RISK MANAGEMENT AND

DERIVATIVES
TOPICS:
OPTION MARKET & STRATEGIES

SUBMITTED BY :
RAKSHITHA V
TEJASWINI K
SHARATH KUMAR
NAVANEET
 OPTION MARKETS
An option is a contract which gives the
buyer (the owner or holder of the option)
the right, but not the obligation, to buy or
sell and underlying asset or instruments at
a specified strike price on a specified date,
depending on the form of the options.
 TERMINOLOGIES OF OPTION MARKET
 Stock options
 Buyer of an option
 Writer of an option
 Expiration date
 Strike price
 Exercising the option
 Exercise price
 In the money [ITM]
 At the money[ATM]
 Out of the money[OTM]
TYPES OF OPTION MARKET
Call option
Put option
American option
European option
 What is hedging?
HEDGING IS A RISK MANAGEMENT STRATEGY USED IN
LIMITING OR OFFSETTING PROBABILITY OF LOSS
FROM FLUCTUATIONS IN THE PRICES OF
COMMODITIES, CURRENCIES, OR SECURITIES. IN
EFFECT, HEDGING IS A TRANSFER OF RISK WITHOUT
BUYING INSURANCE POLICIES.

HEDGING IS USED ALSO IN PROTECTING ONE'S

CAPITAL AGAINST EFFECTS OF INFLATION THROUGH
INVESTING IN HIGH-YIELD FINANCIAL INSTRUMENTS
(BONDS, NOTES, SHARES), REAL ESTATE, OR PRECIOUS
METALS.
Trading strategies with options:-
 Bullish strategies
 Bearish strategies
 Strategies for volatile situations
 Bullish strategies
 Protective put
 Covered call
 Collars
 Long call (Buy call)
 Short put
 Call bull spread
 Put bull spread
 Straps
Bearish strategies
 Short put
 Long put
 Call bear spread
 Put bear spread
 strips