You are on page 1of 5

TITLE:

A STUDY ON DERIVATIVES (OPTIONS) AT BONANZA PORTFOLIO LTD,


INTRODUCTION

A derivative security is a security whose value depends on the value of together more basic underlying variable. These are also known as contingent claims. Derivatives securities have been very successful in innovation in capital markets. The emergence of the market for derivative products most notably forwards, OPTIONS and options can be traced back to the willingness of risk adverse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, financial markets are market by a very high degree of volatility. Though the use of derivative products, it is possible to partially or fully transfer price risks by locking in asset prices. As instrument of risk management these generally dont influence the fluctuations in the underlying asset prices.

However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash-flow situation of risk-averse investor.

Derivatives are risk management instruments which derives their value from an underlying asset. Underlying asset can be Bullion, Index, Share, Currency, Bonds, Interest, etc.

The emergence of the market for derivatives products, most notably forwards, OPTIONS and futures, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative product minimizes the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors. 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.. Banks, Securities firms, companies and investors to hedge risks, to gain access to cheaper money and to make profit, use derivatives. Derivatives are likely to grow even at a faster rate in future.

NEED FOR THE STUDY:


The present study on OPTIONS is very much appreciable on the grounds that it gives deep insights about the OPTIONS market. It would be essential for the perfect way of trading in OPTIONS. An investor can choose the fight underlying or portfolio for investment 3which is risk free. The study would explain the various ways to minimize the losses and maximize the profits. The study would help the investors how their profit/loss is

reckoned. The study would assist in understanding the OPTIONS segment. The study assists in knowing the different factors that cause for the fluctuations in the OPTIONS market. The study provides information related to the byelaws of OPTIONS trading. The studies elucidate the role of OPTIONS in India Financial Markets.

OBJECTIVES OF THE STUDY


1. To understand the concept of the Financial Derivatives such as OPTIONS and Options. 2. To examine the advantage and the disadvantages of different strategies along with situations. 3. To study the different ways of buying and selling of Options. 4. To present a theoretical framework relating to derivative market in India. 5. To observe the daily price movement of selected stock OPTIONS. 6. To identify the buying and selling signals to the selected scripts. 7. To observe the daily price movement of Nifty Index OPTIONS. 8. To offer suggestions based on the findings to the study. 9. To study the various trends in derivatives market

RESEARCH METHODOLOGY:

The type of research adopted is descriptive in nature and the data collected for this study is the secondary data i.e. from Newspapers, Magazines and Internet.

SOURCES OF INFORMATION:
The data had been collected through Primary and Secondary sources.

1. Primary sources:
The data had been collected through project guide and staff of the company.

2. Secondary sources:
The data had been collected through Books, Journals and websites.

SCOPE OF THE STUDY:


The study is limited to Derivatives With special reference to OPTIONS in the Indian context and the India Infoline has been taken as representative sample for the study. The study cannot be said as totally perfect, any alteration may come. The study has only made humble attempt at evaluating Derivatives Markets only in Indian Context. The study is not based on the International perspective of the Derivatives Markets.

LIMITATIONS OF THE STUDY

The following are the limitations of the study. This study was risk management in derivatives.

The study is restricted only to companies which are analyzed and hence

Conclusions cannot be generalize for other companies

Mainly concentration on the NSE derivative market.

The study was undertaken to analyze options of call and put options.

The scripts chosen for analysis are BHEL, ONGC, RELIANCE CAPITAL and TATA STEEL the contract taken is Dec- 2009 ending on three months contract.

The data collected is completely related to the BHEL, ONGC, RELIANCE CAPITAL and TATA STEEL Dec- Feb 2012 contract; as the analysis limited to 2 companies, the report doesnt representing whole industry status.