Basics of Future & Option For Expert Trading

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END OF THE DAY REPORT (06 April 2015):

Sensex ends above 28,500; Pharma stocks gains, Banks dips.

After a directionless trade indices gained momentum in the latter half of the trading session gains near around 1 percent ahead of RBI policy meet which is held tomorrow. Pharma and FMCG stocks led the market higher. All indices ended in green zone except Banks and metals.

Sensex climbed 244 points to ends at 28504 while Nifty ends at 8659 gains 73 points.


  • KEC International moved higher as wins new orders of Rs 1565 crore.
  • Shares of Pharma index were in demand today; Sun Pharma gains 9% and hits new high.
  • ADLABS today listed 10 percent below its issue price on NSE (National Stock Exchange).
  • Consumer Durables shares gains on prediction that Indian govt. will pass GST Constitutional Amendment Bill in the Lok Sabha soon.
  • Sun TV tanks 10 percent on the back of huge volumes.


  • Realty stocks moved higher in the noon trades on the back of heavy volumes. Realty Index gains 6.72 percent today, HDIL gains 25 percent and hits record high, Indiabulls Real Estate gains 8%.
  • Shares of Dr Reddy’s Lab moved higher after rating agency upgraded target with buy rating.
  • NTPC gains on reports that the country’s largest power producer will more than double its current installed capacity to 90000 MW in the next 10 years.
  • Banks ends negative zone (red territory) after recent polls forecasted that the RBI (central bank) would maintain position quo on interest rates as unseasonal rain which has damaged crops and is likely to situate pressure on the inflation.
  • IT stocks ends flat to positive on lower than expected US economy data; Wipro dips 2%.
  • Coal India tanks in an otherwise market after company missed its production target by 3 percent in FY 2014-15 (financial Year)


  • Kitex Garments hits new high on NSE after reported 2 fold jump in Q4 net profit of Rs 41.63 crore, Sales up by 22 percent stood at Rs 148 crore.
  • Force Motor moved higher after reported 18 percent growth in total sales. In March 2015 Company sold 3771 units.
  • Shares of SML Isuzu were in demand as company reported 33% year on year growth in sales figure, stood at 1772 units in March 2015.

Basics Information of Future & Option

Future trading is a different type of financial agreement where two trading parties such as buyer and seller agree to trade for future delivery at a definite price. Future trading is option economical tools by which a trader makes a variation in their trading. Most of Future trading performs on the NSE (National Stock Exchange) where different kind of trading like as Future volume. The maximum future contracts are proceed on Nifty Future in India. We take an example related to Futures contract. Assume peter wants to buy a mobile which price is Rs. 10,000, but he has not sufficient cash to buy then he makes a decision to buy it for the next month. Peter assumes that one month from at present; the price of the mobile will increase. Then peter is perplexed how can I purchase the mobile today? And seem the value of Rs. 10,000 although obtain delivery of the mobile in 30 days?

Peter enters into an agreement with the mobile seller: one month from today, at 1000 Peter will buy the mobile and the mobile seller will deliver the mobile to Peter. Peter is being careful and agrees to buy the mobile at today’s price, after 30 days. Therefore, as defined above, it is an agreement with a particular date and delivery price. There is no cash exchanged between the parties when the agreement is initiated.

Nifty and Future

The Sensex and Nifty are the famous both Indices established in India. The Sensex is the index of 30 top companies which are listed on BSE, due to this it is also known as the BSE 30 in the stock trading. The Nifty index contains lists top 50 major companies on the NSE. In these companies, traders need deep analysis and perfect tips like as Stock Tips, Forex Tips and Nifty Tips for risk less trading.

Both the indices indicate the situation of market variation. Hence both indices go up that shows the market is in excellent position and most of the stocks in the list are also going up during the given time in India.

If the Nifty goes negative wave, that denotes most of the index companies at negative position and on the BSE the stock price of most of the main stocks has gone downward.

Nifty Futures are also different types of Index Futures; we can illustrate this definition to clearly explain what the meanings of the Nifty Futures are. Basically Nifty futures are index futures where the fundamental is the Nifty index of S&P CNX. Nifty Futures agreements have normally three expiration dates which are the near, mid, and the last month one is extreme month. The final or last Thursday of every month is the expiration day for every agreement. Nifty Futures are the majority traded bond in India.

Benefits of Future Trading

Compared to general trading like stocks, the exchange usually suggests more exposure; hence, they are further extremely leveraged and the holder does not have to place up as much primary margin to put a trade. This results in permitting the trader to operate in larger amounts.

Futures can moreover provide as a hedge where a trader wants to lock in a definite price of a financial result at present, or a definite profit in the case of arbitrage. For instance, a trader can short an Equity Future and buy the Equity Cash for equal amounts and therefore defend himself from market extensive movements.

Nifty and definite Equity Futures are frequently very liquid; with liquidity there is an brilliant prospect that the trader will confine the price he seeks.

 You do not have to be anxious with futures about closing your position at the last day, while in the Cash Trading you require to be careful of closing Intraday positions if you are attractive margin.

The margin profit of Futures can also provide as a difficulty. Just as it might feel to be easier to produce by trading Futures in place of Cash, you are able to also just as easily drop more by trading Futures in case of Cash.


An option is an agreement processed by a seller that suggest to the buyer the right, but not the responsibility, to buy or to sell a particular asset, at a specific price like as Strike price or Exercise price in future. Strike price is the price at which trading performs with superior Option Tips. In return for compromise the option, the seller accumulates a payment (e g the premium payment) from the buyer. Swap traded option type and significant category of options which have uniform agreement features and deal on public contacts, assist trading among a big number of investors. They give settlement assurance by the Clearing business, thereby reducing counter-party hazard. Options can be applied for hedging, considering a view on the future path of the market, for arbitrage or for executing strategies which can assist in generating profits for investors under different market situation.

Option Terminology

Index options:  An option which has the index and also has European approach payment, such as Nifty Option etc.

Stock options: Stock options are the special options on the particular stocks. A stock option contract supplies the stock holder the authority to purchase or sell the underlying assets at the specific price. They contain an American approach settlement.

Buyer of an option: The option buyer is the one who paying the option premium for buying the authority, but not the commitment to process his option on the seller/writer.

Writer or seller of an option: The writer or seller of option is the one who obtains the option premium and is thereby grateful to sell/buy the share if the buyer process on him.

Call option: It is the option type; here it gives the holder the authority, but not the obligation to purchase an asset by a definite date for a confident price.

Put option: A put option provides the holder the authority, but not the obligation to trade or sell an asset by a definite date for a confident price. Option is a great tool for trading, although if you have specialist guidance then you make more profits.


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