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 A Comprehensive Project Report
On

“A General Awareness of Financial

Derivatives”

Submitted to
Institute Code: 807

Sal Institute of Management

Under the Guidance of

ASST PROFESSOR. FALGUNI PRAJAPATI

In partial Fulfilment of the Requirement of the award of the

Degree of Master of Business Administration (MBA)
Offered By
Gujarat Technological University
Ahmedabad

Submitted by:
No. Name Enrollment number
1 Kishan Rana 208070592009
2 Vishakha Prajapati 208070592006

1
 Student(s)’s Declaration

We hereby declare that the COMPREHENSIVE Project Report titled “A study on A

General awareness of financial derivatives at angel broking co LTD.a study Under the
Guidance of ASST PROF Falguni Prajapati submitted in partial fulfilment of the
requirements for award of the degree of Master Of Business Administration to the
Gujarat Technological University, Ahmedabad is a result of our own work and our
indebtedness to other work publications, references, if any, have been duly acknowledged.
If we are found guilty of copying from any other report or published information and
showing as our original work, or extending plagiarism limit, we understand that we shall
be liable and punishable by the university, which may include ‘Fail’ in examination or any
other punishment that university may decide.

Enrollment no. Name Signature

208070592009 Kishan Rana

208070592006 Vishakha
Prajapati

2
 Date: 14/07/2022
Institute Certificate

“This is to Certify that this COMPREHENSIVE Project Report Titled “A study on A

General awareness of financial derivatives at angel broking co LTD. “is the bona fide
work of Kishan Rana (208070592009) and Vishakha Prajapati (208070592006) who
have carried out their project under my supervision. I also certify further, that to the best of
my knowledge the work reported herein does not form part of any other project report or
dissertation on the basis of which a degree or award was conferred on an earlier occasion
on this or any other candidate. I have also checked the plagiarism extent of this report
which is 26.9 % and it is below the prescribed limit of 30%. The separate plagiarism
report in the form of html /pdf file is enclosed with this.
Rating of Project Report [A/B/C/D/E]: ______
(A=Excellent; B=Good; C=Average; D=Poor; E=Worst)
(By Faculty Guide)
Signature of the Faculty Guide/s : PROF. Falguni Prajapati

Signature of Principal/Director with Stamp of Institute

Dr. Viral Bhatt (Director)

3
PLAGIARISM REPORT

4
 CERTIFICATE OF EXAMINER

This is to certify that project work embodied in this report entitled A study on A General
awareness of financial derivatives was carried out by Kishan Rana (208070592009) of
807.
The report is approved / not approved.
Comments of External Examiner:

This report is for the partial fulfilment of the requirement of the award of
the degree of Master of Business Administration offered by Gujarat
Technological University.

----------------------------------
(Examiner’s Sign)
Name of Examiner:
Institute Name:
Institute Code:
Date: / /2022
5
 CERTIFICATE OF EXAMINER

This is to certify that project work embodied in this report entitled A study on A General
awareness of financial derivatives was carried out by Vishakha Prajapati
(208070592006) of 807.
The report is approved / not approved.
Comments of External Examiner:

This report is for the partial fulfilment of the requirement of the award of
the degree of Master of Business Administration offered by Gujarat
Technological University.

----------------------------------
(Examiner’s Sign)
Name of Examiner:
Institute Name:
Institute Code: 807
Date: / / 2022

6
 ACKNOWLEDGEMENT

It is indeed a great pleasure for us to present this Comprehensive Project Report on “A

study on A General awareness of financial derivatives at angel broking co LTD.” as a
part of the curriculum of the Master of business administration (MBA) degree. Firstly we
are very much thankful to Dr. Viral Bhatt, Director, Sal Institute of management.
We are extremely thankful and pay our gratitude to our faculty PORF. Falguni Prajapati
Director for his valuable guidance and support on completion of this project. He has always
been there and available to solve any query or help us throughout this report.
We also acknowledge with a deep sense of reverence, our gratitude Towards our parents
and member of our family, who has always supported us morally. At last we would like to
gratitude to all our friends who directly or Indirectly helped us to complete this project
report.

Thanking you,

Kishan Rana
Vishakha Prajap

7
 EXECUTIVE SUMMARY

Derivatives are risk management instruments, which derive their value from an
underlying asset. The underlying asset can be bullion, index, share, bonds, currency,
interest etc.

SEBI set up a 24-member committee under Chairmanship of Dr. L.C. Gupta to

develop the appropriate regulatory framework for derivatives trading in India. The
committee submitted its report in March 1998. On May 11, 1998 SEBI accepted
the recommendations of the committee and approved the phased introduction of
derivatives trading in India beginning with stock index futures. SEBI also approved
the "suggestive bye-laws" recommended by the committee for regulation and control
of trading and settlement of derivatives contracts.

My study is to know about the investors' familiarity and awareness of the derivative
market.

8
 PREFACE

MBA is a stepping-stone to the management carrier and to develop good manager it is

necessary that the theoretical must be supplemented with exposure to the real environment.
Theoretical knowledge just provides the base and it‘s not sufficient to produce a good
manager that‘s why practical knowledge is needed.

As a part of final year MBA student, we were supposed to prepare one grand report as a
compulsory subject, project reports helps to bridge the gap between theories we learn in the
class room and their practical implication in the outside world. Such reports also boost the
knowledge of students helping them to learn something‘s from outside the books. In
accordance with the requirement of MBA course we have comprehensive study report and
for that purpose we chose Title. ““A study on A General awareness of financial
derivatives at angel broking co LTD.”

This report is basically a valuation report prepared for the purpose to study and to find out
the satisfaction level of students of MBA Aspirants .The motto behind preparing this report
was to indulge in to practical aspect of basic norms. Choosing such live project will improve
our concept clarity and will increase our practical knowledge.

9
 INDEX

Ch No Content

1 INTRODUCTION OF THE TOPIC

Participate in Derivatives market

Future and forward contract

options terminology

INDUSTRY PROFILE
2.1 Analysis of brokerage industry based on Michel porter’s 5factor

2.2 Phase of Indian brokerage industry

2.3 Critical Success Factors of Industry

2.4 PESTEL Analysis of brokerage industry

2 COMPANY PROFILE

3.1 Products of Angel broking

3.2 The elements of 7s model are

3.3 SWOT Analysis

3 Literature review

10
 1.1 Literature review

1.2 Objective of study

1.3 Scope of study

4 Research methodology

1.4 Research methodology

1.5 Research design

1.6 Data collection Source

5 1.7 Limitation

6 FINDINGS

7 SUGGESTION

8 CONCLUSION

9 BIBLOGRAPHY

10 QUESTIONNAIR

11
 CHAPTER : 1

INTRODUCTION OF THE TOPIC

1: INTRODUCTIONS TO DERIVATIVES

The term ‘Derivative’ stands for a contract or a product whose value is derived from value of some
other asset known as underlying. Derivatives are based on wide range of underlying assets. These
include:

• Metals such as Gold, Silver, Aluminum, Copper, Zinc, Nickel, Tin, Lead etc.

• Energy resources such as Oil (crude oil, products, cracks), Coal, Electricity, Natural Gas etc.

• Agri commodities such as wheat, Sugar, Coffee, Cotton, Pulses etc., and

• Financial assets such as Shares, Bonds and Foreign Exchange.

▪ TYPES OF DERIVATIVE CONTRACTS: Derivatives comprise four basic

contracts namely Forwards, Futures, Options and Swaps. Over the past couple of decades
several exotic contracts have also emerged but these are largely the variants of these basic
contracts. Let us briefly definesome of the contracts.

▪ Forward Contracts
It is a contractual agreement between two parties to buy/sell an underlying asset at a certain
future date for a particular price that is pre-decided on the date of contract. Both the
contracting parties are committed and are obliged to honor the transaction irrespective of
price of the underlying asset at the time of delivery. Since forwards are negotiated between
two parties, the terms and conditions of contracts are customized. These are Over-the
counter (i.e., outside the stock exchanges, directly between the two parties) contract

12
 ▪ Futures Contracts
A futures contract is similar to a forward, except that the deal is made through an organized
and regulated exchange rather than being negotiated directly between two parties. Indeed,
we may say futures are exchange traded forward contracts.
▪ Options Contracts
Options give the buyer (holder) a right but not an obligation to buy or sell an asset in future.
Options are of two types - calls and puts. Calls give the buyer the right but not the obligation
to buy a given quantity of the underlying asset, at a given price on or before a given future
date. Puts give the buyer the right, but not the obligation to sell a givenquantity of the
underlying asset at a given price on or before a given date. One can buy and sell each of
the contracts. When one buys an option, he is said to be having a long position and when
one sells, he is said to be having a short position. It should be noted that, in the first two
types of derivative contracts (forwards and futures) both the parties (buyer and seller) have
an obligation; i.e., the buyer needs to pay for the asset to the seller and the seller needs to
deliver the asset to the buyer on the settlement date. In case of options only the seller (also
called option writer) is under an obligation and not the buyer (also called option
purchaser). The buyer has a right to buy (call options) or sell (put options) the asset from /
to the seller of the option but he may or may not exercise this right. In case the buyer of
the option does exercise his right, the seller of the option must fulfill whatever is his
obligation (for a call option the seller has to deliver the assetto the buyer of the option and
for a put option the seller has to receive the asset from the buyer of the option). An option
can be exercised at the expiry of the contract period or anytime up to the expiry of the
contract period.
▪ Swaps
A swap is an agreement made between two parties to exchange cash flows in the future
according to a prearranged formula. Swaps are broadly speaking, series of forward

13
contracts. Swaps help market participants manage risk associated with volatile interestrates,
currency exchange rates and commodity prices.

➢ PARTICIPANTS IN A DERIVATIVE MARKET

The derivatives market is similar to any other financial market and has following three broad
categories of participants:

❖ Hedgers

They face risk associated with the prices of underlying assets and use derivatives to reduce their
risk. Corporations, investing institutions and banks all use derivative products to hedge or reduce
their exposures to market variables such as interest rates, share values, bond prices, currency
exchange rates and commodity prices.

❖ Speculators/Traders

They try to predict the future movements in prices of underlying assets and based on the views,
take positions in derivative contracts. Derivatives are preferred over underlying asset for trading
purpose, as they offer leverage, are less expensive (cost of transaction is generally lower than
that of the underlying) and are faster to execute in size (high volumes market).

❖ Arbitragers

Arbitrage is a deal that produces profit by exploiting a price difference in a product in two different
markets. Arbitrage originates when a trader purchases an asset cheaply in one location and
simultaneously arranges to sell it at a higher price in another location. Such opportunities are
unlikely to persist for very long, since arbitrageurs would rush in to these transactions, thus closing
the price gap at different locations.

14
CONTRACT PERIOD

At any point of time there will be always be available nearly 3months contract periods in Indian
Markets. These were:

1) Current Month

2) Near Month

3) Far Month

For example, in the month of September 2008 one can enter into September futures contract or
October futures contract or November futures contract. The Thursday of the week specified in the
contract shall be the final settlement date for the contract at both NSE as well as BSE It isalso
known as Expiry Date.

FUTURE AND FORWARD CONTRACTS

➢ Forward Contracts

A forward contract is an agreement to buy or sell an asset on a specified date for a specified price.
One of the parties to the contract assumes a long position and agrees to buy the underlying asset
on a certain specified future date for a certain specified price. The other party assumes a short
position and agrees to sell the asset on the same date for the same price. Other contract details like
delivery date, price and quantity are negotiated bilaterally by the parties to the contract. The
forward contracts are normally traded outside the exchanges. The salient featuresof forward
contracts are as given below:

• They are bilateral contracts and hence exposed to counter-party risk.

• Each contract is custom designed, and hence is unique in terms of contract size, expiration date
and the asset type and quality.

• The contract price is generally not available in public domain.

• On the expiration date, the contract has to be settled by delivery of the asset.

15
• If the party wishes to reverse the contract, it has to compulsorily go to the same counterparty,
which often results in high prices being charged.

➢ Limitations of forward markets

Forward markets world-wide are posed by several problems:

• Lack of centralization of trading,

• Liquidity and

• Counterparty risk

in the first two of these, the basic problem is that of too much flexibility and generality. The
forward market is like a real estate market, in which any two consenting adults can form contracts
against each other. This often makes them design the terms of the deal which are convenient in
that specific situation, but makes the contracts non-tradable.

Counterparty risk arises from the possibility of default by any one party to the transaction. When
one of the two sides to the transaction declares bankruptcy, the other suffers. When forward
markets trade standardized contracts, though it avoids the problem of illiquidity, still the
counterparty risk remains a very serious issue.

➢ INTRODUCTION TO FUTURES

A futures contract is an agreement between two parties to buy or sell an asset at a certain time in
the future at a certain price. But unlike forward contracts, the futures contracts are standardized
and exchange traded. To facilitate liquidity in the futures contracts, the exchange specifies certain
standard features of the contract. It is a standardized contract with standard underlying instrument,
a standard quantity and quality of the underlying instrument that can be delivered, (or which can
be used for reference purposes in settlement) and a standard timing of such settlement. A futures
contract may be offset prior to maturity by entering into an equal and opposite transaction. The
standardized items in a futures contract are:

16
• Quantity of the underlying

• Quality of the underlying

• The date and the month of delivery

• The units of price quotation and minimum price change

• Location of settlement

➢ TYPES OF FUTURES

On the basis of the underlying asset they derive, the futures are divided into two types:

• Stock Futures

• Index Futures

➢ PARTIES IN THE FUTURES CONTRACT

There are two parties in a futures contract, the buyers and the seller. The buyer of the futures
contract is one who is LONG on the futures contract and the seller of the futures contract is who
is SHORT on the futures contract.

❖ PAY-OFFS OF FUTURES

The pay-off for the buyers and the seller of the futures of the contracts are as follows:

❖ 1 PAY-OFF FOR A BUYER OF FUTURE

❖ 2 PAY-OFF FOR A SELLER OF FUTURE

17
CASE 1:- The buyers bought the futures contract at (F); if the futures Price Goes to E1 then
the buyer gets the profit of (FP).
CASE 2:-The buyers gets loss when the futures price less then (F); if The Futures price goes to
E2 then the buyer the loss of (FL)

18
CASE 1:-The seller sold the future contract at (F); if the future goes to E1Then the seller gets
the profit of (FP).
CASE 2:-The seller gets loss when the future price goes greater than (F); If the future price
goes to E2 then the seller get the loss of (FL).

19
 ❖ HOW THE FUTURE MARKET WORKS:

The futures market is a centralized marketplace for buyers and sellers from around the world who
meet and enter into futures contracts. Pricing can be based on an open outcry system, orbids
and offers can be matched electronically. The futures contract will state the price that willbe
paid and the date of delivery. Almost all futures contracts end without the actual physical delivery
of the commodity.

❖ Distinction between Futures and Forwards Contracts

Forward contracts are often confused with futures contracts. The confusion is primarily because
both serve essentially the same economic functions of allocating risk in the presence of future price
uncertainty. However, futures are a significant improvement over the forward contracts as they
eliminate counterparty risk and offer more liquidity. Following table lists the distinction between
the forwards and futures contracts.

20
 Bhatt, V., & Mehta, B. (2020).

Factors Influencing Overall Service Quality of Online Banking: A Comparative Study of

Indian Public and Private Sector Banks. Journal of Applied Business &

Economics, 22(4).

❖ FUTURES TERMINOLOGY
• Spot price: The price at which an underlying asset trades in the spot market.
• Futures price: The price that is agreed upon at the time of the contract for the delivery of an
asset at a specific future date.
• Contract cycle: It is the period over which a contract trades. It could one month, two months
and three months.
• Expiry date: Is the date on which the final settlement of the contract takes place.
• Contract size: The amount of asset that has to be delivered under one contract. This is also
called as the lot size.
• Basis: Basis is defined as the futures price minus the spot price. There will be a different
basis for each delivery month for each contract. In a normal market, basis will be positive.
This reflects that futures prices normally exceed spot prices.
• Cost of carry: Measures the storage cost plus the interest that is paid to finance the asset
less the income earned on the asset.
• Initial margin: The amount that must be deposited in the margin account at the time a futures
contract is first entered into is known as initial margin
• Marking-to-market: In market, at the end of each trading day, the margin account is
adjusted to reflect the investor’s gain or loss depending upon the futures closing price. This
is called marking-to-market

21
 • Maintenance margin: Investors are required to place margins with their
trading members before they are allowed to trade. If the balance in the margin
account falls below the maintenance margin, the investor receives a margin call
and is expected to top up the margin account to the initial margin level before
trading commences o the next day.

❖ OPTIONS CONTRACTS

An 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 favorable to him,
but, when he decides to exercise, option writer would be legally bound to honor the
contract.

Prajapati, K., & Bhatt, V. (2019).

A Study of an Influencing Factor in the Expansion of Brand in the

Road Machine Market: An Impassive Study on the Heavy Machinery Production Company
(HEPCO). Research Journal of Humanities and Social Sciences, 10(3), 813-821.

22
❖ Options may be categorized into two main types:-
• Call Options
• Put Options

Option, which gives buyer a right to buy the underlying asset, is called Call option
and the option which gives buyer a right to sell the underlying asset, is called Put
option.

❖ PROPERTIES OF OPTION

Options have several unique properties that set them apart from other securities. The
following are the properties of option:

▪ Limited Loss
▪ High leverages potential
▪ Limited Life

❖ PARTIES IN AN OPTION CONTRACT

There are two participants in Option Contract.

• Buyer/Holder/Owner of an Option:
The Buyer of an Option is the one who by paying the option premium buys the right but
not the obligation to exercise his option on the seller/writer.
• Seller/writer of an Option:
The writer of a call/put option is the one who receives the option premium and is thereby
obliged to sell/buy the asset if the buyer exercises on him.

23
 ➢ CHARACTERISTICS OF OPTIONS:

The following are the main characteristics of options:

1. Options holders do not receive any dividend or interest.

2. Options only capital gains.

3. Options holder can enjoy a tax advantage.

4. Options holders are traded an O.T.C and in all recognized stock exchanges.

5. Options holders can control their rights on the underlying asset.

6. Options create the possibility of gaining a windfall profit.

7. Options holders can enjoy a much wider risk-return combinations.

8. Options can reduce the total portfolio transaction costs.

9. Options enable with the investors to gain a better return with a limited amount of

investment.

❖ PAY-OFFS OF OPTIONS

➢ PAY-OFF PROFILE FOR BUYER OF A CALL OPTION

The Pay-off of a buyer option depends on a spot price of an underlying asset. The following

graph shows the pay-off of buyers of a call option.

24
 S = Strike price ITM = In the Money

Sp = premium/loss ATM = At the Money

E1 = Spot price 1 OTM = Out of the Money

E2 = Spot price 2

SR = Profit at spot price E

CASE 1: (Spot Price > Strike price) As the Spot price (E1) of the underlying asset is more

than strike price (S). The buyer gets profit of (SR), if price increases more than E1 then profit

also increase more than (SR)

CASE 2: (Spot Price < Strike Price) As a spot price (E2) of the underlying asset is less than strike

price (S)The buyer gets loss of (SP); if price goes down less than E2 then also his loss is limited to

his premium (SP)

➢PAY-OFF PROFILE FOR SELLER OF A CALL OPTION

The pay-off of seller of the call option depends on the spot price of the underlying asset. The
following graph shows the pay-off of seller of a call option:

25
S = Strike price ITM = In the Money

SP = Premium / profit ATM = At The money

E1 = Spot Price 1 OTM = Out of the Money

E2 = Spot Price 2

SR = loss at spot price E2

CASE 1: (Spot price < Strike price) As the spot price (E1) of the underlying is less thanstrike
price (S). The seller gets the profit of (SP), if the price decreases less than E1 then also profit of
the seller does not exceed (SP).

26
CASE 2: (Spot price > Strike price) As the spot price (E2) of the underlying asset is more than
strike price (S) the Seller gets loss of (SR), if price goes more than E2 then the loss of the seller
also increases more than (SR).

Prajapati, K., & Bhatt, V. (2019).

A Study on Perception of Brand Extension by FMCG Consumer in Ahmedabad. Research
Journal of Humanities and Social Sciences, 10(3), 747-753.

Bhatt, V., & Prajapati, M. F. (2018).

An Empirical study on Consumer’s Securitization and faith on online payment in Gujarat. Int. J.
Rev. and Res. Social Sci, 6(3), 291-296.

❖ PAY-OFF PROFILE FOR BUYER OF A PUT OPTION

The Pay-off of the buyer of the option depends on the spot price of the underlying asset.
The following graph shows the pay-off of the buyer of a call option.

27
S = Strike price
SP = Premium / loss
E1 = Spot price 1
E2 = Spot price 2
SR = Profit at spot price E1
ITM = In the Money
ATM = At the Money
OTM = Out of the Money

CASE 1: (Spot price < Strike price)As the spot price (E1) of the underlying asset is less than
strike price (S). The buyer gets the profit (SR), if price decreases less than E1 then profit also
increases more than (SR).
CASE 2: (Spot price > Strike price) As the spot price (E2) of the underlying asset is more than
strike price (S), The buyer gets loss of (SP), if price goes more than E2 than the loss of the buyer
is limited to his premium (SP).

❖ PAY-OFF PROFILE FOR SELLER OF A PUT OPTION

The pay-off of a seller of the option depends on the spot price of the underlying asset.
Thefollowing graph shows the pay-off of seller of a put option.

28
 S = Strike price ITM = In the Money
SP = Premium/profit ATM = At the Money
E1 = Spot price 1 OTM = Out of the Money
E2 = Spot price 2
SR = Loss at spot price E1

CASE 1: (Spot price < Strike price) 25 As the spot price (E1) of the underlying asset is
less than strike price (S), the seller gets the loss of (SR), if price decreases less than E1 than
the loss also increases more than (SR).

CASE 2: (Spot price > Strike price) As the spot price (E2) of the underlying asset is more than
strike price (S), the seller gets profit of (SP), of price goes more than E2 than the profit of seller is
limited to his premium (SP)

❖ OPTIONS TERMINOLOGY

➢ Index option: These options have index as the underlying asset. For example options on
Nifty, Sensex, etc.
➢ Stock option: These options have individual stocks as the underlying asset. For example,
option on ONGC, NTPC etc.
➢ Buyer of an option: The buyer of an option is one who has a right but not the obligation
in the contract. For owning this right, he pays a price to the seller of this right called ‘option
premium’ to the option seller.
➢ Writer of an option: The writer of an option is one who receives the option premium
and is thereby obliged to sell/buy the asset if the buyer of option exercises his right.

29
➢ American option: The owner of such option can exercise his right at any time on or before
the expiry date/day of the contract.
➢ European option: The owner of such option can exercise his right only on the expiry
date/day of the contract. In India, Index options are European.
➢ Option price/premium: It is the price which the option buyer pays to the option seller.
It is also referred to as the option premium.

➢ Lot size: Lot size is the number of units of underlying asset in a contract. For example, lot
size of Nifty option contracts is 50.
➢ Expiration Day: The day on which a derivative contract ceases to exist. It is the last trading
date/day of the contract.
➢ Spot price: It is the price at which the underlying asset trades in the spot market.

➢ Strike price or Exercise price: Strike price is the price per share for which the
underlying security may be purchased or sold by the option holder.

➢ In the money (ITM) option: This option would give holder a positive cash flow, if it
were exercised immediately. A call option is said to be ITM, when spot price is higher than
strike price. And, a put option is said to be ITM when spot price is lower than strike price.
➢ At the money (ATM) option: At the money option would lead to zero cash flow if it
were exercised immediately. Therefore, for both call and put ATM options, strike price is equal
to spot price.

➢ Out of the money (OTM) option: Out of the money option is one with strike price worse
than the spot price for the holder of option. In other words, this option would give the holder a
negative cash flow if it were exercised immediately. A call option is said to be OTM, when
spot price is lower than strike price. And a put option is said to be OTM when spot price is
higher than strike price.
➢ Intrinsic value: Option premium, defined above, consists of two components - intrinsic
value and time value. For an option, intrinsic value refers to the amount by which option is in
the money i.e., the amount an option buyer will realize, before adjusting for premium paid, if
he exercises the option instantly. Therefore, only in-the-money options have intrinsic value
whereas at-the money and out-of-the-money options have zero intrinsic value. The intrinsic
30
 value of an option can never be negative. Thus, for call option which is in-the-money, intrinsic
value is the excess of spot price (S) over the strike price. Thus, intrinsic value of call option can
be calculated as spot price minus strike price, with minimum value possible aszero because
no one would like to exercise his right under no advantage condition. Similarly, for put option
which is in-the-money, intrinsic value is the excess of strike price over the spot price. Thus,
intrinsic value of put option can be calculated as strike price minus spot price, with minimum
value possible as zero.
➢ Time value: It is the difference between premium and intrinsic value, if any, of an option.
ATM and OTM options will have only time value because the intrinsic value of such options
is zero.

CHAPTER: 02

INDUSTRY PROFILE

2.0 INDUSTRY PROFILE

THE BROKERAGE INDUSTRY

The brokerage industry is currently characterized by a large number of companies (private or

unorganized). In effect it is a fragmented industry with a large number of participants. The industry
thus has ‘monopolistic competition’, i.e., a large number of firms selling a slightly differentiated
product.
Indian stock broking industry is the oldest trading industry that has been around even before the
establishment of BSE in 1875. Despite passing through a number of changes in post liberalization
period, the industry has found its way towards sustainable growth. With the purpose of gaining
deeper understanding about the role of Indian stock broking industry, in the country’s economy,
let us have a look at the following data-:
• On the basis of geographical concentration, Western region has maximum of 52%,
around 24% are located in the North, 13% in South, and 10% in the East.
• 3% of firms started broking operations before 1950, 65% between 1950-1995, and 32%
post 1995.
• On the basis of terminals 40% are located in Mumbai, 12% in Delhi, 8% in Ahmadabad,
7% in Kolkata, 4% in Chennai, and 29% in other cities.
• From the study it was found that 36% of firms trade in cash, 27% in derivatives, and 20%
in cash, derivatives and commodities.
31
 • In the cash market, 34% trade in NSE, 14% in BSE, 45% in both. Whereas in debt
market, 31% trade in NSE, 26% trades in BSE, and 43% in both.
• Majority branches are located in North, i.e., 40%, 31% in West, 24% in South, and 5% in
East.
• In terms of sub-brokers, around 55% are located in South, 29% in West, 11% in North,
and 4% in East.
• Trading, IPOs and Mutual Funds are the top three products offered by 90% of firms
offering trading, 67% IPOs, and 53% offering Mutual Fund transaction
•
In terms of various areas of growth, 84% of firms have shown their
interest in expanding their institutional clients, 66% firms intend to increase FIIs, and 34% are interested
in setting up Joint Ventures in India and abroad.
• In terms of IT penetration 62% firms provide their website, and 90% have email facility.

Analysis of brokerage industry based on Michael Porter’s 5 factor

model

Competition in the industry

Potential of new entrants

Power of suppliers

Power of customers

Threat of subsitutes

32
 • Competition
The industry is now in a fairly high growth phase. However, the brokerage industry is very
cyclical and is impacted by activity levels in the markets. During the downturns such as 2008-
2009 periods, the smaller players were squeezed out of the business. As a result, there is a
contrast consolidation happening in the industry.

• Potential of new entrants

A new entrant in addition to the above also needs a reasonable level of capital to fund the
working requirements of the business (finance to customers, deposits with exchanges, etc).
The scale requirements are increasing constantly and as a result a new entrant will require higher
levels of investments in the future to enter the business. As pointed out, it is likely to see many
entrants in the industry. On the contrary, it is likely that the smaller players will exit by selling
out or closing.

• Power of the supplier

Not much relevant in most segments except investment banking, where employees control client
relationships and hence have to be highly compensated.

• Power of the buyers/customers

This is important in the institutional brokerage business which involves high volume and low
brokerage charges. The extent of buyer power is very low to non-existent in all kinds of retail
segments.

• Threat of substitutes
The products offered by all firms in this industry are more or less differentiated. Investing rather
saving in the bank rather than investing in a brokerage firm can be one option; else this is not
applicable for this industry

33
 Companies Covered

Angel Broking Limited

Geojit Financial Services Limited

ICICI Securities Limited

IIFL Finance Limited

Kotak Securities Limited

Motilal Oswal Financial Services Limited

Reliance Capital Limited

SMC Global Securities Limited

HDFC Securities Limited

Share khan Limited

PHASES OF INDIAN BROKERAGE INDUSTRY

Indian Brokerage Industry-Pre 2000

• Post liberalization period.

• Business restricted to friends and relatives.
Settlement T+15 days.
• Low trade volumes- No derivatives trading allowed.
• Lack of investment in technology- No front or back-office software.

34
 Indian Brokerage Industry 2000-2008

• Venture capital funding for brokerage businesses.

• Investment in technology- Front end and back end.
• National presence.
• Integrated risk management system.
• Significant increase in trade volumes- Derivatives trades play a major role.
• Margin funding for the retail clients.

Indian Brokerage Industry 2009 onwards

• Paradigm shift from transaction oriented to research/ portfolio based advisory.

• Focus on franchisee-based business model.
• Dematerialized accounts access for international trade.
• Access to international stock exchange.
• Trading on hand held platform (mobile phones etc.) allowed.

Current Global Economic Environment

• The global economy is slowly recovering from a deep recession, with significant risks
remaining.
• Euro crisis has become one of the hindrances in the overall economic growth of the world
economy and thereby, Indian economy too.
• Countries are looking for ways to achieve sustainable economic growth and job creation.
• Competitiveness has become more important than ever

35
 -Globalization will continue and strong international competitors are emerging.
-Companies are re-examining everything in terms of how and where they operate.

• India has achieved a long-term competitive transformation, but the next stage of
development will be more challenging.

Critical Success Factors of the Industry

Fig:2
Seeing the overall brokerage as a single unit, the key success factors or the winning strategy of
Indian Brokerage Industry is a mixture of:
• People
• Process
• Technology

There are the three ingredients that together create value for both international and domestic
customers.
By people it indicates to the service providers or the employees of the various firms of this industry,
who day in and day out interact with the customers and provide them services and satisfy them.

36
Transparency of the process followed and disclosure method is yet another success factor. The
settlement of transactions is generally done in a process of T+2 days. And the government support
even still plays a very vital role in forming the rules and norms of such processes.
Technology enables to stay competitive and on edge with the competitors; facilitating the ease of
processes and speed and to maintain and be up to date. This serves as a great success of the
brokerage industry.
All these factors together help create value to the customer.

PESTEL ANALYSIS OF BROKERAGE INDUSTRY

PESTEL analysis

Stands for "Political, Economic, Social, Technological, Environmental and Legal analysis" and
describes a framework of macro-environmental factors used in the environmental scanning
component of strategic management. It is a part of the external analysis when conducting a
strategic analysis or doing market research, and gives an overview of the different macro
environmental factors that the company has to take into consideration. It is a useful strategic tool
for understanding market growth or decline, business position, potential and direction for
operations.

• Political factors are how and to what degree a government intervenes in the economy.
Specifically, political factors include areas such as tax policy, labour law, environmental
law, trade restrictions, tariffs, and political stability.
• Economic factors include economic growth, interest rates, exchange rates and the inflation
rate. These factors have major impacts on how businesses operate and make decisions. For
example, interest rates affect a firm's cost of capital and therefore to what extent a business
grows and expands.
• Social factors include the cultural aspects and include health consciousness, population
growth rate, age distribution, career attitudes and emphasis on safety. Trends in social
factors affect the demand for a company's products and how that company operates.

37
• Technological factors include technological aspects such as R&D activity, automation,
technology incentives and the rate of technological change. They can determine barriers
to entry, minimum efficient production level and influence outsourcing decisions.
Furthermore, technological shifts can affect costs, quality and lead to innovation
.
• Environmental factors include ecological and environmental aspects such as weather,
climate, and climate change, which may especially affect industries such as tourism,
farming, and insurance.

• Legal factors include discrimination law, consumer law, antitrust law, employment law,
and health and safety law. These factors can affect how a company operates, its costs, and
the demand for its products.

38
39
 Chapter: 03

Company profile

40
 3.0 COMPANY PROFILE

ANGEL BROKING LTD

Angel One Limited (formerly known as Angel Broking Limited), a digital-first approach is
something that has always been deep rooted in our hearts. Right from the time we started our
operations, we have effectively leveraged technology to deliver our products, services, and class-
leading experience to our ever-expanding client base. And as one of the original trailblazers in the
stockbroking industry, we have been leading from the front for over two decades. For quite a few
years, we have been first-hand witnesses of the rise of a new age of young investors. In fact, we
were one of the first broking houses to recognize the evolving expectations of this set of investors,
which goes far beyond just mutual fund investments and stock trading and into the realm of rule-
based investing trading. This led us to Angel One.

With the Angel One brand, the Company is transitioning into a new-age FinTech platform capable
of enabling millennials from new age India to meet their financial dreams. We’ll continue to
onboard customers digitally, deliver the most cutting-edge solutions at the comfort of a mobile tap.

Over the years, we have become leaner yet stronger, and have been fruitfully tapping new
geographies and onboarding millions of new customers including tier-2 and tier-3 cities as well.
It’s no wonder then, that our Company is the largest listed retail broking house in India in terms
of active clients on NSE as of December 31, 2021.

Our popularity with millennials attests to the fact that we have penetrated deeper into the broking
industry with a range of digital products that remain unmatched in the industry. Our products such
as the ARQ Prime, Angel BEE and Smart Money have been received with tremendous enthusiasm

41
and millions of users are paving their way to a smarter, richer and better tomorrow.

We are a technology-led financial services company providing broking and advisory services,
margin funding, loans against shares (through one of our Subsidiaries, AFPL) and financial
products distribution to our clients under the brand “Angel One”. Our broking and allied services
are offered through our online and digital platforms, and (ii) our network of over 16,000+
registered Authorized Persons (the “Authorized Persons”), as of December 31, 2021.

Angel One Limited (formerly known as Angel Broking Limited) is a member of the Bombay Stock
Exchange (BSE), National Stock Exchange (NSE), Metropolitan Stock Exchange of India (MSEI),
NCDEX & MCX. Angel One Limited is also registered as a Depository Participant with CDSL.

➢ Vision of the Company

To provide best value for money to investors through innovative products, trading/
investment strategies, state-of-the-y technology and personalized service.

➢ Philosophy of the Company

Ethical practices & transparency in our entire dealing’s customer interest above our own
always deliver what we promise effective cost management.

➢ Quality Assurance Policy

We are committed to being the leader in providing World Class Product & Services
which exceed the expectations of our customers Achieved by teamwork and a process of
continuous improvement.\

➢ CRM POLICY
42
A Customer is the most important visitor on our premises. He is not dependent on us but
we are dependent on him. He is not interruption in our work, but is the Purpose of it. We
are not doing him a favor by serving. He is doing us a favor by giving us an opportunity
to do so.

Products of Angel Broking

❖ Online Trading
❖ Mutual Fund
❖ Personal loans
❖ IPO Advisory
❖ Commodities
❖ Insurance
❖ DP Services

The elements of 7s model are:

Strategy: Action plan of a company in response to changes in the external

environment.

Structure: Roles and responsibilities and basis for speculation.

System: Formal and informal procedures that support strategy and structure.

43
 Style Culture: Management style and organizational culture.

Staff: Human: resource management processes- training and development

process, socialization process, how new managers are introduced to the organization.

Skill: competencies prevailing in the organization and how these are being
developed and expanded by the organization.

Shared values: Guiding concepts among the employees must be simple and at
an abstract level, must not be easily understood by the people from outside.

44
 SWOT ANALYSIS
Strengths:

▪ Angel provides better service

▪ Angel has wide range of distribution network
▪ The marketing team is proficient enough to cover various segments
▪ Angel has better products to serve the customers

Weakness:

▪ Angel still could not meet the fuller customer satisfaction

▪ Branding is the concern
▪ There is a stiff competition from banks

Opportunities:

▪ Ever increasing market in investment field

▪ Improving technology
▪ Unfulfilled needs of the customer
▪ Education level

Threats:

▪ New competitors
▪ Technology based business.

45
 Literature Review :-

➢ Risk is omnipresent, and hedging has been motivated by the desire to reduce risk.
An essential feature of hedging is that the trader synchronizes his/her positions in two
markets. One is generally the “cash" or" spot" market (the market for immediate delivery),
while theother is the derivatives market (Johnson, 1960)

➢ Shah and Thomas (2003) review the changes which took place on India’s equity
and debt markets in the decade of the 1990s. This has focused on the importance of crises
as a mechanism for obtaining reforms.

➢ Mohan (2004) provides the rationale of financial sector reforms in India, policy
reforms in the financial sector, and the outcomes of the financial sector reform process in
some detail.

➢ Shirai (2004) examines the impact of financial and capital market reforms on
corporate finance reforms since the early1990s have had a positive impact on both the
banking sector and capital markets. Nevertheless, the capital markets remain shallow,
particularly when it comes to differentiating high-quality firms from low-quality ones and
thus lowering capital costs for the former compared with the latter. The paper argues that
India should build an infrastructure that willfoster sound capital markets and strengthen
banks’ incentives for better risk management.

➢ cash markets have remained an active topic of analytic and empirical interest.
Questions pertaining to the impact of derivative trading on cash market volatility have been
empirically addressed in two ways: by comparing cash market volatilities during the pre-
and post-futures/options trading eras and second, by evaluating the impact of options and
futures trading (generally proxied by trading volume) on the behavior of cash

46
markets. The literature is, however, inconclusive on whether introduction of derivative
products lead to an increase or decrease in the spot market volatility.

➢ One school of thought argues that the introduction of futures trading increases the
spot market volatility and thereby, destabilizes market (Cox 1976; Figlewski 1981; Stein,
1987). Others argue that the introduction of futures actually reduces the spot market
volatility and thereby, stabilizes the market (Powers, 1970; Schwarz man Laatsch, 1991
etc.). The rationale and findings of these two alternative schools are discussed in detail in
this section.

➢ The advocates of the first school perceive derivatives markets a market for
speculators. Traders with very little or no cash or shares can participate in the derivatives
market, which mischaracterized by high risk. Thus, it is argued that the participation of
speculative traders in systems, which allow high degrees of leverage, lowers the quality
of information in the market. These uninformed traders could play a destabilizing role in
cash markets (Chatrath, Ramchandra and Song, 1995). However, according to another
viewpoint, speculation could also be viewed as a process, which evens out price
fluctuations.

➢ The debate about speculators and the impact of futures on spot price volatility
suggests that increased volatility is undesirable. This is, however, misleading as it fails to
recognize the link between the information and the volatility (Antoniou and Holmes, 1995).
Prices depend on the information currently available in the market. Futures trading can alter
the available information for two reasons: first, futures trading attract additional traders in
the market; second, as transaction costs in the futures market are lower than those in the
Spot market.

47
➢ Maximizing earnings with minimum efforts/ costs/ risks is the fundamental of
financial newline management. Abnormal sums of money in modern times could be made
through Stock newline Exchanges, Currency trading, Commodity Exchanges and the like.
The basic qualities on newline which these exchanges operate are high risk and high
volatility (which may / may not newline result in high returns). People get exposedto
risky situations/ positions in order to earn newline profits derived out of the transactions
entered into. newline Need as they say is the mother of all inventions.

48
Objective of study

➢ To understand Future & 0ption in derivatives market

➢ To understand investors perception about derivative market

➢ To analyst the awareness of investors towered derivative market as hedging tool

➢ To Study The role of Indian derivatives market

Scope of the study

The study is limited to "Derivatives" with special references to futures and options in the
Indian context .The study has only made humble attempt at evaluating derivatives only in
Indian markets.

The study is limited to the analysis made for types of instruments of derivatives Each
strategy is analyzed according to its risk and return characteristics and derivatives
performance against the profit and policies of the company. The study is not based on the
international perspective of derivatives which exists in DOWJONES and NASDAQ.

49
 Research methodology

SELECTION OF SCRIPT: The sample of the stocks for the purpose of collecting
secondary data has been selected on the basis of Random Sampling.
The stocks are chosen in an unbiased manner and each stock is chosen independent of the
other stocks chosen. And the scrip selected is NIFTY '50. The lot is of any size, profitability
position of futures, buyers and sellers & also the option holders and option writers are
studied.

Research design:

The sampling technique in this project is convenient sampling. The sample size comprises of
different types of users who are trading in stock market. A sample of 100 respondents was
taken into account for finding their uses for the derivatives market.

50
 DATA COLLECTION SOURCE

The data collected is of both Primary & Secondary data.

1. Primary data: The data gathered from individual discussions with approved agents
& individuals from Exchange. The data gathered from the speeches of the administer of
the Branch of Market Actions, EDP etc., and the information gathered from Bulletin,
Publications of NSE, BSE and various records topics of the work.

2. Secondary data: It is the data which has already been collected by someone or an
organization for some other purpose or research study .The data for study has been collected
from various sources:

➢ Books

➢ Journals

➢ Magazines

➢ Internet sources

Statistical Tools Used:

Simple tools like bar graphs, tabulation, line diagrams have been used.

51
 Limitation:

➢ The subject of derivates if vast it requires extensive study and research to understand
the dept of the various instrumers operating in the market only a recent phenome.
But various international examples have also been added to make the study more
comfortable.

➢ There are various other factors also which define the risk and return preferences of
an investor however the study was only contained towards the risk maximization
and profit maximization objective of the investor.

➢ The derivative market is a dynamic one premium, contract rates strike price fluctuate
on demand and supply basis. Therefore, data related to last few trading months was
only considered and interpreted.

➢ The time available to conduct the study was only 2 months. It being a wide topic
had a limited time.

➢ Limited resources are available to collect the information about the commodity
trading.

➢ Share market is so much volatile and it is difficult to forecast anything about it.
whether you trade through online or offline

➢ Some of the aspects may not be covered in my study.

52
 CHAPTER: 5
Analysis & interpretation

DATA ANALYSIS

GENDER?

GENDER

Frequency Percent Valid Percent Cumulative Percent

Female 33 33.00 33.00 33.0

Male 67 67.00 67.00 100.0

Total 101 100.0 100.0

53
 Gender wise classifications of investors are presented in the Figure 5.1. Of the total sample
(100 Respondents) of investors in Ahmedabad city, 67 respondents are male investors and rest
of the respondents (33 investors) are female respondents.

AGE?

AGE
Frequency Percent Valid Cumulative Percent
Percent
20-25 years 57 57 57 57
25-40 years 24 24 24 81
40-60 years 3 3 3 84
Above 60
1 1 1 85
years

Below 20 years 15 15 15 100.0

Total 100 100.0 100.0

Age wise classifications of respondents are presented in the Table 5.2. The table reveals that

54
 majority (57.0 percent) of the respondents are included in the 20-25 category. 24percent of the
respondents are 25-40 years‘category. 15 percent of the respondents are below 20 years category
and only 3 percent of the respondents were 40-60 years age category.

Figure 5.2 shows that investors are categorized into different age groups. Majority of the
investors belonged to 20-25 age category and the next majority comes to 25-40 category.

ARE YOU INTRESTED IN FINANCIAL DERIVATIVES?

INTRESTED IN TRADING
Frequency Percent Valid Percent Cumulative
Percent

No( if you say no than

55 55.00 55.00 55.00
section 2)

Yes( if you say yes then

45 45.00 45.00 100.0
continue section 1)
Total 100 100.0 100.0

55
Here the majority of the respondents do not interested in financial derivatives and there 45
respondents are interested in financial derivatives market.

EDUCATION QUALIFICATION?

EDUCATION QUALIFICATION
Frequency Percent Valid Percent Cumulative
Percent
Businessman 14 14.0 14.0 14.0
Graduate 17 17.0 17.0 31.0
House wife 2 2.0 2.0 33.0
Other 3 3.0 3.0 36.0
Post graduate 31 31.0 31.0 67.0
Professional degree holder 12 12.0 12.0 79.0
Student 3 3.0 3.0 82.0
Under graduate 18 18.0 18.0 100.0
Total 100 100.0 100.0

56
The levels of education of the respondents are shown in the Table5.4. It is clearly evident from the
table that majority of the respondents (31 percent) are post graduate and (17 percent) are graduate
level and (18 percent) are post graduate from the following chart.

MONTHLY INCOME?

MONTHLY INCOME
Frequency Percent Valid Percent Cumulative
Percent
1.5 lakh to 3.0 lakh 25 25.0 25.0 25.0

3.0 lakh to 5.0 lakh 18 18.0 18.0 43.0

above 5.0 lakh 7 7.0 7.0 50.0
Below 1.5 lakh 46 46.0 46.0 96.0
Not Earning 4 4.0 4.0 100.0
Total 100 100.0 100.0

57
From the above chart shown in the table 5.5, the majority respondents are below 1.5 lakh
monthly income and 25 percent are between 1.5 lakh to 3.0 lakh

WHAT ARE THE FACTOR CONSIDER WHILE TRADING IN

DERIVATIVES MARKET?

FACTORES WHILE TRADING DERIVATIVES

Frequenc Percent Valid Cumulative
y Percent Percent
Return 24 53.33 53.33 53.33
Savings 10 22.22 22.22 75.55
Volatility 11 24.45 24.45 100.00
Total 45 100.0 100.0

58
From the following chart shown in the table 5.6, the majority of respondents considered the return
factors while trading in a derivatives market and other remaining respondents are considered
saving and volatility factor while trading.

WHICH OF THE FOLLOWING DERIVATIVES INSTRUMENT DO

YOU DEAL IN?

DERIVATIVES INSTRUMENT
Frequenc Percent Valid Cumulative
y Percent Percent
Currency 2 4.4 4.4 4.4
Stock Future 6 13.3 13.3 17.7
Stock Index Future 7 15.6 15.6 33.3
Stock Index Options 17 37.8 37.8 71.1
Stock Options 12 26.7 26.7 97.8
Swaps 1 2.2 2.2 100.0
Total 45 100.0 100.0

59
From the following chart shown in the table 5.7, majority of respondents are trading in stock index
option and stock options remaining respondents are trading in currency stock future stock index
future and swaps.

HOW MUCH PERCENTAGE OF YOUR INCOME YOU TRADING IN

DERIVATIVES MARKET?

HOW MUCH PERCENTAGE OF INCOME TRADING?

Frequenc Percent Valid Cumulative
y Percent Percent
11% - 15% 14 31.1 31.1 31.1
16%-20% 3 6.7 6.7 37.8
5% - 10% 16 35.6 35.6 73.4
DON'T TRADE 4 8.9 8.9 82.3
Less than 5 % 5 11.1 11.1 93.4
More than 20% 3 6.7 6.7 100
Total 45 100.0 100.0

60
From the following charts shown in the figure 5.8, majority of respondents are (35.6 percent) 5-
15% using there salary for trading in derivatives and the 8.9% do not trade and 11.1% respondents
do not use more than 5% of the salary and 6.7% respondents were using 20% of there salary for
trading in derivatives market.

YOU PARTICIPATE IN DERIVATIVES MARKET AS ?

PARTICIPATE AS
Frequenc Percent Valid Cumulative
y Percent Percent
Arbitrager 15 33.3 33.3 33.3
Hedger 14 31.1 31.1 64.4
Speculators 16 35.6 35.6 100.00
Total 45 100.0 100.0
61
From the following chart shown in the figure 5.9, 35.6% respondents are speculators , 33.3%
respondents are arbitragers and 31.1% respondents are hedger as participated in a derivatives
market.

DO YOU USE ANY STRATEGIES WHILE TRADING IN

DERIVATIVES MARKET?

VAR00013
Frequenc Percent Valid Cumulative
y Percent Percent
No 16 35.6 35.6 35.6
Yes 29 64.4 64.4 100.0
Total 45 100.0 100.0

62
From the following chart shown in the figure 5.10, the majority of 64.4% respondents are using
strategies while trading in derivatives market and remaining 35.6% respondents do not using any
type of strategies while trading in derivatives market.

WHAT IS RATE OF RETURN ARE YOU EXPECTED BY YOUFROM

DERIVATIVES MARKET?

EXPECTED RETURN
Frequenc Percent Valid Cumulative
y Percent Percent
11%-15% 6 13.3 13.3 13.3
15%-25% 7 15.6 15.6 28.9
5%-10% 18 40.0 40.0 68.9
Don't trade 3 8.9 8.9 77.8
Less than 5% 10 22.2 22.2 100.0
Total 45 100.0 100.0

63
From the following chart shown in the figure 5.11, majority of 40% respondents are expected 5-
10% rate of return while trading n a derivatives market. 22.2% respondents are expected to at
least 5%, 15.6% respondents are expected 15- 25%, and 13.3% respondents are expected to 15-
25% while trading in derivatives market.

ARE YOU SATISFIED WITH CURRENT PERFORMANCE OF THE

DERIVATIVES MARKET?

MARKET PERFORMANCE
Frequenc Percent Valid Cumulative
y Percent Percent
Agree 18 40.0 40.0 40.0
Disagree 4 11.1 11.1 51.1
Don't trade 5 8.9 8.9 60.0
Neutral 10 22.2 22.2 82.2
Strongly agree 8 17.8 17.8 100.0
Total 45 100.0 100.0

64
From the following chart shown in the figure 5.12, 40.0% majority are satisfied with the current
performance of the derivatives market, 22% were neutral, and 11.1% were disagree with the
current performance of the derivatives market.

REASON FOR NOT INVESTING IN THE DERIVATIVES MARKET?

NOT INVESTING IN DERIVATIVES

Frequenc Percent Valid Cumulative
y Percent Percent
Currently not interested 1 1.8 1.8 1.8
Huge amount of
10 18.2 18.2 20.0
investment
Lack of Awareness 9 16.4 16.4 36.4
Lack of Knowledge 19 34.5 34.5 70.9
Study 1 1.8 1.8 71.7
Very Risky 15 27.3 27.3 100.0
Total 55 100.0 100.0

65
From the following chart shown in the figure 5.13, the majority of 34.5% respondents do not have
a knowledge about derivatives market, 27.3% respondents were think that the derivatives market
were too much risky , 18.2% and 16.4% were do not aware about derivatives market and amount
of investment .

WHAT ARE THE DIFFICULTIES YOU ARE FACE WHEN YOU

TRADING IN DERIVATIVES MARKET?

FACES PROBLEM
Frequenc Percent Valid Cumulative
y Percent Percent
Clear positions 4 7.3 7.3 7.3
Lack of knowledge 34 61.8 61.8 69.1
Lot size 9 16.4 16.4 85.5
Margins 8 14.5 14.5 100.0
Total 55 100.0 100.0

66
From the following chart shown in the figure 5.14, majority 61.8% respondents were do not have
a knowledge about trading in derivatives market, 16.4% and 14.5% respondents think that the lot
size is big and the margins are too much.

Statement regarding benefits you received through general awareness of

financial derivatives.

Frequency Percent Valid Percent Cumulative

Percent
Derivatives are 20 20% 20% 20%
highly preferred
over equity
shares?

67
Investing in the 8 8% 8% 8%
option contract
are less risky
compared to
future contract?
Future and 10 10% 10% 10%
option a
contract help to
hedge and
transfer risk
efficiently?
Derivatives like 12 12% 12% 12%
future and
option contract
are effective
risk
management
stools?
Derivative 25 25% 25% 100%
market is
properly
regulated?
Investing in 25 25% 25% 100%
derivatives is
much better in
terms of return
than depositing
mony in bank?
Total 100 100% 100%

68
 statmant regarding benifites you recived through
general awareness of financial derivatives.
Investing in
derivatives is much
better in termsof
return than
depositing mony in
bank? Investing in
the option
contract are
Derivatives are highly
preferred over equity less risky
shares? compared to
future
contract
Derivative market is
properly regulated?
Future
and
option a
contract
help to
hedge
Derivatives like and
future and option transfer
contract are effective riske
risk management fficiently

Above the pie chart indicated to total 100 respondents out of 20 respondents are strongly agree
to derivatives are highly preferred over equity shares .and 8 respondents are strongly agree to
investing in the option contract are less risky compared to future contract. And 10 respondents are
strongly agree to future and option contract help to hedge and transfer risk efficiently. And
12 respondents are strongly agree to derivatives like future and option contract are effective risk
management tool. And 25 respondents are strongly agree to derivatives market is properly
regulated. And 25 respondents are strongly agree to investing derivative is much better in terms of
return than depositing money in bank.

69
CHAI-SQUAR TEST

VALU DF Asymptotic
significance
( 2 Sided)
Person chai – 72.049a 6 .000
square
Likelihood 68.233 6 .000
Ratio
Linear-by-liner 4.101 1 .043
association
N of valid cases 100

Interpretation

HO = There is no significant association between age of respondents and their occupation

H1 = There is significant association between age of respondents and their occupation

Here level of significant or p value Is less than 0.05, it means that HOis rejected and H1 is accepted
which mean that there is significant association between age of respondent and their occupation

70
 N Minimum Maximum Mean SD

Derivatives are 100 1 5 3.45 .896

highly preferred
over equity
Shares?
Investing in the 100 1 5 4.81 .829
option contract
are less risky
compared to
Future contract?
Future and 100 1 5 2.40 .764
option a
contract help to
hedge and
transfer risk
Efficiently?
Derivatives like 100 1 5 3.33 .848
future and
option contract
are effective
risk
management
Stocks?
Derivative 100 1 5 4.18 .964
market is
properly
regulated?

71
 N Minimum Maximum Mean SD

100 1 5 2.39 1.010

Investing in
derivatives is
much better in
terms of return
than depositing
money in bank?
Valid N (List 100
Wise)

DESCRIPTIVE TEST

• 1 to 1.8 strongly disagree

• 1.81 to 2.6 disagree
• 2.61 to 3.4 neutral
• 3.41 to 4.20 agree
• 4.21 to 5 strongly agree

If result are rely between above average that the mean is very significant

• Mean value is 3.45 it mean peoples are agree from the 1st statement
• Mean value is 4.81 it means peoples are strongly agree from the 2nd statement
• Mean value is 2.90 it means peoples are neutral form the 3rd statement
• Mean value is 3.33 it mean people are neutral from the 4th statement
• Mean value is 4.18 it mean people are agree from the 5th statement
• Mean value is 2.39 it mean people are disagree from the 5th statement

72
FINDINGS

From the above data analysis, finds that male are too dominating compare to the female in
trading in financial derivatives market

The youngsters are aware

RECOMMENDATIONS

➢ The derivatives market is newly started in India and it is not known by every investor, so
SEBI has to take steps to create awareness among the investors about the derivative
segment.
➢ In order to increase the derivatives market in India, SEBI should revise some of their
regulations like contract size, participation of FII in the derivatives market.
➢ size should be minimized because small investors cannot afford this much of huge
premiums.

73
 CONCLUSION

➢ In derivative segment the profit/loss of the option writer purely depends on the fluctuations
of the underlying asset.
➢ In bullish market the call option writer incurs more losses so the investor is suggested to
go for a call option to hold, whereas the put option holder suffers in a bullish market, so he
is suggested to write a put option.
➢ In bearish market the call option holder will incur more losses so the investor is suggested
to go for a call option to write, whereas the put option writer will get more losses, so he is
suggested to hold a put option

74
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80
 QUESTIONNAIRE
1. name

2. gender
a. male
b. female

3. education
a.ug
b. graduate
c. pg
d. profession

4. age.
a.20to25 year
b.25 to30 year
c.30to 40 year
d.40 above

5. are you interested in financial derivatives ?

a. yes
b. no

6. reason for not investing in the derivative market?

a.currently not interested
b. lack of awareness
c. very risky
d. study.
e.lack of knowledge

7. occupation
a.businessman
b.job
c.student
d.house wife
e.retired

8. monthly income
a.below 1.5 lakh
b. 1.5 to 3 lakh
c. 3 lakh to 4.5 lakh
d.more than 5 lakh

9. what are the factor consider while trading in derivative market?

a.return
b.saving
81
c.volatility

10. which of the following derivatives instrument do you deal in?

a. currency
b. stock future
c.stock index future
d.stock index option
e.stock option
f.swap

11. how much percentage of your income you trading in derivative market?
a.less than 5%
b 5 to 10 %
c. 10 to 15%
d. 15 to 20 %
e. more than 20 %

12. you participate in the derivative market as?

a. arbitrage
b. hedger.
c.speculators

13. do you use any strategies while trading in the derivative market?
a. yes
b. no

14. what is rate of return are you expected by you from the derivative market?
a. less than 5%
b. 5 to 10%
c. 10 to 15%
d. 15 to 20 %
e. more than 20 %

15. satisfied with current performance of the derivative market?

a. agree
b. disagree
c.neutral
d.strongly agree
e.strongly disagree

16.derivatives are highly preferred over equity shares?

a. agree
b. disagree
c.neutral
d.strongly agree
e.strongly disagree

82
 17.investing in the option contract are less risky compared to future contract?
a. agree
b. disagree
c.neutral
d.strongly agree
e.strongly disagree

18.future and option a contract help to hedge and transfer risk efficiently ?
a. agree
b. disagree
c.neutral
d.strongly agree
e.strongly disagree

19.derivatvies like future and option contract are effective risk management tools?
a. agree
b. disagree
c.neutral
d.strongly agree
e.strongly disagree

20.derivative market is properly regulated?

a. agree
b. disagree
c.neutral
d.strongly agree
e.strongly disagree

21. investing in derivatives is much better in terms of return than depositing money in bank?
a. agree
b. disagree
c.neutral
d.strongly agree
e.strongly disagree

22.. what are the difficulties you are facing when you are trade in the derivative market?
a. lack of knowledge
b. clear positions
c. lot size
d.margin

83

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