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ACKNOWLEDGEMENT
I express my sincere gratitude to the following dignitaries for helping me and providing necessary
information during various stages of project thereby making it successful.
I would like to thank my external guide Mr. Sandeep Das Mohapatra (Manager Equity, Religare
securities ltd. Bhubaneswar) for giving me the opportunity to work in their esteemed organization under
his guidance, and helping me to complete the project in a successful manner. I am also thankful to all the
staff members of Religare securities ltd. Bhubaneswar who extended their hands and cooperation
directly or indirectly for successful completion of the training programme.
I am obliged to my Faculty guide Prof. Ashok Ku. Rath for providing time, effort and most of all his
patience in helping me for preparing this project report. I am also thankful to all the faulty members of
our college for their kind cooperation with me to write this report.
Last but not least I am thankful to my family members and friends for providing me moral support to do
this project successfully.
Date:
Place: Soumya Ranjan Tripathy
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Risk Management Through Derivatives in Equity Segment
DECLARATION
This project report has not been submitted to any other institute/university for the award of any
degree or diploma.
Date:
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Risk Management Through Derivatives in Equity Segment
This is to certify that the project entitled “RISK MANAGEMENT THROUGH DERIVATIVES
IN EQUITY SEGMENT” is done by SOUMYA RANJAN TRIPATHY student of RCMA
(second year) under my guidence and supervision for partial fulfillment of MBA curriculum of
Regional College Of Management Autonomous, Bhubaneswar.
3. Is up to the standard both in respect to the content and language for being referred to the
examiner.
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Risk Management Through Derivatives in Equity Segment
This is to certify that the project entitled “RISK MANAGEMENT THROUGH DERIVATIVES IN
EQUITY SEGMENT” is done by SOUMYA RANJAN TRIPATHY, student of RCMA (second
year) under the guidance and supervision for partial fulfillment of MBA curriculum of Regional
College Of Management Autonomous, Bhubaneswar.
3. Is up to the standard both in respect to the content and language for being referred to the
examiner.
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Risk Management Through Derivatives in Equity Segment
ABSTRACT
The emergence of the market for derivative products, most notably forwards, futures and options, 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
products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of
risk-averse investors. The past decade has witnessed a massive growth in the use of financial derivatives
by a wide range of corporate and financial institutions. This growth has run in parallel with the increasing
direct reliance of companies on the capital market as the major source of long term funding. In this
respect, derivatives have a vital role to play in enhancing shareholder value by ensuring minimum risk of
investment.
During this project I got to know different ways or different strategies by using which investor can
minimize the loss. An individual always faces the problem as to which strategy he should use in different
market condition. During this course of Internship I had gathered a good knowledge of cash and
derivative market. This knowledge was helpful in my project to achieve the objective.
I had worked out on 14 strategies by applying which in appropriate market condition an investor can
minimize his risk/loss and even earn profit by only taking positions.
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Risk Management Through Derivatives in Equity Segment
EXECUTIVE SUMMARY
This is the report submitted by Soumya Ranjan Tripathy studying at Regional College of
Management(Autonomous), Bhubaneswar, in the partial fulfillment of the requirement of MBA
Program, carried at Religare securities Ltd, Bhubaneswar.
Religare Securities Limited is engaged in providing financial services all across the country and is one of
the most renowned broking houses in India.
The project is on RISK MANAGEMENT THROUGH DERIVATIVES IN EQUITY SEGMENT and
the objective of the project is to identify, understand and analyze the strategy which helps to minimize the
Risk in the Indian Equity Derivative Market. Using the findings depicted at the end of the project will
helpful for the investor by indicating whether to invest in the option and future or not.
Equity market reforms are a major constituent of the overall economic reforms in India and considering
the growing surge in the broking firm, the objective of the project is such set so that it will enable the
investors as well as the RMs to formulate strategies as per market trend and investor’s risk appetite.
To achieve the objectives of the project, training was undergone to gain practical knowledge and learn
about derivatives and its applications and also to know the behaviors of investor during trading hours.
The training enabled to learn the concepts of secondary market, the derivatives and the importance of
various tools that were used to undergo the activities to invest in equity market.
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Risk Management Through Derivatives in Equity Segment
CONTENTS
1. Introduction
b. Methodology used
2. Company profile
3. Investment
4. Equity investment
5. Secondary Market
6. Derivatives
(I) Forward contract
(II) Future contract
• Futures terminology
• Futures payoffs
• Applications of future contract
(III)Option contract
• Option contracts
• Option terminologies
• Option strategies
7. Findings
8. Conclusion
9. Bibliography
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Risk Management Through Derivatives in Equity Segment
INTRODUCTION
Derivative products initially emerged as hedging devices against fluctuations in commodity prices, and
commodity-linked derivatives remained the sole form of such products for almost three hundred years.
Financial derivatives came into spotlight in the post-1970 period due to growing instability in the
financial markets. However, since their emergence, these products have become very popular and by
1990s, they accounted for about two-thirds of total transactions in derivative products. In recent years, the
market for financial derivatives has grown tremendously in terms of variety of instruments available, their
complexity and also turnover. In the class of equity derivatives the world over, futures and options on
stock indices have gained more popularity than on individual stocks, especially among institutional
investors, who are major users of index-linked derivatives. Even small investors find these useful due to
high correlation of the popular indexes with various portfolios and ease of use.
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Risk Management Through Derivatives in Equity Segment
To identify, understand and analyze the strategies which help to minimize the Risk in the Indian Equity
Derivative Market in different market conditions.
To implement strategies on investor’s portfolio and measures the profit or loss as a result of implementing
the strategies.
METHODOLOGY USED
The information used for this study was collected through secondary sources whch are available for
public
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Risk Management Through Derivatives in Equity Segment
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Risk Management Through Derivatives in Equity Segment
A diversified financial services group with a pan-India presence and presence in multiple international
locations, Religare Enterprises Limited ("REL") offers a comprehensive suite of customer-focused
financial products and services targeted at retail investors, high net worth individuals and corporate and
institutional clients.
REL, along with its joint venture partners, offers a range of products and services in India, including asset
management, life insurance, wealth management, equity and commodity broking, investment banking,
lending services, private equity and venture capital. Religare has also ventured into the alternative
investments sphere through its holistic arts initiative and film fund.
With a view to expand and diversify, REL operates in the life insurance space under 'Aegon Religare Life
Insurance Company Limited' and has launched India's first wealth management joint venture under the
brand name 'Religare Macquarie Private Wealth'.
REL, through its subsidiaries, has launched India's first holistic arts initiative - with a gallery - as well as
the first SEBI approved film fund, which is an initiative towards innovation and spotting new
opportunities for creation and maximization of wealth for investors.
REL operates from seven domestic regional offices, 43 sub-regional offices, and has a presence in 498
cities and towns controlling 1,837 business locations all over India & having an employee strength of
over 10000 employees.
To make a mark in the global arena, REL acquired UK-based Hichens, Harrison & Co. in 2008 which
was subsequently re-named as Religare Hichens Harrison PLC ("RHH"). Hichens, Harrison & Co. was
incorporated in London in the year 1803 and is believed to be one of the oldest firms of stockbrokers in
the City of London.
Pursuant to expansion of REL's business, the company has grown from largely an equity trading company
into a diversified financial services company. With the addition of RHH the REL group now
operates out of multiple global locations, other than India, (the UK, the USA, Brazil, South Africa, South
East Asia, Dubai and Singapore).
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Risk Management Through Derivatives in Equity Segment
Vision: To build Religare as a globally trusted brand in the financial services domain and
present it as the ‘Investment Gateway of India'.
Mission: Providing complete financial care driven by the core values of diligence and transparency.
Brand Essence: Core brand essence is Diligence and Religare is driven by ethical and dynamic
processes for wealth creation.
Name: Religare is a Latin word that translates as 'to bind together'. This name has been chosen to
reflect the integrated nature of the financial services the company offers.
Symbol: The Religare name is paired with the symbol of a four-leaf clover. Traditionally, it is considered
good fortune to find a four-leaf clover as there is only one four-leaf clover for every 10,000 three-leaf
clovers found. For us, each leaf of the clover has a special meaning. It is a symbol of Hope, Trust, Care,
& Good Fortune. For the world, it is the symbol of Religare.
The first leaf of the clover represents Hope. The aspirations to succeed. The dream
of becoming. Of new possibilities. It is the beginning of every step and the
foundation on which a person reaches for the stars.
The second leaf of the clover represents Trust. The ability to place one’s own faith in
another. To have a relationship as partners in a team. To accomplish a given goal
with the balance that brings satisfaction to all, not in the binding, but in the bond that
is built.
The third leaf of the clover represents Care. The secret ingredient that is the cement
in every relationship. The truth of feeling that underlines sincerity and the triumph
of diligence in every aspect. From it springs true warmth of service and the ability to
adapt to evolving environments with consideration to all.
The fourth and final leaf of the clover represents Good Fortune. Signifying that rare
ability to meld opportunity and planning with circumstance to generate those often
looked for remunerative moments of success.
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Risk Management Through Derivatives in Equity Segment
Hope. Trust. Care. Good Fortune. All elements perfectly combine in the emblematic
and rare, four-leaf clover to visually symbolize the values that bind together and
form the core of the Religare vision.
• *Religare Asset Management Company (P) Limited is a wholly owned subsidiary of Religare
Securities Limited (RSL), which in turn is a 100% subsidiary of Religare Enterprises Limited.
• ** Religare Hichens, Harrison plc. (RHH) is a part of Religare Enterprises Limited (REL).
Hichens, Harrison & Co. plc. (HH), established in 1803, is London’s oldest brokerage and
investment firm with a global footprint. Post its acquisition through REL’s indirect subsidiary -
Religare Capital Markets International (UK) Limited, HH has been rechristened as Religare
Hichens Harrison plc
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Risk Management Through Derivatives in Equity Segment
INVESTMENT
Investment in a general way is defined as any use of resources intended to increase future production
output or income.
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Risk Management Through Derivatives in Equity Segment
In finance investment refers to the purchase or acquisition of an asset or item with a hope to get return
from it in the future. The return may be in terms of regular income or value appreciation.
In an economy, people indulge in economic activity to support their consumption requirements. Savings
arise from deferred consumption, to be invested, in anticipation of future returns. Investments could be
made into financial assets, like stocks, bonds, and similar instruments or into real assets, like houses, land,
or commodities.
The main idea behind investment is to utilize the saved idle money to earn a return on it. The money you
earn is partly spent and the rest is saved for meeting future expenses. Instead of keeping the savings idle it
is a general psychology of people to earn some return by utilizing the savings which form the investment.
SECURITIES MARKET
A securities market is a market for securities (debt or equity), where business enterprises (companies)
and governments can raise funds. The definition of ‘Securities’ as per the Securities Contracts egulation
Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other marketable
securities of similar nature in or of any incorporate company or body corporate, government securities,
derivatives of securities, units of collective investment scheme, interest and rights in securities, security
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Risk Management Through Derivatives in Equity Segment
receipt or any other instruments so declared by the Central Government. Securities market can be Money
market or Capital market. Capital market is defined as a market in which money is provided for periods
longer than a year[1], as the raising of short-term funds takes place on the money markets. The capital
market includes the stock market (equity securities) and the bond market (debt). A capital market is
simply any market where a government or a company can raise money(capital) to fund their operations
and long term investments.
In financial terms capital market is a market where financil instruments are issued and traded.
Capital market denotes the securities market where the stocks, bonds and several other derivatives are
traded. This market provides necessary fund to different companies and governments also. Both long and
short term debts are are raised from this market. At the same time, the capital market provides the
investors with the opportunity to make regular income from the market.
The capital market channelizes funds from surplus sources to the needy areas and here a balance is sought
to be achieved among diverse market participants. It impels enterprises to focus on performance.
EQUITY INVESTMENT
When you buy a share of a company you become a shareholder in that company. Shares are also known
as Equities. Shares are issued for the first time through Initial Public Offer(IPO) or Follow on Public
Offer (FPO) and subsequently traded in the secondary markets that are the stock exchanges. Equities have
the potential to increase in value over time. It also provides your portfolio with the growth necessary to
reach your long term investment goals. Research studies have proved that the equities have outperformed
most other forms of investments in the long term. This may be illustrated with the help of following
examples:
unfavourable events like war, economic crisis, communal riots, minority government etc. depress the
market irrespective of certain companies performing well. However, the effect of market-specific factor is
generally short-term. Despite ups and downs, price of a stock in the long run gets stabilized based on the
stock specific factors. Therefore, a prudent advice to all investors is to analyze and invest and not
speculate in shares.
SECONDARY MARKET
Secondary market refers to a market where securities are traded after being initially offered to the public
in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the
secondary market. Secondary market comprises of equity markets and the debt markets.
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Risk Management Through Derivatives in Equity Segment
A stock exchange is the place where securities, shares, debentures and bonds of joint stock companies,
central & state govt., semi govt. organizations, local bodies and foreign govt. are bought and sold. A
stock exchange is the nerve center of capital market. Changes in the capital market are brought about by a
complex set of factors, all operating on the market simultaneously. Such changes are subject to secular
trends set by the economic progress of the nation, and governed by the factors like general economic
situation, financial and monetary policies, tax changes, political environment, international economic and
financial development etc. A stock exchange provides necessary mobility to capital and directs the flow
of capital into profitable and successful enterprises.
1875- Stockbrokers in Bombay organized an informal association “Native Shares and Stock
Brokers Association”.
1894 - Ahmedabad Stock Exchange founded.
1908 – Calcutta Stock Exchange founded.
In the post-independence period also, the size of the capital market remained small.
1st & 2nd 5-year plans – Govt. emphasis was to develop PSUs, but their shares were not listed on
the stock exchanges.
The Controller of Capital Issues (CCI) closely supervised and controlled the timing, composition,
interest rates, pricing, allotment, and floatation costs of new issues. These strict regulations
demotivated many companies from going public for almost four and a half decades.
In 1950s - Century Textiles, Tata Steel, Bombay Dyeing, National Rayon, and Kohinoor Mills
were the favorite scrips of speculators. As speculation became rampant, the stock market came to
be known as 'Satta Bazaar'. Despite speculation, non-payment or defaults were not very frequent.
In 1956 – Govt. enacted Securities Contracts (Regulation) Act, which was characterized by the
establishment of a network for the development of financial institutions and state financial
corporations.
In 1960s - Characterized by wars and droughts in the country which led to bearish trends. Trends
were aggravated by ban in 1969 on forward trading and 'badla‘.
In 1964 - The Unit Trust of India (UTI), first mutual fund of India came into existence. FIs such
as LIC and GIC helped to revive the sentiment by emerging as the most important group of
investors.
In 1970s - Badla trading was resumed. This revived the market.
On July 6, 1974 – Govt. enforced Dividend Restriction Ordinance, restricting the payment of
dividend by companies to 12 per cent of the face value or one-third of the profits of the companies
(that can be distributed as computed under section 369 of the Companies Act), whichever was
lower. This led to a slump in market capitalization at the BSE by about 20 per cent overnight and
the stock market did not open for nearly a fortnight.
1973- Introduction of Foreign Exchange Regulation Act (FERA).
As a result, 123 MNCs offered shares, which were lower than their intrinsic worth. For the first
time, many investors got an opportunity to invest in the stocks of such MNCs as Colgate, and
Hindustan Liver Limited.
In 1977 - Dhirubhai Ambani, tapped the capital market with Reliance Textiles, the base of today’s
entire Reliance empire.
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Risk Management Through Derivatives in Equity Segment
In 1980s - Witnessed an explosive growth of the securities market in India, Major events:
- Participation by small investors, speculation, defaults, ban on badla, and
- resumption of badla continued.
- Convertible debentures emerged as a popular instrument of resource mobilization
in the primary market.
- The introduction of public sector bonds and the successful mega issues of Reliance
Petrochemicals and Larsen and Toubro gave a new lease of life to the primary market.
- The decade of the 1980s was characterized by an increase in the number of stock
exchanges,
listed companies, paid up-capital, and market capitalization.
In1990s - Liberalization and globalization of Indian economy opening new doors for investment.
In 1992 - The Capital Issues (Control) Act, 1947 was cancelled. Emergence of new industrial
policy & SEBI as a regulator of capital market.
The securities scam of March 1992 involving Harshad Mehta, a broker as well as bankers was on
of the biggest scams in the history of the capital market. which drove away small investors from
the market.
In 1995 - The M S Shoes case, one such scam which took place, put a break on new issue activity.
In1990’s - Securities scam revealed the inadequacies of and inefficiencies in the financial system.
It was the scam, which prompted a reform of the equity market. The Indian stock market
witnessed a sea change in terms of technology and market prices because of all such scams.
Technology brought radical changes in the trading mechanism.
National Stock Exchange, set up in 1994, and Over the Counter Exchange of India, set up in 1992.
The National Securities Clearing Corporation (NSCCL) and National Securities Depository
Limited (NSDL) were set up in April 1995 and November 1996 respectively. These institutions
improved clearing and settlement and brought about dematerialized trading.
In 1995-96 - The Securities Contracts (Regulation) Act, 1956 was amended for introduction of
- options trading.
Rolling settlement was introduced in January 1998 for the dematerialized segment of all
companies.
The Indian capital market entered the twenty-first century with the Ketan Parekh scam. As a result
of this scam, badla was discontinued from July 2001 and rolling settlement was introduced in all
scrips.
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Risk Management Through Derivatives in Equity Segment
Trading of futures commenced from June 2000, and Internet trading was permitted in February
2000.
On July 2, 2001, the Unit Trust of India announced suspension of the sale and repurchase of its
flagship US-64 scheme due to heavy redemption leading to panic on the bourses.
Then, the government's decision to privatize oil PSUs in 2003 fuelled stock prices. One big
divestment of international telephony major VSNL took place in early February 2002.
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Risk Management Through Derivatives in Equity Segment
(Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange
Board of India (SEBI).
With demutualisation, BSE has two of world's best exchanges, Deutsche Börse and Singapore
Exchange, as its strategic partners.
Today, BSE is the world's number 1 exchange in terms of the number of listed companies and the
world's 5th in transaction numbers.
An investor can choose from more than 4,700 listed companies, which for easy reference, are
classified into A, B, S, T and Z groups.
The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature, and is
tracked worldwide. It is an index of 30 stocks representing 12 major sectors, and is sensitive to
market sentiments and market realities.
Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral indices.
Emergence of NSE
The NSE has genesis in the report of the High Powered Study Group on Establishment of New
Stock Exchanges. Based on the recommendations, NSE was promoted by leading Financial
Institutions at the behest of the Government of India and was incorporated in November 1992 as a
tax-paying company unlike other stock exchanges in the country.
NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The
Capital Market (Equities) segment commenced operations in November 1994 and operations in
Derivatives segment commenced in June 2000.
The following years witnessed rapid development of Indian capital market with introduction of
internet trading, Exchange traded funds (ETF), stock derivatives and the first volatility index -
IndiaVIX in April 2008.
August 2008 - introduction of Currency derivatives in India with the launch of Currency Futures
in USD-INR by NSE. Interest Rate Futures was introduced for the first time in India by NSE on
31st August 2009, exactly after one year of the launch of Currency Futures.
STOCK TRADING
Screen Based Trading
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Risk Management Through Derivatives in Equity Segment
The trading on stock exchanges in India used to take place through open outcry without use of
information technology for immediate matching or recording of trades. This was time consuming and
inefficient. This imposed limits on trading volumes and efficiency. In order to provide efficiency,
liquidity and transparency, NSE introduced a nationwide, on-line, fully automated screen based trading
system (SBTS) where a member can punch into the computer the quantities of a security and the price at
which he would like to transact, and the transaction is executed as soon as a matching sale or buy order
from a counter party is found.
What is NEAT?
NSE is the first exchange in the world to use satellite communication technology for trading. Its trading
system, called National Exchange for Automated Trading (NEAT), is a state of-the-art client server based
application. At the server end all trading information is stored in an in memory database to achieve
minimum response time and maximum system availability for users. It has uptime record of 99.7%. For
all trades entered into NEAT system, there is uniform response time of less than one second.
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DERIVATIVES
INTRODUCTION
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Financial market have been innovating and acquiring new shapes and dimensions. There are two core
factors which directs the financial market, they are increasing returns and reducing risks in investment.
There have been continuous innovations and developments in the financial markets on these two factors.
One of the most significant developments in these two factors in the securities markets has been the
development and expansion of financial derivatives. The term “derivatives” is used to refer to financial
instruments which derive their value from some underlying assets. The underlying assets could be
equities (shares), debt (bonds, T-bills, and notes), currencies, and even indices of these various assets,
such as the Nifty 50 Index. Derivatives derive their names from their respective underlying asset. Thus if
a derivative’s underlying asset is equity, it is called equity derivative and so on.
Origin of derivatives
While trading in derivatives products has grown tremendously in recent times, the earliest evidence of
these types of instruments can be traced back to ancient Greece. Even though derivatives have been in
existence in some form or the other since ancient times, the advent of modern day derivatives contracts is
attributed to farmers’ need to protect themselves against a decline in crop prices due to various economic
and environmental factors. Thus, derivatives contracts initially developed in commodities. The first
“futures” contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. The farmers
were afraid of rice prices falling in the future at the time of harvesting. To lock in a price (that is, to sell
the rice at a predetermined fixed price in the future), the farmers entered into contracts with the buyers.
These were evidently standardized contracts, much like today’s futures contracts. In 1848, the Chicago
Board of Trade (CBOT) was established to facilitate trading of forward contracts on various
commodities. From then
on, futures contracts on commodities have remained more or less in the same form, as we know them
today.
Derivatives in India
In India, derivatives markets have been functioning since the nineteenth century, with
organized trading in cotton through the establishment of the Cotton Trade Association in 1875.
Derivatives, as exchange traded financial instruments were introduced in India in June 2000.
The National Stock Exchange (NSE) is the largest exchange in India in derivatives, trading in various
derivatives contracts. The first contract to be launched on NSE was the Nifty 50 index futures contract. In
a span of one and a half years after the introduction of index futures, index options, stock options and
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Risk Management Through Derivatives in Equity Segment
stock futures were also introduced in the derivatives segment for trading. NSE’s equity derivatives
segment is called the Futures & Options Segment or F&O Segment. NSE also trades in Currency and
Interest Rate Futures contracts under a separate segment.
A series of reforms in the financial markets paved way for the development of exchange-traded equity
derivatives markets in India. In 1993, the NSE was established as an electronic, national exchange and it
started operations in 1994. It improved the efficiency and transparency of the stock markets by offering a
fully automated screen-based trading system with real-time price dissemination. A report on exchange
traded derivatives, by the L.C. Gupta Committee, set up by the Securities and Exchange Board of India
(SEBI), recommended a phased introduction of derivatives instruments with bi-level regulation (i.e., self-
regulation by exchanges, with SEBI providing the overall regulatory and supervisory role). Another
report, by the J.R. Varma Committee in 1998, worked out the various operational details such as
margining and risk management systems for these instruments. In 1999, the Securities Contracts
(Regulation) Act of 1956, or SC(R)A, was amended so that derivatives could be declared as “securities”.
This allowed the regulatory
framework for trading securities, to be extended to derivatives. The Act considers derivatives on equities
to be legal and valid, but only if they are traded on exchanges.
The Securities Contracts (Regulation) Act, 1956 defines "derivatives" to include:
1. A security derived from a debt instrument, share, loan whether secured or unsecured,
risk instrument, or contract for differences or any other form of security.
2. A contract which derives its value from the prices, or index of prices, of underlying
securities.
At present, the equity derivatives market is the most active derivatives market in India. Trading volumes
in equity derivatives are, on an average, more than three and a half times the trading volumes in the cash
equity markets.
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Risk Management Through Derivatives in Equity Segment
November 18, 1996 - L.C. Gupta Committee set up to draft a policy framework for introducing
derivatives
May 11, 1998 - L.C. Gupta committee submits its report on the policy framework
May 25, 2000 - SEBI allows exchanges to trade in index futures
June 12, 2000 - Trading on Nifty futures commences on the NSE
June 4, 2001 - Trading for Nifty options commences o n the NSE
July 2, 2001 - Trading on Stock options commences on the NSE
November 9, 2001 - Trading on Stock futures commences on the NSE
August 29, 2008 - Currency derivatives trading commences on the NSE
August 31, 2009 - Interest rate derivatives trading commences on the NSE
2009-10 72392.07
2008-09 45310.63
2007-08 52153.3
2006-07 29543
2005-06 19220
2004-05 Average Daily
10107
Turnover (Rs. cr.)
2003-04 8388
2002-03 1752
2001-02 410
2000-01 11
The basic purpose of derivatives is to transfer the price risk (inherent in fluctuations of the asset prices)
from one party to another; they facilitate the allocation of risk to those who are willing to take it. In so
doing, derivatives help mitigate the risk arising from the future uncertainty of prices. For example, on
November 1, 2009 a rice farmer may wish to sell his harvest at a future date (say January 1, 2010) for a
pre-determined fixed price to eliminate the risk of change in prices by that date. Such a transaction is an
example of a derivatives contract. The price of this derivative is driven by the spot price of rice which is
the "underlying asset".
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Risk Management Through Derivatives in Equity Segment
The main use of derivatives is to either remove risk or take on risk depending if one were a hedger or a
speculator. The diverse range of potential underlying assets and payoff alternatives leads to a huge range
of derivatives contracts available to be traded in the market. The main types of derivatives are
1. Future Contracts
2. Forward Contracts
3. Option Contracts and
4. Swaps
FORWARD CONTRACT
A forward contract is an agreement between two parties to buy or sell an asset (which can be of any
kind) at a pre-agreed future point in time. Therefore, the trade date and delivery date are separated. It is
used to control and hedge risk, for example currency exposure risk (e.g. forward contracts on USD or
EUR) or commodity prices (e.g. forward contracts on oil).
One party agrees to sell, the other to buy, for a forward price agreed in advance. In a forward transaction,
no actual cash changes hands. The forward price of such a contract is commonly contrasted with the spot
price, which is the price at which the asset changes hands (on the spot date, usually two business days).
The difference between the spot and the forward price is the forward premium or forward discount. For
example, Jewelry manufacturer Goldbuyer agrees to buy gold at Rs. 600 (the forward or delivery date)
from gold mining concern Goldseller. No money changes hands between Goldbuyer and Goldseller at the
time the forward contract is created. Rather, Goldbuyer’s payoff depends on the spot price at the time of
delivery. Suppose that the spot price reaches Rs. 610 at the delivery date. Then Goldbuyer gains Rs. 10 on
his forward position (i.e. the difference between the spot and forward prices) by taking delivery of the
gold at Rs. 600. Risk
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FUTURE CONTRACT
In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a
certain underlying instrument at a certain date in the future, at a specified price. The future date is called
the delivery date or final settlement date. The pre-set price is called the futures price. The price of the
underlying asset on the delivery date is called the settlement price.
A futures contract gives the holder the obligation to buy or sell, which differs from an options contract,
which gives the holder the right, but not the obligation. In other words, the owner of an options contract
may exercise the contract. Both parties of a "futures contract" must fulfill the contract on the settlement
date. The seller delivers the commodity to the buyer, or, if it is a cash-settled future, then cash is
transferred from the futures trader who sustained a loss to the one who made a profit. To exit the
commitment prior to the settlement date, the holder of a futures position has to offset his position by
either selling a long position or buying back a short position, effectively closing out the futures position
and its contract obligations.
12000000 500%
10000000 400%
8000000 300%
6000000 200%
4000000 100%
2000000 0%
0 -100%
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
National Turnover(Rs cr.) 72998 330485 1860385 2256203 4305452 6370541 11369230.5 7049753.52 9129635.31
Growth(%) 0% 352.73% 462.93% 21.28% 90.83% 47.96% 78.47% -37.99% 29.50%
Year
FUTURES TERMINOLOGY
o Spot price: The price at which an asset trades in the spot market.
o Futures price: The price at which the futures contract trades in the futures market.
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Risk Management Through Derivatives in Equity Segment
o Contract cycle: The period over which a contract trades. The index futures contracts on the NSE
have one- month, two-month and three-month expiry cycles which expire on the last Thursday of
the month. Thus a January expiration contract expires on the last Thursday of January and a
February expiration contract ceases trading on the last Thursday of February. On the Friday
following the last Thursday, a new contract having a three- month expiry is introduced for
trading.
o Expiry date: It is the date specified in the futures contract. This is the last day on which the
contract will be traded, at the end of which it will cease to exist.
o Contract size: The amount of asset that has to be delivered under one contract called lot size.
o Basis: In the context of financial futures, basis can be 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.
o Cost of carry: The relationship between futures prices and spot prices can be summarized in terms
of what is known as the cost of carry. This measures the storage cost plus the interest that is paid
to finance the asset less the income earned on the asset.
o 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.
o Marking-to-market: In the futures 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.
o Maintenance margin: This is somewhat lower than the initial margin. This is set to ensure that
the balance in the margin account never becomes negative. 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 on the next day.
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Risk Management Through Derivatives in Equity Segment
FUTURES PAYOFFS
Futures contracts have linear payoffs. In simple words, it means that the losses as well as profits for the
buyer and the seller of a futures contract are unlimited. These linear payoffs are fascinating as they can be
combined with options and the underlying to generate various complex payoffs.
profit
Loss
starts making profits, and when the index moves up, it starts making losses. Figure 4.2 shows the payoff
diagram for the seller of a futures contract.
profit
Loss
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Risk Management Through Derivatives in Equity Segment
APPLICATION OF FUTURES
Hedging: Long security, sell futures
Futures can be used as an effective risk-management tool. Take the case of an investor who holds the
shares of a company and gets uncomfortable with market movements in the short run. He sees the value
of his security falling from Rs.450 to Rs.390. In the absence of stock futures, he would either suffer the
discomfort of a price fall or sell the security in anticipation of a market upheaval. With security futures he
can minimize his price risk. All he need do is enter into an offsetting stock futures position, in this case,
take on a short futures position. Assume that the spot price of the security he holds is Rs.390. Two-month
futures cost him Rs.402. For this he pays an initial margin. Now if the price of the security falls any
further, he will suffer losses on the security he holds. However, the losses he suffers on the security, will
be offset by the profits he makes on his short futures position. Take for instance that the price of his
security falls to Rs.350. The fall in the price of the security will result in a fall in the price of futures.
Futures will now trade at a price lower than the price at which he entered into a short futures position.
Hence his short futures position will start making profits. The loss of Rs.40 incurred on the security he
holds, will be made up by the profits made on his short futures position.
Index futures in particular can be very effectively used to get rid of the market risk of a portfolio. Every
portfolio contains a hidden index exposure or a market exposure. This statement is true for all portfolios,
whether a portfolio is composed of index securities or not. In the case of portfolios, most of the portfolio
risk is accounted for by index fluctuations (unlike individual securities, where only 30-60% of the
securities risk is accounted for by index fluctuations). Hence a position LONG PORTFOLIO + SHORT
NIFTY can often become one-tenth as risky as the LONG PORTFOLIO position!
Suppose we have a portfolio of Rs. 1 million which has a beta of 1.25. Then a complete hedge is obtained
by selling Rs.1.25 million of Nifty futures.
He makes a profit of Rs.1000 on an investment of Rs. 1,00,000 for a period of two months. This works
out to an annual return of 6 percent.
Today a speculator can take exactly the same position on the security by using futures contracts. Let us
see how this works. The security trades at Rs.1000 and the two-month futures trades at 1006. Just for the
sake of comparison, assume that the minimum contract value is 1,00,000. He buys 100 security futures
for which he pays a margin of Rs.20,000. Two months later the security closes at 1010. On the day of
expiration, the futures price converges to the spot price and he makes a profit of Rs.400 on an investment
of Rs.20,000. This works out to an annual return of 12 percent. Because of the leverage they provide,
security futures form an attractive option for speculators.
underlying security, as long as there is sufficient liquidity in the market for the security. If the security
price rises, so will the futures price. If the security price falls, so will the futures price.
Now take the case of the trader who expects to see a fall in the price of ABC Ltd. He sells one two-month
contract of futures on ABC at Rs.240 (each contact for 100 underlying shares). He pays a small margin on
the same. Two months later, when the futures contract expires, ABC closes at 220. On the day of
expiration, the spot and the futures price converges. He has made a clean profit of Rs.20 per share. For
the one contract that he bought, this works out to be Rs.2000.
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Risk Management Through Derivatives in Equity Segment
Say for instance, ABC Ltd. trades at Rs.1000. One- month ABC futures trade at Rs.1025 and seem
overpriced. As an arbitrageur, you can make riskless profit by entering into the following set of
transactions.
1. On day one, borrow funds, buy the security on the cash/spot market at 1000.
2. Simultaneously, sell the futures on the security at 1025.
3. Take delivery of the security purchased and hold the security for a month.
4. On the futures expiration date, the spot and the futures price converge. Now unwind the position.
5. Say the security closes at Rs.1015. Sell the security.
6. Futures position expires with profit of Rs.10.
7. The result is a riskless profit of Rs.15 on the spot position and Rs.10 on the futures position.
8. Return the borrowed funds. When does it make sense to enter into this arbitrage? If your cost of
borrowing funds to buy the security is less than the arbitrage profit possible, it makes sense for you to
arbitrage. This is termed as cash-and-carry arbitrage. Remember however, that exploiting an arbitrage
opportunity involves trading on the spot and futures market. In the real world, one has to build in the
transactions costs into the arbitrage strategy.
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Risk Management Through Derivatives in Equity Segment
trading on the spot market. As more and more players in the market develop the knowledge and skills to
do cash-and-carry and reverse cash-and-carry, we will see increased volumes and lower spreads in both
the cash as well as the derivatives market.
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Risk Management Through Derivatives in Equity Segment
OPTION CONTRACTS
Options are financial instruments that convey the right, but not the obligation, to engage in a future
transaction on some underlying security. For example, buying a call option provides the right to buy a
specified amount of a security at a set strike price at some time on or before expiration, while buying a
put option provides the right to sell. Upon the option holder's choice to exercise the option, the party that
sold, or wrote, the option must fulfill the terms of the contract.
For example, Jewelry manufacturer Goldbuyer agrees to buy gold at Rs. 600 (the forward or delivery
date) from gold mining concern Goldseller. Suppose that Goldbuyer belives that there is some chance for
the spot price to fall below Rs.600, so that he losses on his forward position. To limit his loss, Goldbuyer
could purchase a call option for Rs. 5 (the option price or premium) at a strike or exercise price of Rs.
600 with an expiration date three months from now. The call option gives Goldbuyer the right (but not
the obligation) to buy gold at the strike price on the expiration date. Then, if the spot price indeed
declines, he could choose not to exercise the option, and his loss would be limited to the purchase price of
Rs. 5. Alternatively, Goldbuyer may anticipate that the spot price is very likely to decline, and attempt to
profit from such an eventuality by buying a put option, giving him the right to sell gold at the strike price
on the expiration date
OPTION
CALL
PUT
OPTION
OPTION
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Risk Management Through Derivatives in Equity Segment
9000000 300.00%
8000000
250.00%
7000000
6000000 200.00%
5000000
150.00%
4000000
3000000 100.00%
2000000
50.00%
1000000
0 0.00%
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
National turnover(Rs cr.) 28928 109377 270023 290779 518722 985701 1721247.43 3960728.65 8534029.38
Growth 0.00% 278.10% 146.87% 7.69% 78.39% 90.02% 74.62% 130.11% 115.47%
OPTION TERMINOLOGY
Index options: These options have the index as the underlying. Some options are
European while others are American. Like index futures contracts, index options contracts
are also cash settled.
Stock options: Stock options are options on individual stoc ks. Options currently trade on
over 500 stocks in the United States. A contract gives the holder the right to buy or sell
shares at the specified price.
Buyer 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.
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. There
are two basic types of options, call options and put options.
Call option: A call option gives the holder the right but not the obligation to buy an asset
by a certain date for a certain price.
Put option: A put option gives the holder the right but not the obligation to sell an asset by
a certain date for a certain price.
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Risk Management Through Derivatives in Equity Segment
Option price/premium: Option price is the price which the option buyer pays to the option
seller. It is also referred to as the option premium.
Expiration date: The date specified in the options contract is known as the expiration date,
the exercise date, the strike date or the maturity.
Strike price: The price specified in the options contract is known as the strike price or the
exercise price.
American options: American options are options that can be exercised at any time upto the
expiration date. In India stock options are American options
European options: European options are options that can be exercised only on the
expiration date itself. European options are easier to analyze than American options, and
properties of an American option are frequently deduced from those of its European
counterpart. In Indian context Index options are European options
In-the-money option: An in-the-money (ITM) option is an option that would lead to a
positive cashflow to the holder if it were exercised immediately. A call option on the index
is said to be in-the-money when the current index stands at a level higher than the strike
price (i.e. spot price > strike price). If the index is much higher than the strike price, the
call is said to be deep ITM. In the case of a put, the put is ITM if the index is below the
strike price.
At-the-money option: An at-the-money (ATM) option is an option that would lead to zero
cashflow if it were exercised immediately. An option on the index is at-the-money when
the current index equals the strike price (i.e. spot price = strike price).
Out-of-the-money option: An out-of-the-money (OTM) option is an option that would
lead to a negative cashflow if it were exercised immediately. A call option on the index is
out-of-the-money when the current index stands at a level which is less than the strike
price (i.e. spot price < strike price). If the index is much lower than the strike price, the call
is said to be deep OTM. In the case of a put, the put is OTM if the index is above the strike
price.
Intrinsic value of an option: The option premium can be broken down into two
components - intrinsic value and time value. The intrinsic value of a call is the amount the
option is ITM, if it is ITM. If the call is OTM, its intrinsic value is zero. Putting it another
way, the intrinsic value of a call is Max[0, (St — K)] which means the intrinsic value of a
call is the greater of 0 or (St — K). Similarly, the intrinsic value of a put is Max[0, K —
St],i.e. the greater of 0 or (K — St). K is the strike price and St is the spot price.
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Risk Management Through Derivatives in Equity Segment
Time value of an option: The time value of an option is the difference between its
premium and its intrinsic value. Both calls and puts have time value. An option that is
OTM or ATM has only time value. Usually, the maximum time value exists when the
option is ATM. The longer the time to expiration, the greater is an option's time value, all
else equal. At expiration, an option should have no time value.
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Risk Management Through Derivatives in Equity Segment
OPTION STRATEGIES
BUY CALL
Strategy View Investor thinks that the market will rise significantly in the short-term.
Strategy Implementation Call options are bought with a strike price of a. The more bullish the investor
is, the higher the strike price should be. By this strategy, the downside risk is avoided
Buy call
Profit/Loss
Profit
Stock Price
Loss
This strategy has an unlimited profit potential as the diagram depicts but the loss is limited upto
the premium amount paid. The strategy works in a bullish market.
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Risk Management Through Derivatives in Equity Segment
BUY PUT
Strategy View - Investor thinks that the market will fall significantly in the short-term. .
Strategy Implementation - Put option is bought with a strike price of E. The more bearish the investor
is, the lower the strike price should be.
Buy Put
EXAMPLE Profit
E Stock price
Profit/loss
Loss
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Risk Management Through Derivatives in Equity Segment
This strategy gives increaing profit with decrease in price. As the diagram depicts the loss is limited
upto the premium amount paid. The strategy works in a bearish market.
SELL CALL
Strategy View Investor is certain that the market will not rise and is unsure/ unconcerned whether it will
fall.
Strategy Implementation Call option is sold with a strike price of E. If the investor is very certain of his
view then at-the-money options should be sold, if less certain, then out-of-the-money ones should be sold.
EXAMPLE
Exercise Price 150
Sell Call
Profit
Stock price
E
Loss
This strategy has a limited profit potential upto the amount of premium received as the diagram
depicts but the loss is unlimited with the increase in stock price. The strategy works when the
investor is not bullish.
SELL PUT
Strategy View Investor is certain that the market will not go down, but unsure/unconcerned about
whether it will rise.
Strategy Implementation Put options are sold with a strike price E. If an investor is very bullish, then in-
the-money puts would be sold.
EXAMPLE
Exercise price Rs110
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Risk Management Through Derivatives in Equity Segment
S1<102.50 X<102.50-110
Profit
Sell Put
Stock price
Loss
This strategy has a limited profit potential as the diagram depicts but the loss is unlimited upto the
amount increase in stock cash market price. The strategy works when the investor is not bearish.
Strategy Implementation It involves having two calls on the same stock with same expiry date but with
different exercise prices. Call option is bought with a strike price below the stock price and another call
option sold with a strike price above the stock price.
Exercise the option on 23 June 2010 as on 23 June, the price of the scrip touched Rs 738.
Payoff from bought call = 738 -680 = 58
Payoff from sold call = 700-738 = -38
Total payoff = 58 - (76.10+38) = Rs 56.10(loss)
b Stock price
Profit/loss
Loss
This strategy minimizes the loss up to the amount of initial outlay due to difference in premium
paid amount and received amount. The profit is also limited.
Strategy Implementation It involves writing put b at a higher strike price and buying a put a with a
lower strike price.
Profit
Bull Spread (Put)
Profit/loss
b Stock price
Loss
This strategy gives protection from downside risk as loss of sold put gets adjusted with profits from
bought put and the strategy gives usually an initial inflow of premium which is a clear profit in an
increasing market.
Strategy Implementation Call option is sold with a lower strike price of ‘a’ and another call option is
bought with a higher strike of ‘b’
Profit
Bear Spread (Call)
Profit/loss
a b
Stock price
Loss
This strategy involves very less risk in a bearish outlook. In this strategy both profit and loss gets
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Risk Management Through Derivatives in Equity Segment
Strategy Implementation Put option is sold with a lower strike price of a and another put option is
bought with a strike of b
Strategy view Where the Investor expects a sharp movement in the share price, but unsure of direction, it
is an appropriate strategy.
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Risk Management Through Derivatives in Equity Segment
Strategy implementation long straddle involves buying a Call & a Put at the same exercise price and for
the same tenure. A buyer of the Straddle buys both call & the put.
EXAMPLE
ASSUMPTION -- STRIKE = Rs 100
CALL PREMIUM = Rs 5
Put premium = Rs 4
Initial investment = Rs 9
Profit
Buy Straddle
Profit/loss
Stock price
Loss
In this strategy maximum loss can be the amount of total premium paid for the call and put where
as the amount of profit can be unlimited as the diagram indicates.
SHORT STRADDLE
Strategy view: Investor thinks that the market will be not be very volatile in the short-term. It is a
strategy for relatively stable stock. A short straddle works whenever the price remains within the band.
Strategy implementation: A short straddle involves selling both the call and the put.
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Risk Management Through Derivatives in Equity Segment
Profit
Sell Straddle
Profit/loss
Stock price
Loss
This strategy gives a limited profit of total premium received for both the option sold but the loss
can be unlimited. So this strategy is risky and maximum precaution should be taken while adopting
this strategy.
BUY STRANGLE
Strategy view: Investor thinks that the market will be very volatile in the short-term.
Strategy implementation: This is identical to the straddle except that the call has an exercise price above
the stock price and the put has an exercise price below the stock price and the premium paid is less.
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Risk Management Through Derivatives in Equity Segment
Profit
Buy Strangle
Profit/loss Profit/loss
From put option From call option
a b
Stock price
Loss
In this strategy maximum loss can be the amount of total premium paid for the call and put where
as the amount of profit can be unlimited as the diagram indicates.
SELL STRANGLE
Strategy view: The investor thinks that the market will not be volatile within a broadish band.
Strategy implementation: This is identical to the straddle except that the call has an exercise price above
the stock price and the put has an exercise price below the stock price and the premium paid is less.
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Risk Management Through Derivatives in Equity Segment
Sell Strangle
Profit
Profit/loss
From put option
a b
Profit/loss
From call option
Loss
This strategy gives a limited profit of total premium received for both the option sold but the loss
can be unlimited. So this strategy is risky and maximum precaution should be taken while adopting
this strategy.
BUTTERFLY SPREAD
Strategy view: This strategy hopes that the price will remain within a steady range , but does not want
exposure to an unexpected rise or fall.
Strategy implementation: This involves the following;-
1. Buying a call at low exercise price
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Risk Management Through Derivatives in Equity Segment
In this strategy there is very minimum risk and limited profit. This strategy should be used when
FINDINGS
BULLISH STRATEGIES
A. Buy Call: This strategy is very easy to implement and give good amount of return if price
B. Buy Futures: Futures has given large amount of profits as compared to options
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Risk Management Through Derivatives in Equity Segment
strategies but at the same time risk associated with it also very high.
C. Bull Spread (Call): It provides limited profits and limited loss. If Index/ Scrip goes up
then one can have profits and vice-versa. This strategy should be use when expected volatility
D. Bull Spread (Put): It provides limited profit and limited loss. The maximum gain can be
E. Sell Put: In this strategy maximum profit is premium received and loss is unlimited. If
a person expects bullish view then he may go with this strategy but this strategy is quite risky.
NEUTRAL STRATEGIES
F. Buy Straddle: This strategy should only be used when expected volatility is very high and
market outlook is not known. If scrip remains at the same price then loss will be maximum.
H. Sell Strangle: This strategy should be used when volatility is very less.
I. Long Butterfly: In this strategy there is very minimum risk and limited profit. This strategy
should be used when proper strike prices are available to make this strategy.
J. Short Butterfly: This strategy led to profit when volatility is very high in the option
market.
K. Sell Straddle: When investor want more returns at higher risk then he may go with this
strategy. IF suddenly the volatility increases at a very high rate then huge losses may occur.
BEARISH STRATEGIES
L. Buy Put: This strategy should be used when investors perceive that the option price will
go down.
M. Sell Future: This strategy can be use to hedge or it can be use as a speculative strategy
N. Bear Spread (Put) & Bear Spread (Call): This strategy involves very less risk & bearish
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Risk Management Through Derivatives in Equity Segment
outlook. So for those investors who expect the option prices will go down but they are not
O. Sell Call: In this strategy maximum profit earned and maximum loss is unlimited. So
less risk takers should select very lower strike price while selecting this strategy.
Although derivative market is growing in a faster rate still it is not so popular in Indian financial market.
Due to lack of awareness or risk averseness, Indian investors don’t show interest to use derivatives to
hedge in equity market. Notwithstanding the endorsement of derivatives by financial economists and
business persons, there is a widespread belief among regulators, bureaucrats and politicians that
derivatives are employed mainly for speculation purposes, and they accentuate the volatility of the
underlying cash markets.
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Risk Management Through Derivatives in Equity Segment
Many in the profession, however, disagree vehemently with the view that derivatives accentuate volatility
in the cash markets. On the contrary volatility in the underlying cash market declines with the
introduction of derivatives. Since hedging opportunities prove valuable only if the underlying cash
markets are volatile, derivatives are introduced only when the underlying asset prices become more
volatile.
After studying about financial derivatives and different derivative strategies following
Many strategies like straddle, strangle and butterfly depend upon volatility of scrip or
index and give returns accordingly. So volatility should be forecasted before forming any
strategy.
Fundamental and Technical analysis of the scrip or index should be done before
Specific strategy should be used according to the purpose of investor instead of investing
Derivative market is highly ill- famed among the investor. Thus it is required to provide in
Strategies should be evaluated daily for better returns and less risk.
Theoretical price of an option should be found out using option pricing models and
those options whose price is less than theoretical price should be used for formulation
of strategy.
By using a hedging strategy an investor can recover some of his losses and can also make
profit.
When the movement and volatility of market or scrip is not known at that time
Investor should make strategy according to position in the cash market and accordingly
make strategy.
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BIBLIOGRAPHY
Books
(a) Options, futures and Other Derivatives by JOHN C. HULL
(b) NCFM Derivative Market (dealers) Module
(c) Future and Option‖ second edition Tata McGraw- Hill by N D VOHRA, B R Bagri
Websites
(a) www.nseindia.com
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Risk Management Through Derivatives in Equity Segment
(c) www.bseindia.com
(d) www.investopedia.com
(f ) http://www.cboe.com/Strategies/EquityOptions/BuyingCalls/Part1.aspx
(g) www.religare.in
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