Presented By-

Kunal Janyani
Taniya Nagpal
 What Is a Derivative?
• The term Derivative stands for a contract whose price
is derived from or is dependent upon an underlying
asset.
• The underlying asset could be a financial asset such as
currency , stock and market index, an interest bearing
securities or a physical commodity.
• As Derivative are merely contract between two or
more parties, anything like weather data or amount of
rain can be used as underlying assets.
Need For Derivatives

•  The derivatives market performs a

number of economic functions.
• Transferring risks
• Discovery of future as well as current
prices
• Catalyzing entrepreneurial activity
• Increasing saving and investments in
long run
Participants In
Derivative Hedgers-use futures
or options markets
Speculators-use
futures and options
Arbitrageurs-are in
business to take

Market
contract to get extra advantage of a
to reduce or
leverage in betting discrepancy
eliminate the risk
on future between prices in
associated with
movements in the two different
price of an asset
price of an asset. markets.
Types OF Derivatives
Forward
Futures
Options
Swaps
Case Study -I
Case Study- II

RICHARD
DENNIS
In the year
1986, he
made
$80million
Early Life
HE GREW UP IN CHICAGO DURING THE
1950S, A STREET KID FROM THE OLD
SOUTH SIDE NEIGHBOURHOODS. THERE
WAS NO PRIVILEGED CHILDHOOD WITH
WEALTHY PARENTS AND WELL PLACED
FRIENDS. HE DID NOT HAVE A SILVER
SPOON OR THE RIGHT CONNECTIONS.
HIS FIRST STAB AT TRADING, WHILE
ATTENDING THE ALL-BOYS’ ST. LAURENCE
PREP SCHOOL IN CHICAGO, WAS TO BUY
TEN SHARES OF A $3 “PHONOGRAPH”
STOCK. THE COMPANY FOLDED. WHILE
HIS FIRST ATTEMPT AT TRADING FAILED
AT SEVENTEEN, DENNIS LANDED A
SUMMER JOB AS A RUNNER ($1.60 AN
HOUR) AT THE CHICAGO MERCANTILE
EXCHANGE. EACH DAY THE EXCHANGE
FLOOR WAS MOBBED BY HUNDREDS OF
TRADERS FIGHTING AND SCREAMING TO
PLACE THEIR TRADES.
AFTER GRADUATING FROM DEPAUL
UNIVERSITY HE RECEIVED A FELLOWSHIP
TO TULANE UNIVERSITY GRADUATE
SCHOOL, BUT PROMPTLY DROPPED OUT
AND RETURNED TO CHICAGO WITHIN
DAYS TO START TRADING FULL TIME.
Tips to Trade by Richard Dennis

• Whatever method you use to enter trades, the most critical thing is that
if there is a major trend, your approach should assure that you get in
that trend.
• A good trend following system will keep you in the market until there is
evidence that the trend has changed.
• When you have a position, you put it on for a reason, and you’ve got to
keep it until the reason no longer exists.
• Expect the unexpected in this business; expect the extreme. Don’t think
in terms of boundaries that limit what the market might do.
 Trading Trade small
The unexpected
decisions because that’s
and the The key is
should be made when you are as Learn from your
impossible consistency and
as bad as you are mistakes.
happen every discipline.
unemotionally ever going to
now and then.
as possible be.
Thank You