivatives if somebody can explain me.

Thanks,
Chetan

Hi Chetan,

In response to your queries,

Since it is the broker who blocks the margin it has to be maintained with him.

Margin is applicable for all future positions long or short and all short options.

There is no margin for long options.

Regds and trade well

 

[vince]

Hi Friends,

I do not understand FnO market as such. I have read a lot but that has been of US markets.

Can someone brief me about the logistics of the Indian market. FnO seems pretty risky but very fruitful and interesting at the same time.

I would like to know the following:

1. Diffrence between F and O.
2. What is the typical lot size in F and O (each lot has how many shares)
3. What is the kind of investment required in F and O.
4. Which is riskier F or O.

more queries to come

do answer them as that will help me in taking a decision.

Thanx,
Sanjoy

Hi sanjoy,

F stands for futures and o for options which are based on the underlying which could be an index or a stock. It would be advisable to read a good book to gain further insight on this subject. Many are listed on this site.

The lot sizes are available at the website www.nse-india.com

Investment required is in the form of margins to be deposited with your broker to trade f n o contracts. Its your choice really how big you want to trade. For eg. the margin for 1 nifty is normally 10% of spot, that would be 29500 today.

Both are equally risky if you do not know what you are doing.

Trade well

 

[trader31339]

Today lets suppose I went long in nifty future at 3250, at the same time bought nifty put option of strike price 3200 at 23 ;so that I can hedge my long position in futures.

Now I know as and when nifty future will fall I will gain from puts and thus my risk will be controlled.

But since the put I have bot is out the money put so it will gain enough only when it bcomes in the money put.So, if the nifty future trades at 3225 then I loose 25 points here but how gain I will get from puts I have bot ( just an idea)

What I wanna know is , how to hedge futures with calls ( in case of stop loss)

How much we will gain if the futures goes upto 3300 considering the puts premium and how much we will loose if the future falls upto 3225, here also pls consider the puts premium.

 

[ivanboesky]

You cannot perfectly hedge a long futures position by selling calls. However, you can hedge a short futures position by buying calls.
If you buy a futures contract and sell a call, you are only protected to the extent of the premium you receive by selling the call. So it is not a perfect hedge, but only a loss reduction strategy.

 

[vince]

Trader 31339,

To answer your question about how to hedge futures with calls look to the greeks.
In your example if NF is at 3250 you would have to sell 2 atm calls/ future to be perfectly hedged.
Monitor your position every 100 deltas and adjust as required.

Regds

 

[ivanboesky]

Dynamic hedging does not provide a perfect hedge, especially in the presence of jumps.

 

[ravi1967]

can anyone revive this thread please?. a lot of information to people like me. vinceji once said my 'analysis paralysis'. i dont want this to happen. this month june i have done a buy as follows

Sell TISCO JUNE 500 PUT @15/-
Buy TISCO JUNE 520 PUT @ 22.5/-
Sell TISCO JUNE 540 CALL @37/-

i am expecting a wild swing upto 600 and then a bearish market this month?.in case the charts are strong after 600 then i will buy the 540 call at loss and sell 600 call. is this okay?
bye

 

[vince]

can anyone revive this thread please?. a lot of information to people like me. vinceji once said my 'analysis paralysis'. i dont want this to happen. this month june i have done a buy as follows

Sell TISCO JUNE 500 PUT @15/-
Buy TISCO JUNE 520 PUT @ 22.5/-
Sell TISCO JUNE 540 CALL @37/-

i am expecting a wild swing upto 600 and then a bearish market this month?.in case the charts are strong after 600 then i will buy the 540 call at loss and sell 600 call. is this okay?
bye

Hi Ravi,

There's no need for the 'ji' pls.

If tisco goes over 540 , I would cover the short call with a long future until it stays above 540 instead of buying the call back.
Remember the long future is supposed to be a hedgs for the short call so do not book profits on it until your short call is open.