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  • CourseBookDerivatives 191107 170345

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    Siddharth Wagh
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    The document discusses derivatives futures and options. Futures involve an obligation to buy or sell an underlying asset at a future date and price. Options provide the right but not obligation to buy or sell an asset. A put option gives the right to sell, while a call option gives the right to buy. Protective puts and covered calls are common options strategies, where puts are bought to hedge stock and calls are sold against held stock.

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    CourseBookDerivatives-191107-170345

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    The document discusses derivatives futures and options. Futures involve an obligation to buy or sell an underlying asset at a future date and price. Options provide the right but not obligation to buy or sell an asset. A put option gives the right to sell, while a call option gives the right to buy. Protective puts and covered calls are common options strategies, where puts are bought to hedge stock and calls are sold against held stock.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    6 views6 pages

    CourseBookDerivatives 191107 170345

    Uploaded by

    Siddharth Wagh
    The document discusses derivatives futures and options. Futures involve an obligation to buy or sell an underlying asset at a future date and price. Options provide the right but not obligation to buy or sell an asset. A put option gives the right to sell, while a call option gives the right to buy. Protective puts and covered calls are common options strategies, where puts are bought to hedge stock and calls are sold against held stock.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 6

    Derivatives

    (Futures &
    OPtions)

    GOELASF.IN - All rights reserved. Do not share, copy, reproduce or sell any part of this document unless you have written
    permission from Goela School of Finance LLP©
    Futures
    • The buyer of a future has the obligation to buy the underlying asset at a
    given date and given price.
    • The seller of the future has the obligation to sell the underlying asset at a
    given date and given price.
    • In short this is a trade which happens at a later date.

    • Futures gives us the ability to use very high leverage.

    GOELASF.IN - All rights reserved. Do not share, copy, reproduce or sell any part of this document unless you have written
    permission from Goela School of Finance LLP©
    Futures
    Advantages:
    1. Allows us to get high leverage
    2. Will enable you to earn money even when the market is falling
    3. Enables us to hedge our position

    Disadvantages:
    1. High leverage
    2. Mark to market
    3. Roll over cost

    GOELASF.IN - All rights reserved. Do not share, copy, reproduce or sell any part of this document unless you have written
    permission from Goela School of Finance LLP©
    Options
    Put Option:
    • The buyer has the right to sell the underlying asset at a given date and at a
    given price.
    • The seller has the obligation to buy the underlying asset at a given date
    and at a given price.

    Call Option:
    • The buyer has the right to buy the underlying asset at a given date and at
    a given price.
    • The seller has the obligation to buy the underlying asset at a given date
    and at a given price.

    GOELASF.IN - All rights reserved. Do not share, copy, reproduce or sell any part of this document unless you have written
    permission from Goela School of Finance LLP©
    Options
    Protective Put: Buy Equity shares + Buy put
    Objective: A situation which creates a more efficient stop loss as compared
    to a traditional stop loss
    Note: The buy price of equity shares and the strike price of the put option
    should be the same

    GOELASF.IN - All rights reserved. Do not share, copy, reproduce or sell any part of this document unless you have written
    permission from Goela School of Finance LLP©
    Options
    Covered call: Buy Equity shares + Sell call
    Objective: Getting additional income off of your existing stock holdings
    Note: Aim for a particular interest rate per year according to your risk profile.

    GOELASF.IN - All rights reserved. Do not share, copy, reproduce or sell any part of this document unless you have written
    permission from Goela School of Finance LLP©

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