Qty Bid (₹) Ask (₹) Qty

60054.15 103 583.05 583.25 1,848

16345 583.00 583.30 15450
2,501 582.95 583.35 1,567
4,137 582.90 583.40 1,542
4,169 582.85 583.45 2,264
583.55
583.75
584.00

.
Risk ? Uncertainty Deviation from expectation

Systematic Risk Uncontrolable calculated

Unsystematic Risk Controllable Unclalculated

Pure Risk Insurance

Speculative Risk Derivatives Up
Down
Hedging
Revenue - Cost = Profit

Wheat USD Due to deliver

10000Mt 10MT 1000

Due to Receive
Spot Price ₹ 2,450 per q 30day
₹ 24,500 per mt
₹ 245,000,000 11/2/2022 11/7/2022 11/17/2022
12/2/2022 --> Expiry date
Cost of Carry Storage Spot Price +Cost of Carry -benefits
Transportation
Labour Forward Contract
Interest
Benefit

ITC 11/2/2022
Long on FC ₹ 2,475

Expected Spot G/L

2000 -₹ 475 Long Futures/Forwa
2050 -₹ 425 ₹ 400
2100 -₹ 375 ₹ 300
2150 -₹ 325
₹ 200
2200 -₹ 275
₹ 100
2250 -₹ 225
₹0
1 2 3 4 5 6 7 8 9 10 1
-₹ 100
-₹ 200
-₹ 300
 ₹ 300
₹ 200
₹ 100
₹0
2300 -₹ 175 1 2 3 4 5 6 7 8 9 10 1
2350 -₹ 125 -₹ 100

2400 -₹ 75 -₹ 200
2450 -₹ 25 -₹ 300
2500 ₹ 25 -₹ 400
2550 ₹ 75 -₹ 500
2600 ₹ 125 -₹ 600
2650 ₹ 175
2700 ₹ 225
2750 ₹ 275 Short Futures/Forwar
2800 ₹ 325 ₹ 600
₹ 500
Farmer 11/2/2022
₹ 400
Short on FC ₹ 2,475
₹ 300
₹ 200
Expected Spot G/L
2000 ₹ 475 ₹ 100
2050 ₹ 425 ₹0
1 2 3 4 5 6 7 8 9 10 1
2100 ₹ 375 -₹ 100
2150 ₹ 325 -₹ 200
2200 ₹ 275 -₹ 300
2250 ₹ 225 -₹ 400
2300 ₹ 175
2350 ₹ 125
2400 ₹ 75
2450 ₹ 25
2500 -₹ 25
2550 -₹ 75
2600 -₹ 125
2650 -₹ 175
2700 -₹ 225
2750 -₹ 275
2800 -₹ 325

Speculator
Forecast --> Price of Wheat will go up by next one week.
Decision --> Long Futures

Price goes down

Short Futures
Bids Ask
Q Q
10 583 25
15 584 29
150 585 468
1600 585.5 1250 580
25 586 24 585
34 587 26
B S
15:29:30 525 525 525 -9.48%
Q Price Trade Values
1000 525 525000
10 585 5850
100 584 58400
125 583.25 72906.25
662156.25
536.16

Near Month Mid Month Last Month

27-Oct-22 24-Nov-22 29-Dec-22
near mid last

Long SBIN 1500 580 ₹ 870,000

Hedge SBI FuturesShort SBI Futures
 16 583 9328
Avg. Buy 585

Beta

No problem
Problem Arises

Long on FC Short on FC
Buyer of Forward ConSeller of FC
Money Wheat
Buyer Seller
ITC Farmers
Wheat Money
2475 per/Q
2100 2600

Forwards: Future:
Carry -benefits - Customised - Standardised
- OTC - Exchange Traded

ong Futures/Forwards

6 7 8 9 10 11 12 13 14 15 16 17
 6 7 8 9 10 11 12 13 14 15 16 17

ort Futures/Forwards

6 7 8 9 10 11 12 13 14 15 16 17
 An investor holds 1500 SBIN shares
CMP 580
Forecast: SBI will fall by 20% by next 2months

The investor needs to manage his situation .. !!

How can it be done ?

Value of investment? 870000 696000 464

Strategy: Short SBIN futures

CMP of Futures 583 870000

Forecat is Correct Forecat is Incorrect

At Expiry date --> Price goes to 464 Price goes to 700

Futures Equity
11/2/2022 Short 583 -580 Short 583
1/1/2023 Short cover -464 464 Short cover -700
P/L from equity -116 120
P/L from Futures 119 per unit 178500 -117
Total 3 3

696000 874500
178500
874500

Exercise Price (X) 500 500 500

Spot (S) 400 500 600
Right Buyer of Call Option OTM ATM ITM
Exercisable
Obligation to sell
Call Premium 1150
Call X 1000 1050 1100
S 1050 1050 1050
ITM ATM OTM Spot 580
Cp Max(S - X,0) 61 10 2.5
Intrinsic Value 50 0 0
Time Value 11 10 2.5
Put Exercise Price (X) 500 500 500
Spot (S) 400 500 600
Right Buyer of Put option ITM ATM OTM
Pp Max (X-S,0) 120 10 3.5
Intrinsic Value 100 0 0
Time Value 20 10 3.5
 Day --> 1

Futures Buy Sell

A 8
B 4
C 4
D
E
Total Outstanding Contracts
Chg. In OI
Volumes

180000
-175500
4500

Call X Put
ITM 520 OTM
ITM 540 OTM
ITM 560 OTM
ATM 580 ATM
OTM 600 ITM
OTM 620 ITM
OTM 640 ITM
1 2
Contracts Contracts
Held Buy Sell Held
8 8 1 7
-4 2 4 -2
-4 1 4 -3
0 2 -2
0 0
8 7
-1
8 3
C2
BS Financial position A L Equity
P&L NCA NCL
CFS CA CL

A B
P&L
Revenue/Net Sales 100 1500
Less: Direct Expenses 35 450
Gross Profit 65 65.00% 1050 70.00%
Less: Operating Expenses 25
EBIT 40
Less: Interest 10
EBT 30
Less: Tax 10
PAT 20

Production EfficienTotal Effic Profitability

GP/NS
EBIT/NS
EBIT/GP
PAT/NS
LC Operating Efficienc
PAT/EBIT

Interest & Tax Effect

PAT/TA

FA turnover ratio NS/FA

Inventory turnoverNS/I
NS/TA
OUR Cash turnover ratioNS/C
Receivables turnovNS/TR
TA turnover ratio RoA