INTRODUCTION

Finance is the lifeblood of business. Earlier there were many companies who use to survive only with their owned capital, but with the passage of time and the increased competition in the economy the companies started using borrowed capital, in other words debt capital. And with the increased awareness among the people to invest and improvements in the economy i.e., stock markets, financial institutions etc., their development and systematic regulation, the companies started raising their capital from the primary markets, secondary markets, over-the-counter market and online scrip less trading market. The primary of new issue market deals with the offer and exchange of stocks or bonds that have never been previously issued are traded in the secondary markets, which include the organized stock exchanges and over-the-counter market. The over-the-counter exchange of India (OTCEI) began its operations in the year 1990 as a second-tier source which permits smaller companies to raise funds. In addition to these markets, NSE has also started on-line scrip less trading in India in the year 1994. Due to the increased volatility and the risk involvement the derivatives market has been developed under which futures and options have gained more popularity. The project deals with SHAREKHAN PRIVATE LIMITED, Hyderabad as a member of National stock exchange, the way it functions in respect to futures and options market and also deal with the trading, clearing and settlement and the regulations of SEBI in respect to Futures and Options.

Need for the study:

The emergence of the market for derivatives 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 fluctuation in asset prices. The futures and options, most important part of derivative products facilitates the stock market and the investors in the following way. Through the use of futures and options, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments for 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 riskaverse investors. Derivative products initially emerged as hedging devices against fluctuations in commodity prices. In recent year, the market for financial derivatives has grown tremendously both in terms of variety of instruments available, their complexity and also turnover. The following factors have been driving the growth of financial derivatives: 1. Increased volatility in asset prices in financial markets. 2. Increased integration of national financial markets with the international markets. 3. Marked improvements in communication facilities and sharp decline in their costs. 4. Development of more sophisticated risk management tools, providing economic agents a wider choice of risk management strategies. 5. Innovations in the derivatives markets, which optimally combine the risks and returns over a large number of financial assets, leading to higher returns, reduced risk as well as transactions costs as compared to individual financial assets.
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Objectives of the study:

The project is done mainly to study the activities and prospects of the stock market and to gain knowledge about how the stock broking is done. The project is done on the activities of one of the member of NSE i.e., Sharekhan Private Limited, Hyderabad.

The main objective of the study is: 1. To highlight the concept of on-line trading, clearing and settlement and regulatory framework of futures and options with reference to Sharekhan Private Limited, Hyderabad. 2. To understand the various features of stock exchange and also concentrate on the activities of Sharekhan Private Limited, Hyderabad as a member of NSE in the secondary market operations. 3. To bring into picture the latest development and procedures of futures and options and also the benefits the investors and also Sharekhan Private Limited, Hyderabad in terms of revenue from its operations. 4. To make an individual investor to understand the importance of Futures and options with reference to Sharekhan Private Limited, Hyderabad. 5. To understand the advantages of holding Futures and options with reference to Sharekhan Private Limited, Hyderabad. 6. To understand the terminology used in Futures and options market with reference to Sharekhan Private Limited, Hyderabad. 7. To understand the risk management in Futures and options with reference to Sharekhan Private Limited, Hyderabad.

Methodology of the study:

The project study is mainly based on both the primary and secondary data. Major portion of the data is collected through direct interaction with the officials and some of the theoretical support is also added to this like Journals, Booklets etc. which provides information with regard to the existing system of trading and settlement of futures and options.

Sources of data: Data for the study is collected through two sources. 1. Primary data. 2. Secondary data.

1. Primary data: Data is collected through personal discussion with the authorized members and employees of the exchange.

2. Secondary data: By the explanation of daily activities done from the officials and the employees., By watching the on-line trading system., By practically taking part in mock trading on futures and options of BAJAJ AUTOMOBILES, HCL TECHNOLOGIES, KOTAK BANK and RANBAXY LABS and working out with different trading operations as a part of the project. By attending the classes conducted by Sharekhan Private Limited, Hyderabad to its staff members.

Limitations of the study:

The following are limitations of the study. 1. The in depth study on trading system is made impossible due to constraint of time i.e, 8 weeks as project duration. 2. There were practically many difficulties felt while collecting the primary data. 3. A complex subject certainly cannot be dealt with in depth both in view of constraint of time and constraint of work. 4. The concept of Futures and options itself is new to India and the awareness was comparatively very less.

INDUSTRY PROFILE
Stock exchange:
Stock exchange means anybody or individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. It is an association of member brokers for the purpose of self-regulation and protecting the interests of its members. It can operate only if it is recognized by the Government under the securities contracts (regulation) Act, 1956. The recognition is granted under section 3 of the Act by the central government, Ministry of Finance.

Bylaws:
Besides the above act, the securities contracts (regulation) rules were also made in 1957 to regulate certain matters of trading on the stock exchanges. There are also bylaws of the exchanges, which are concerned with the following subjects. Opening/closing of the stock exchanges, timing of trading, regulation of blank transfers, regulation of badla or carryover business, control of the settlement and other activities of the stock exchange, fixation of margins, fixation of market prices or making up prices, regulation of taravani business (jobbing), etc., regulation of brokers trading, brokerage charges, trading rules on the exchange, arbitration and settlement of disputes, settlement and clearing of the trading etc.

Regulation of stock exchanges:

The securities contracts (regulation) act is the basis for operations of the stock exchanges in India. No exchange can operate legally without the government permission or recognition. Stock exchanges are given monopoly in certain areas under section 19 of the above Act to ensure that the control and regulation are facilitated. Recognition can be granted to a stock exchange provided certain conditions are satisfied and the necessary information is supplied to the government. Recognition can also be withdrawn, if necessary. Where there are no stock exchanges, the government can license some of the brokers to perform the functions of a stock exchange in its absence.

Securities and exchange board of india(SEBI):

SEBI was set up as an autonomous regulatory authority by the Government of India in 1988 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto. It is empowered by two acts namely the SEBI Act, 1992 and the securities contract (regulation) Act, 1956 to perform the function of protecting investor's rights and regulating the capital markets.

National stock exchange:

The NSE was incorporated in Nov 1992 with an equity capital of Rs.25crs. The International securities consultancy (ISC) of Hong Kong has helped in setting up NSE. ISC has prepared the detailed business plans and installation of hardware and software systems. The promotions for NSE were financial institutions, insurances companies, banks and SEBI capital market ltd, Infrastructure leasing and financial services ltd and stock holding corporation ltd. It has been set up to strengthen the move towards professionalization of the capital market as well as provide nationwide securities trading facilities to investors. NSE is not an exchange in the traditional sense where brokers own and manage the exchange. A two tier administrative set up involving a company board and a governing aboard of the exchange is envisaged. NSE is a national market for shares PSU bonds, debentures and government securities since infrastructure and trading facilities are provided.

Objectives:
1) To establish a nationwide trading facility for equities, debt instruments and hybrids. 2) To ensure equal access to investors all over the country through appropriate communication network. 3) To provide a fair, efficient and transparent securities market to investors using an electronic communication network. 4) To enable shorter settlement cycle and book entry settlement system. 5) To meet current international standards of securities market.

NSE - nifty:
The national Stock Exchange on April 22, 1996 launched a new Equity Index. The NSE-50. The new Index which replaces the existing NSE-100 Index is expected to serve as an appropriate Index for the new segment of futures and options. Nifty means National Index for Fifty Stock. The NSE-50 comprises 50 companies that represent 20 broad Industry groups with an aggregate market capitalization of around Rs.170000crores. All companies included in the index have a market capitalization in excess of Rs.500crores each and should have traded for 85% of trading days at an impact cost of less than 1.5%. The base period for the index is the close of prices on Nov 3,1995 which makes one year of completion of operation of NSEs capital market segment. The base value of the Index has been set at 1000.

NSE - midcap index:

The NSE midcap Index or the Junior Nifty comprises 50 stocks that represents 21 board Industry groups and will provide proper representation of the midcap segment of the Indian capital Market. All stocks in the Index should have market capitalization of greater than Rs. 200 crs and should have traded 85% of the trading days at an impact cost of less 2.5%. The base period for the index is Nov 4, 1996, which signifies two years for completion of operations of the capital market segment of the operations. The base value of the Index has been set at 1000. Average daily turn over of the present scenario 258212 (Lacs) and number of average daily trades 2160 (Lacs).

Defects:
1. Lack of liquidity in most of the markets in terms of depth and breadth. 2. Lack of ability to develop markets for debts. 3. Lack of infrastructure facilities and outdated trading system. 4. Lack of transparency in the operations that effect investors confidence. 5. Outdated settlement systems that are inadequate to cater to the growing volume, leading to delays. 6. Lack of single market due to the inability of various stock exchanges to function cohesively with legal structure and regulatory framework.

Promoters:
1. Industrial Development Bank of India (IDBI) 2. Industrial Credit and Investment Corporation of India (ICICI) 3. Industrial Financing Corporation of India (IFCI) 4. Life Insurance Corporation of India (LIC) 5. State Bank of India (SBI) 6. General Insurance Corporation (GIC) 7. Bank of Baroda 8. Canara Bank 9. Corporation Bank 10.Indian Bank 11.Oriental Bank of Commerce 12.Union Bank of India 13.Punjab National Bank 14.Stock Holding Corporation of India
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Membership:
The membership is based on the factors as capital adequacy, corporate structure, Track record, Education, Experience etc. Admission is a two-stage process with applicants required to go through a written examination followed by an interview. A committee consisting of experienced professionals from the industry, to assess the applicants capability to operate as an exchange member. The exchange admits members separately to wholesale debt Market (WDM) segment and the Capital market segment. Only corporate members are admitted to the debt market Segment whereas individuals and firms are also eligible to the capital market segment. Eligibility criteria for trading membership on the segment of WCM are as follows: 1. The person eligible to become trading members are bodies corporate, companies, institutions including subsidiaries of banks engaged in financial services and such other persons or entities are may be permitted from time to time by RBI\SEBI. 2. The whole-time Directors should possess at least two years experience in any activity related to banking or financial services. 3. The applicant must be engaged solely in the business of the securities and must not be engaged in any fund-based activities. 4. The applicant must possess a minimum of Rs.2crores

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Eligibility criteria for the capital market segment are:

1. Individual, registered firms, corporate bodies, companies and such other persons may be permitted under the SCR Act, 1957. 2. The applicant may be engaged in the business of securities and must not be engaged in any fund-based activities. 3. The minimum net worth requirements prescribed are as follows: a) Individuals and registered firms-Rs.75Lakhs. b) Corporate bodies-Rs100Lakhs c) In case of partnership firm each partner should contribute at least 5% of the net worth of the firm. 4. A corporate trading member should consist only of individuals (maximum of 4) who should directly hold at least 40% of the paid-up capital in case of listed companies and at least 51% in case of these companies. 5. The minimum prescribed qualification of graduation and two years experience of handling securities as broker, Sub-broker, authorized assistant etc. must be fulfilled by a) Minimum two directors in case the applicant are a corporate b) Minimum two partners in case of partnership firms In case of individual or sole proprietary concerns. The two experienced directors in a corporate applicant or trading member should hold minimum 5% of the capital of the company.

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Bombay Stock Exchange:

This stock exchange, Mumbai, popularly known as BSE was established in 1875 as The Native share and stock brokers association, as a voluntary non-profit making association. It has an evolved over the years into its present status as the premiere stock exchange in the country. It may be noted that the stock exchanges the oldest one in Asia, even older than the Tokyo Stock exchange which was founded in 1878. The exchange, while providing an efficient and transparent market for trading in securities, upholds the interests of the investors and ensures redressed of their grievances, whether against the companies or its own member brokers. It also strives to educate and enlighten the investors by making available necessary informative inputs and conducting investor education programs. A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public representatives and an executive director is the apex body, which decides the policies and regulates the affairs of the exchange. The Executive director as the chief executive officer is responsible for the day today administration of the exchange. The average daily turnover of the exchange during the year 200001(April-March) was Rs 3984.19 crs and average number of daily trades 5.69 laces. However the average daily turnover of the exchange during the year 2001-02 has declined to Rs. 1244.10 crs and number of average daily trades during the period to 5.17 laces. The average daily turnover of the exchange during the year 2002-03 has declined and number of average daily trades during the period is also decreased.

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The Ban on all deferral products like BLESS AND ALBM in the Indian capital markets by SEBI i.e. July 2, 2001, abolition of account Period settlements, introduction of compulsory rolling settlements in all scrips traded on the exchanges i.e. Dec 31, 2001, etc., have adversely impacted the liquidity and consequently there is a considerable decline in the daily turnover at the exchange. The average daily turnover of the exchange present scenario is 110363 (Laces) and number of average daily trades 1057(Laces).

BSE- indices:
In order to enable the market participants, analysts etc., to track the various ups and downs in the Indian stock market, the Exchange has introduced in 1986 an equity stock index called BSE-SENSEX that subsequently became the barometer of the moments of the share prices in the Indian stock market. It is a "Market capitalization-weighted" index of 30 component stocks representing a sample of large, well-established and leading companies. The base year of Sensex is 197879. The Sensex is widely reported in both domestic and international markets through print as well as electronic media. Sensex is calculated using a market capitalization weighted method. As per this methodology, the level of the index reflects the total market value of all 30component stocks from different industries related to particular base period. The total market value of a company is determined by multiplying the price of its stock by the number of shares outstanding. Statisticians call an index of a set of

combined variables (such as price and number of shares) a composite Index. An Indexed number is used to represent the results of this calculation in order to make
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the value easier to work with and track over a time. It is much easier to graph a chart based on Indexed values than one based on actual values world over majority of the well-known Indices are constructed using Market capitalization weighted method. In practice, the daily calculation of SENSEX is done by dividing the aggregate market value of the 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. The Divisor keeps the Index comparable over a period of time and if the reference point for the entire Index maintenance adjustments. SENSEX is widely used to describe the mood in the Indian Stock markets. Base year average is changed as per the formula New base year average = Old base year average (New market Value/old market value)

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Recent developments in indian stock market:

Many steps have been taken in recent years to reform the Stock Market such as: 1. Regulation of Intermediaries. 2. Changes in the Management Structure. 3. Insistence on Quality Securities. 4. Prohibition of Insider Trading. 5. Transparency of Accounting Processes. 6. Strict supervision of Stock Market Operations. 7. Prevention of Price Rigging. 8. Encouragement of Market Making. 9. Discouragement of Price Manipulations. 10.Introduction of Electronic Trading. 11.Introducing of Depository System. 12.Derivates Trading. 13.International Listing. At present, there are 24 stock exchanges recognized under the securities contract (regulation) Act, 1956.

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List of Stock Exchanges under the securities contract Act, 1956:

NAME OF THE STOCK EXCHANGE 1. Bombay stock exchange, 2. Ahmedabad share and stock brokers association 3. Calcutta stock exchange association Ltd, 4. Delhi stock exchange association Ltd, 5. Madras stock exchange association Ltd, 6. Indoor stock brokers association, 7. Bangalore stock exchange, 8. Hyderabad stock exchange, 9. Cochin stock exchange, 10.Pune stock exchange Ltd, 11.U.P stock exchange association Ltd, 12.Ludhiana stock exchange association Ltd, 13.Jaipur stock exchange Ltd, 14.Gauhathi stock exchange Ltd, 15.Mangalore stock exchange Ltd, 16.Maghad stock exchange Ltd, Patna, 17.Bhubaneshwar stock exchange association Ltd, 18.Over the counter exchange of India, Bombay, 19.Saurasthra kutch stock exchange Ltd, 20.Vsdodara stock exchange Ltd, 21.Coimbatore stock exchange Ltd, 22.The meerut stock exchange Ltd, 23.National stock exchange Ltd, 24.Integrated stock exchange,
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YEAR 1875 1875 1957 1957 1957 1957 1958 1963 1943 1978 1982 1982 1983 1983-84 1984 1985 1986 1989 1989 1990 1991 1991 1991 1991,1999

COMPANY PROFILE
Sharekhan:
Sharekhan is one of India's largest and leading financial services companies. It is an online stock trading company of SSKI Group (S.S. Kantilal Ishwarlal Securities Limited) which has been a provider of India-based investment banking and corporate finance service for over 80 years. SSKI caters to most of the prominent financial institutions, foreign and domestic, investing in Indian equities. It has been valued for its strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

The key features of Sharekhan are as follows:

1. You get freedom from paperwork. 2. There are instant credit and money transfer facilities. 3. You can trade from any net enabled PC. 4. After hour orders facilities. 5. You can go for online orders over the phone. 6. Timely advice and research reports 7. Real-time Portfolio tracking. 8. Information and Price alerts. Sharekhan provides assistance and the advice like no one else could. It has created special information tools to help answer any queries. Sharekhans first step program, built specifically for new investors, is testament to of its commitment to being your guide throughout your investing life cycle.

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Sharekhan services:
The tag line of Sharekhan says that it is your guide to the financial jungle. As per the tag line there are many amazing services that Sharekhan offers like technical research, fundamental research, share shops, portfolio management, dialn-trade, commodities trade, online services, depository services, equity and derivatives trading (including currency trading). With Sharekhans online trading account, you can buy and sell shares at anytime and from anywhere you like. With a physical presence in over 300 cities of India through more than 800 Share Shops with more than 3000 employees, and an online presence through Sharekhan.com, India's premier, it reaches out to more than 8, 00,000 trading customers.

A Sharekhan outlet online destination offers the following services:

1. Online BSE and NSE executions (through BOLT & NEAT terminals) 2. Free access to investment advice from Sharekhan's Research team 3. Sharekhan Value Line (a monthly publication with reviews of recommendations, stocks to watch out for etc) 4. Daily research reports and market review (High Noon & Eagle Eye) 5. Pre-market Report (Morning Cuppa) 6. Daily trading calls based on Technical Analysis 7. Cool trading products (Daring Derivatives and Market Strategy) 8. Personalized Advice 9. Live Market Information 10.Depository Services: Demat Transactions 11.Derivatives Trading (Futures and Options) 12.Commodities Trading
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13.IPOs & Mutual Funds Distribution 14.Internet-based Online Trading: Speed Trade

Sharekhan has one of the best state-of-art web portals providing fundamental and statistical information across equity, mutual funds and IPOs. Surfing can be done across 5,500 companies for in-depth information, details about more than 1,500 mutual fund schemes and IPO data. Other market related details such as board meetings, result announcements, FII transactions, buying/selling by mutual funds and much more can also be accessed. It provides a complete life-cycle of investment solution in Equities, Derivatives, Commodities, IPO, Mutual Funds, Depository Services, Portfolio Management Services and Insurance. It also offers personalized wealth management services for High Net worth individuals.

Online services:
The online trading account can be chosen as per trading habits and preferences, that is the classic account for most investors and speed trade for active day traders. Sharekhan also provides a free software called Trade tiger to all its account holders. The Classic Account enables you to trade online for investing in Equities and Derivatives on the NSE via Sharekhan.com; it gives access to all the research content and also comes with a free Dial-n-Trade service enabling to buy shares using the telephone.

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Its features are:

1. Streaming quotes (using the applet based system) 2. Multiple watch lists 3. Integrated Banking, demat and digital contracts 4. Instant credit and transfer 5. Real-time portfolio tracking with price alerts and, of course, the assurance of secure transactions.

Trade tiger:
The Trade Tiger is a next-generation online trading product that brings the power of the broker's terminal to your PC. It's the perfect trading platform for active day traders.

Its features are:

1. A single platform for multiple exchange BSE & NSE (Cash & F&O), MCX, NCDEX, Mutual Funds, IPOs 2. Multiple Market Watch available on Single Screen 3. Multiple Charts with Tick by Tick Intraday and End of Day Charting powered with various Studies 4. Graph Studies include Average, Band- Bollinger, Know Sure Thing, MACD, RSI, etc 5. Apply studies such as Vertical, Horizontal, Trend, Retracement & Free lines

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6. User can save his own defined screen as well as graph template, that is, saving the layout for future use 7. User-defined alert settings on an input Stock Price trigger 8. Tools available to gauge market such as Tick Query, Ticker, Market Summary, Action Watch, Option Premium Calculator, Span Calculator 9. Shortcut key for FAST access to order placements & reports 10.Online fund transfer activated with 12 Banks 11.Sharekhan provides you the facility to trade in Commodities through Sharekhan Commodities Pvt. Ltd. a wholly owned subsidiary of its parent SSKI. It trades on two major commodity exchanges of the country: 12.Multi Commodity Exchange of India Ltd, Mumbai (MCX) and 13.National Commodity and Derivative Exchange, Mumbai (NCDEX). For trading in any commodity, initial margin of around 10% on any commodity is to be maintained. Sharekhan has launched its own commodity derivatives micro-site. The site is available through the Sharekhan home page www.Sharekhan.com. Along with the site Sharekhan has launched several commodity derivatives products (both research and trading) too.

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The products have been listed below:

1. Commodities Buzz: a daily view on precious metals and agro commodities. 2. Commodities Beat: a summary of the days trading activity. 3. Traders Corner: Under commodity trading calls, there are two types of trading calls: i. Rapid Fire: (short-term calls for 1 day to 5 days updated daily) ii. Medium-term Plays: (medium-term calls for 1 month to 3 months updated weekly or in between if needed) 4. Sharekhan Xclusive: the commodity research reports and analyses (periodical). 5. Market Scan: the daily commodity market data and statistics (end of day). 6. All these products are both e-mailed as newsletters and published on the commodity derivatives site .

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Organization chart of Sharekhan Private Limited:

CHAIRMAN

EXECUTIVE DIRECTOR

BOARD OF DIRECTORS

NON EXECUTIVE DIRECTOR

INDEPENDENT DIRECTOR

HR MANAGER

SYSTEMS MANAGER

CUSTOMER RELATIONSHIP MANAGER

EXECUTIVES

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THEORETICAL FRAME WORK

Derivatives:
A Derivative is a financial instrument whose value depends on other, more basic, underlying variables. The variables underlying could be prices of traded securities and stock, prices of gold or copper. Derivatives have become increasingly important in the field of finance, Options and Futures are traded actively on many exchanges, Forward contracts, Swap and different types of options are regularly traded outside exchanges by financial intuitions, banks and their corporate clients in what are termed as overthe-counter markets in other words, there is no single market place or organized exchanges. The origin of derivatives can be traced back to the need of farmers to protect themselves against fluctuations in the price of their crop. From the time it was sown to the time it was ready for harvest, farmers would face price uncertainty. Through the use of simple derivative products, it was possible for the farmer to partially or fully transfer price risks by locking-in asset prices. These were simple contracts developed to meet the needs of farmers and were basically a means of reducing risk. A farmer who sowed his crop in June faced uncertainty over the price he would receive for his harvest in September. In years of scarcity, he would probably obtain attractive prices. However, during times of oversupply, he would have to dispose off his harvest at a very low price. Clearly this meant that the farmer and his family were exposed to a high risk of price uncertainty.

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On the other hand, a merchant with an ongoing requirement of grains too would face a price risk that of having to pay exorbitant prices during dearth, although favourable prices could be obtained during periods of oversupply. Under such circumstances, it clearly made sense for the farmer and the merchant to come together and enter into contract whereby the price of the grain to be delivered in September could be decided earlier. What they would then negotiate happened to be futures-type contract, which would enable both parties to eliminate the price risk. In 1848, the Chicago Board Of Trade, or CBOT, was established to bring farmers and merchants together. A group of traders got together and created the toarrive contract that permitted farmers to lock into price upfront and deliver the grain later. These to-arrive contracts proved useful as a device for hedging and speculation on price charges. These were eventually standardized, and in 1925 the first futures clearing house came into existence. Today derivatives contracts exist on variety of commodities such as corn, pepper, cotton, wheat, silver etc. Besides commodities, derivatives contracts also exist on a lot of financial underlying like stocks, interest rate, exchange rate, etc.

Meaning:
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 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.
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However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of riskaverse 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. Annual turnover of the derivatives is increasing each year from 1986 onwards, Year 1986 1992 1998 Annual turnover 146 millions 453 millions 1329 millions

2002 & 2003 it has reached to equivalent stage of cash market. Derivatives are used by banks, securities firms, companies and investors to hedge risks, to gain access to cheaper money and to make profits Derivatives are likely to grow even at a faster rate in future they are first of all cheaper to world have met the increasing volume of products tailored to the needs of particular customers, trading in derivatives has increased even in the over the counter markets. In Britain unit trusts allowed to invest in futures and options .The capital adequacy norms for banks in the European Economic Community demand less capital to hedge or speculate through derivatives than to carry underlying assets. Derivatives are weighted lightly than other assets that appear on bank balance sheets. The size of these off-balance sheet assets that include derivatives is more than seven times as large as balance sheet items at some American banks causing concern to regulators

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Definition:
Derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R) A) defines derivative to include 1. A security derived from a debt instrument, share, and 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. Derivatives are the securities under the SC(R)A and hence the trading of derivatives is governed by the regulatory framework under the SC(R)A.

Participants in the derivatives market:

The following three broad categories of participants who trade in the derivatives market: 1. Hedgers 2. Speculators and 3. Arbitrageurs

Hedgers: Hedgers face risk associated with the price of an asset. They use futures or options markets to reduce or eliminate this risk.

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Speculators: Speculators wish to bet on future movements in the price of an asset. Futures and Options contracts can give them an extra leverage; that is, they can increase both the potential gains and potential losses in a speculative venture.

Arbitrageurs: Arbitrageurs are in business to take advantage of a discrepancy between prices in two different markets. For example, they see the futures price of an asset getting out of line with the cash price; they will take offsetting positions in the two markets to lock in a profit.

Objectives:
1. To understand the concept of the Derivatives and Derivative Trading. 2. To know different types of Financial Derivatives 3. To know the role of derivatives trading in India. 4. To analyze the performance of Derivatives Trading since 2001with special reference to Futures and Options.

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Types of derivatives market: Types of derivatives market

Exchange Traded Derivatives

Over The Counter Derivatives

National Stock Exchange

Bombay Stock Exchange

National Commodity Derivative Exchange

Index Future

Index option

Stock option

Stock future

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Types of derivatives

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 pre-set 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. The settlement price, normally, converges towards the futures price on the delivery date.

Options:
A derivative transaction that gives the option holder the right but not the obligation to buy or sell the underlying asset at a price, called the strike price, during a period or on a specific date in exchange for payment of a premium is known as option. Underlying asset refers to any asset that is traded. The price at which the underlying is traded is called the strike price.

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Forward contracts:
A forward contract is an agreement to buy or sell an asset on a specified date for a specified price. One of the parties to the contract assumes a long position and agrees to buy the underlying asset on a certain specified future date for a certain specified price. The other party assumes a short position and agrees to sell the asset on the same date for the same price. Other contract details like delivery date, price and quantity are negotiated bilaterally by the parties to the contract. The forward contracts are n o r m a l l y traded outside the exchanges.

Swaps:
Swaps are transactions which obligates the two parties to the contract to exchange a series of cash flows at specified intervals known as payment or settlement dates. They can be regarded as portfolios of forward's contracts. A contract whereby two parties agree to exchange (swap) payments, based on some notional principle amount is called as a SWAP. In case of swap, only the payment flows are exchanged and not the principle amount.

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History of derivatives:
The history of derivatives is quite colorful and surprisingly a lot longer than most people think. Forward delivery contracts, stating what is to be delivered for a fixed price at a specified place on a specified date, existed in ancient Greece and Rome. Roman emperors entered forward contracts to provide the masses with their supply of Egyptian grain. These contracts were also undertaken between farmers and merchants to eliminate risk arising out of uncertain future prices of grains. Thus, forward contracts have existed for centuries for hedging price risk. The first organized commodity exchange came into existence in the early 1700s in Japan. The first formal commodities exchange, the Chicago Board of Trade (CBOT), was formed in 1848 in the US to deal with the problem of credit risk and to provide centralized location to negotiate forward contracts. From forward trading in commodities emerged the commodity futures. The first type of futures contract was called to arrive at. Trading in futures began on the CBOT in the 1860s. In 1865, CBOT listed the first exchange traded derivatives contract, known as the futures contracts. Futures trading grew out of the need for hedging the price risk involved in many commercial operations. The Chicago Mercantile Exchange (CME), a spin-off of CBOT, was formed in 1919, though it did exist before in 1874 under the names of Chicago Produce Exchange (CPE) and Chicago Egg and Butter Board (CEBB). The first financial futures to emerge were the currency in 1972 in the US. The first foreign currency futures were traded on May 16, 1972, on International Monetary Market (IMM), a division of CME. The currency futures traded on the IMM are the British Pound, the Canadian Dollar, the Japanese Yen, the Swiss Franc, the German Mark, the Australian Dollar, and the Euro dollar. Currency futures were followed soon by interest rate futures. Interest rate futures contracts were traded for the first time on the CBOT on October 20, 1975. Stock index futures and options emerged in 1982. The first
33

stock index futures contracts were traded on Kansas City Board of Trade on February 24, 1982.The first of the several networks, which offered a trading link between two exchanges, was formed between the Singapore International Monetary Exchange (SIMEX) and the CME on September 7, 1984. Options are as old as futures. Their history also dates back to ancient Greece and Rome. Options are very popular with speculators in the tulip craze of seventeenth century Holland. Tulips, the brightly colored flowers, were a symbol of affluence; owing to a high demand, tulip bulb prices shot up. Dutch growers and dealers traded in tulip bulb options. There was so much speculation that people even mortgaged their homes and businesses. These speculators were wiped out when the tulip craze collapsed in 1637 as there was no mechanism to guarantee the performance of the option terms. The first call and put options were invented by an American financier, Russell Sage, in 1872. These options were traded over the counter. Agricultural commodities options were traded in the nineteenth century in England and the US. Options on shares were available in the US on the over the counter (OTC) market only until 1973 without much knowledge of valuation. A group of firms known as Put and Call brokers and Dealers Association was set up in early 1900s to provide a mechanism for bringing buyers and sellers together. On April 26, 1973, the Chicago Board options Exchange (CBOE) was set up at CBOT for the purpose of trading stock options. It was in 1973 again that black, Merton, and Scholes invented the famous Black-Scholes Option Formula. This model helped in assessing the fair price of an option which led to an increased interest in trading of options. With the options markets becoming increasingly popular, the American Stock Exchange (AMEX) and the Philadelphia Stock Exchange (PHLX) began trading in options in 1975.

34

The market for futures and options grew at a rapid pace in the eighties and nineties. The collapse of the Bretton Woods regime of fixed parties and the introduction of floating rates for currencies in the international financial markets paved the way for development of a number of financial derivatives which served as effective risk management tools to cope with market uncertainties. The CBOT and the CME are two largest financial exchanges in the world on which futures contracts are traded. The CBOT now offers 48 futures and option contracts (with the annual volume at more than 211 million in 2001).The CBOE is the largest exchange for trading stock options. The CBOE trades options on the S&P 100 and the S&P 500 stock indices. The Philadelphia Stock Exchange is the premier exchange for trading foreign options. The most traded stock indices include S&P 500, the Dow Jones Industrial Average, the Nasdaq 100, and the Nikkei 225. The US indices and the Nikkei 225 trade almost round the clock. The N225 is also traded on the Chicago Mercantile Exchange.

35

Futures:
A future contract is an agreement between two parties to buy or sell an asset at a certain specified time in future for certain specified price. In this, it is similar to a forward contract. A futures contract is a more organized form of a forward contract; these are traded on organized exchange. However, there are a no of differences between forward and futures. These relate to the contractual futures, the way the markets are organized, profiles of gains and losses, kinds of participants in the markets and the ways in which they use the two instruments. Futures contracts in physical commodities such as wheat, cotton, corn, gold, silver, cattle, and ext. have existed for a long time. Futures in financial assets, currencies, and interest bearing instruments like Treasury bill and bonds and other innovations like futures contracts in stock indexes are relatively new developments. The Futures market described as continuous auction markets and exchange providing the latest information about supply and demand with respect to individual commodities, financial instruments and currencies, etc. Futures exchanges are where buyers and sellers of an expanding list of commodities; financial instruments and currencies come together to trade. Trading has also been initiated in options on futures contracts. Thus option buyers participate in futures markets with different risk. The option buyer knows the exact risk, which is unknown to the futures trader.

36

Features of futures contracts:

The principal features of the contract are as follows.

Organized Exchange:
Unlike forward contracts which are traded in an over- the-counter market, futures are traded on organized exchange with a designated physical location where trading takes place. This provides a ready, liquid market in which futures can be bought and sold at any time like in a stock market.

Standardization:
In the case of forward contracts the amount of commodities to be delivered and the maturity date are negotiated between the buyer and seller and can be tailor made to buyers requirements. In a futures contract both these are standardized by the exchange on which the contract is traded.

Clearing House:
The exchange acts a clearinghouse to all contract struck on the trading floor. For instance a contract is struck between capital A and B. upon entering into the records of the exchange, this is immediately replaced by two contracts, one between A and the clearing house and other between B and the deal. Where it is a buyer to seller, and seller to buyer. The advantage of this is that A and B do not have to undertake any exercise to investigate each others credit worthiness. It also guarantees financial integrity of the market. The enforces the delivery for the delivery of contracts held for until maturity and protects itself from default risk by imposing margin requirements on traders and enforcing this through a system called marking-to-market.
37

Actual delivery is rate:

In most of the forward contracts, the commodity is actually delivered by the seller and is accepted by the buyer. Forward contracts are entered into for acquiring or disposing of a commodity in the future for a gain at a price known today. In contract to this, in most futures markets, actual delivery takes place in less than one percent of the contracts traded. Futures are used as a device to hedge against price risk and as a way of betting against price movements rather than a means of physical acquisition of the underlying asset. To achieve, this most of the contract entered into are nullified by the matching contract in the opposite direction before maturity of the first.

Margins:
In order to avoid unhealthy competition among clearing members in reducing margins to attract customers, a mandatory minimum margins are obtained by the members from the customers. Such insures the market against serious liquidity crises arising out of possible defaults by the clearing members. The members collect margins from their clients has may be stipulated by the stock exchanges from time to time and pass the margins to the clearing house on the net basis i.e. at a stipulated percentage of the net purchase and sale position.

The stock exchange imposes margins as follows:

1. Initial margins on both the buyer as well as the seller. 2. The accounts of buyer and seller are marked to the market daily. The concept of margin here is same as that of any other trade, i.e. to introduce a financial stake of the client, to ensure performance of the contract and to cover day to day adverse fluctuations in the prices of the securities.
38

The margin for future contracts has two components:

1. Initial margin 2. Marking to market

1.Initial margin:
In futures contract both the buyer and seller are required to perform the contract. Accordingly, both the buyers and the sellers are required to put in the initial margins. The initial margin is also known as the Performance margin and usually 5% to 15% of the purchase price of the contract. The margin is set by the stock exchange keeping in view the volume of business and size of transactions as well as operative risks of the market in general. The concept being used by NSE to compute initial margin on the futures transactions is called Value-at-Risk (VAR) where as the options market had SPAN based margin system.

2.Marking to Market:
Marking to market means, debiting or crediting the clients equity accounts with the losses/profits of the day, based on which margins are sought. It is important to note that through marking to market process, die clearinghouse substitutes each existing futures contract with a new contract that has the settle price or the base price. Base price shall be the previous days closing Nifty value. Settle price is the purchase price in the new contract for the next trading day.

39

Futures terminology:
1. Spot price: The price at which an asset trades in spot market. 2. Futures price: The price at which the futures contract trades in the futures market. 3. 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. 4. Contract Size: The amount of asset that has to be delivered less than one contract. For instance contract size on NSE futures market is 100 Nifties. 5. Basis/Spread: 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 normal market, basis will be positive. This reflects that futures prices normally exceed spot prices. 6. 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. 7. Multiplier: It is a pre-determined value, used to arrive at the contract size. It is the price per index point. 8. Tick Size: It is the minimum price difference between two quotes of similar nature. 9. Open Interest: Total outstanding long/short positions in the market in any specific point of time. As total long positions for market would be equal to total short positions for calculation of open interest, only one side the contract is counted. 10.Long position: Out standing/Unsettled purchase position at any point of time.
40

11.Short position: Out standing/Unsettled sales position at any point of time. 12.Contract Month: The month in which the contract will expire. 13.Volume: No of contracts traded during a specific period of time. During a day during a week or during a month. 14.Physical delivery: Open position at the expiry of the contract is settled through delivery of the underlying. In futures market, delivery is low. 15.Cash settlement: Open position at the expiry of the contract is settled in cash. These contracts are designated as cash settled contracts. Index futures full in this category.

Stock index futures:

Stock index futures are most are most popular financial futures, which have been used to hedge or manage the systematic risk by the Investors of the stock market. They are called Hedgers, who own portfolio of securities and exposed to systematic risk. Stock index is the apt hedging asset since, the rise or fall due to systematic risk is accurately shown in the stock index. Stock index futures contract is an agreement to buy or sell a specified amount of an underlying stock index traded on a regulated futures exchange for a specified price at a specified time in future. Stock index futures will require lower capital adequacy and margin requirement as compared to margins on carry forward of individual scrips. The brokerage cost on index futures will be much lower. Savings in cost is possible through reduced bid- ask spreads where stocks are traded in packaged forms. The impact cost will be much lower in case of stock index futures as opposed to dealing in individual scraps. The market is conditioned to think in terms of the index and

41

therefore, would refer trade in stock index futures. Futures, the chances of manipulation are much lesser. The stock index futures are expected to be extremely liquid, given the speculative nature of the markets and overwhelming retail predication expected to be fairly high. In the near future stock index futures will definitely see incredible volumes in India. It will be a blockbuster product and is pitched to become the most liquid contract in the world in terms of contract traded. The advantage to the equity or cash market is in the fact that they would become less volatile as most of the speculative activity would shift to stock index futures. The stock index futures market should ideally have more depth, volumes and act a stabilizing factor for the cash market. However, it is too early to base any conclusions on the volume are to form any firm trend. The difference between stock index futures and most other financial futures contracts is that settlement is made at the value of the index at maturity of the contract. Example: If BSE Sensex is at 6800 and each point in the index equals to Rs. 30, a contract struck at this level could work Rs. 204000 (6800*30). If at the expiration of the contract, the BSE Sensex is at 6850, a cash settlement of Rs. 1500 is required (6850-6800)*30).

Stock futures:
With the purchase of futures on a security, the essentially makes a legally binding promise or obligation to buy the underlying security at some point in the future (the expiration date of the contract). Security futures do not represent ownership in a corporation and the holder is therefore not regarded as a shareholder. A futures contract represents a promise to transact at some point in the future. In this light, a promise to sell security is just as easy to make as a promise
42

to buy security. Selling security futures without previously owning them simply obligates the trader to sell a certain amount of the underlying security at some point in the future. It can be done just as easily as buying futures, which obligates the trader to buy a certain amount of the underlying security at some in future. Example: If the current price of the ACC share is Rs. 170 per share. We believe that in one month it will touch Rs. 200 and we buy ACC shares. If the price really increases to Rs.200, we made a profit of Rs.30 i.e. a return of 18%. If we buy ACC futures instead, we get the same position as Acc in the cash market, but we have to pay the margin not the entire amount. In the above example if the margin were 20% we would pay only Rs.34 initially to enter into the futures contract. If ACC share goes up to Rs. 200 as expected, we still earn Rs.30 as profit.

Payoff for futures contracts:

Futures contracts have liner 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 liner payoffs are fascinating as they can be combined with options and the underlying to generate various complex payoffs.

Payoff for buyer of futures: Long futures

The payoff for a person who buys a futures contract is similar to the payoff for a person who holds an asset. He has a potentially unlimited upside as well as potentially unlimited downside. Take the case of a speculator who buys a two-month Nifty index futures contract when Nifty stands at 1220. The underlying asset in this case is Nifty portfolio. When the index moves up, the long futures position starts making profits, and when index moves down it starts making losses.
43

Profit

1220

Nifty

Loss
Payoff for buyer of futures: Long futures

Payoff for seller of futures: short futures

The payoff for a person who sells a futures contract is similar to the payoff for a person who shorts an asset. He has potentially unlimited upside as well as potentially unlimited downside.

Payoff for buyer of futures: Short futures

44

Take the case of a speculator who sells a two-month Nifty index futures contract when the Nifty stands at 1220. The underlying asset in this case is the Nifty portfolio. When the index moves down, the short futures position starts making profits, and when index moves up, it starts making losses.

Pricing futures:
Cost of carry model: We use fair value calculation of futures to decide the no arbitrage limits on the price of the futures contract. This is the basis for the cost-of carry model where the price of the contact is defined as follows. F=S+C Where F - Futures price S - Spot price C - Holding cost or Carry cost

This can also be expressed as F=S (1+r) T Where R - Cost of financing T - Time till expiration Pricing index futures given expected dividend amount The pricing of index futures is also based on the cost of carry model where the carrying cost is the cost of financing the purchase of the portfolio underlying the index, minus the present value of the dividends obtained from the stocks in the index portfolio. Example: Nifty futures trade on NSE as one, two and three month contracts. Money can be barrowed at a rate of 15% per annum. What will be the price of a new twomonth.

45

Futures contract on nifty: 1. Let us assume that ACC will be declaring a dividend of Rs. 10/-per share after 15 days of purchasing of contract. 2. Current value of Nifty is 1200 and Nifty trade with a multiplier of 200 3. Since Nifty is traded in multiples of 200 value of the contract is 200*1200=240000 4. If ACC as weight of 7% in nifty, its value in Nifty is Rs.16800 i.e. (240000*0.07) 5. If the market price of ACC is Rs.140, than a traded unit of Nifty involves 120 shares of ACC i.e. (16800/140). 6. To calculate the futures price we need to reduce the cost of carry to the extent of dividend received is Rs.1200 i.e. (120*10). The dividend is received 15 days later and hence compounded only for the remainder of 45 days. To calculate the futures price we need to compute the amount of dividend received for unit of Nifty. Hence, we divided the compounded figure by 200. 7. Thus futures prices F=1200(1.15) 60/365-(120*10(1.15) 45/365)/200=Rs.1221.80 Pricing index futures given expected dividend yield If the dividend flow throughout the year is generally uniform, i.e. if there are few historical cases of clustering of dividends in any particular month, it is useful to calculate the annual dividend yield.

46

F=S (1+r-q) T Where F - Futures price S - spot index value R - Cost of financing Q Expected dividend yield T - Holding period Example: A two-month futures contract trades on the NSE. The cost of financing is 15% and the dividend yield on Nifty is 2% annualized. The spot value of Nifty is 1200. What is the fair value of the futures contract? Fair value=1200(1+0.15-0.02) 60/365=Rs.1224.35.

Pricing stock futures: A futures contract on a stock gives its owner the right and the obligation to buy or sell the stocks. Like index futures, stock futures are also cash settled: There is no delivery of the underlying stock. Pricing stock futures when no dividend is expected The pricing of stock futures is also based on the cost carry model, where the carrying cost is the cost of financing the purchase of the stock, minus the present value of the dividends obtained from the stock. If no dividends are expected during the life of the contract, pricing futures on that stock is very simple. It simply involves the multiplying the spot price by the cost of carry. Example: SBI futures trade on NSE as one, two and three month contracts. Money can be barrowed at 15% per annum. What will be the price of a unit new twomonth futures contract on SEBI if no dividends are expected during the period? 1. Assume that the spot price of SBI is Rs.228. 2. Thus, futures price F=228(1.15) 60/365=Rs.233.30 Pricing stock futures when dividends are expected. When dividends are expected during the life of futures contract, pricing involves reducing the cost of carrying to the extent of the dividends. The net
47

carrying cost is the cost of financing the purchase of the stock, minus the present value of the dividends obtained from the stock.

Example: HDFC futures trade on NSE as one, two and three month contracts. What will be the price of a unit of new two-month futures contract on HDFC if dividends are expected during the period? 1) Let us assume that HDFC will be declaring a dividend of Rs. 10 per share after 15 days purchasing contract. 2) Assume that the market price of HDFC is Rs.140/3) To calculate the futures price, we need to reduce the cost of carrying to the extent of dividend received. The amount of dividend received is Rs.10 .The dividend is received 15 days later and hence, compounded only for the remaining 45 days. 4) Thus, the futures price 5) F=140(1.15) 60/365-10(1.15) 45/365=Rs.133.08

48

Options:
Stock markets by their very nature are fickle. While fortunes can be made in a jiffy more often than not the scenario is the reverse. Investing in stocks has two sides to it a) Unlimited profit potential from any upside (remember Infosys, HFCL etc) b) A downside which could make you a pauper. Derivative products are structured precisely for this reason to curtail the risk exposure of an investor. Index futures and stock options are instruments that enable you to hedge your portfolio or open positions in the market. Option contracts allow you to run your profits while restricting your downside risk. Apart from risk containment, options can be used for speculation and investors can create a wide range of potential profit scenarios. We have seen in the Derivatives School how index futures can be used to protect oneself from volatility or market risk. Here we will try and understand some basic concepts of options. Some people remain puzzled by options. The truth is that most people have been using options for some time, because options are built into everything from mortgages to insurance. An option is a contract, which gives the buyer the right, but not the obligation to buy or sell shares of the underlying security at a specific price on or before a specific date. Option, as the word suggests, is a choice given to the investor to either honour the contract; or if he chooses not to walk away from the contract. To begin, there are two kinds of options: Call Options and Put Options. A Call Option is an option to buy a stock at a specific price on or before a certain date. In this way, Call options are like security deposits. If, for example, you wanted to rent a certain property, and left a security deposit for it, the money
49

would be used to insure that you could, in fact, rent that property at the price agreed upon when you returned. If you never returned, you would give up your security deposit, but you would have no other liability. Call options usually increase in value as the value of the underlying instrument rises. When you buy a Call option, the price you pay for it, called the option premium, secures your right to buy that certain stock at a specified price called the strike price. If you decide not to use the option to buy the stock, and you are not obligated to, your only cost is the option premium. Put Options are options to sell a stock at a specific price on or before a certain date. In this way, Put options are like insurance policies If you buy a new car, and then buy auto insurance on the car, you pay a premium and are, hence, protected if the asset is damaged in an accident. If this happens, you can use your policy to regain the insured value of the car. In this way, the put option gains in value as the value of the underlying instrument decreases. If all goes well and the insurance is not needed, the insurance company keeps your premium in return for taking on the risk. With a Put Option, you can "insure" a stock by fixing a selling price. If something happens which causes the stock price to fall, and thus, "damages" your asset, you can exercise your option and sell it at its "insured" price level. If the price of your stock goes up, and there is no "damage," then you do not need to use the insurance, and, once again, your only cost is the premium. This is the primary function of listed options, to allow investors ways to manage risk. Technically, an option is a contract between two parties. The buyer receives a privilege for which he pays a premium. The seller accepts an obligation for which he receives a fee. We will dwelve further into the mechanics of call/put options in subsequent lessons.
50

There are two types of options:

Call Options Put Options

Call option:
A Call Option is an option to buy a stock at a specific price on or before a certain date. In this way, Call options are like security deposits. An option is a contract between two parties giving the taker (buyer) the right, but not the obligation, to buy or sell a parcel of shares at a predetermined price possibly on, or before a predetermined date. To acquire this right the taker pays a premium to the writer (seller) of the contract. Call options give the taker the right, but not the obligation, to buy the underlying shares at a predetermined price, on or before a predetermined date.

51

Put option:
Put Options are options to sell a stock at a specific price on or before a certain date. In this way, Put options are like insurance policies.

Put Options-Long & Short Positions: When you expect prices to fall, then you take a long position by buying Puts. You are bearish. When you expect prices to rise, then you take a short position by selling Puts. You are bullish.

52

Summary:

CALL OPTION BUYER

CALL OPTION WRITER (Seller)

Pays premium Right to exercise and buy the shares

Receives premium Obligation to sell shares if exercised

Profits from rising prices Limited losses, Potentially

Profits from falling prices or remaining neutral

unlimited gain

Potentially limited gain

unlimited

losses,

PUT OPTION BUYER

PUT OPTION WRITER (Seller)

Pays premium Right to exercise and sell shares Profits from falling prices Limited losses, Potentially

Receives premium Obligation to buy shares if exercised

Profits from rising prices or remaining neutral

unlimited gain

Potentially limited gain

unlimited

losses,

CALL OPTIONS If you expect a fall in Short

PUT OPTIONS Long

price(Bearish) If you expect a rise in price Long (Bullish) Short

53

DATA ANALYSIS AND INTERPRETATION

1. STATEMENT SHOWING MOVEMENT OF FUTURE STOCKS OF BAJAJ AUTOMOBILES DURING THE PERIOD FROM 17-05-2010 TO 24-06-2010:

Table No: 1
Symbol BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO Date 17-May10 18-May10 19-May10 20-May10 21-May10 24-May10 25-May10 26-May10 27-May10 28-May10 31-May10 Expiry Open High Low Close LTP Settle Price No. of Turnover Open contracts in Lacs Int Change in OI Underly ing Value

24-Jun-10

2152

2175

2115

2168.2

2165.95

2168.2

95

408.27

106000 3200

2166.95

24-Jun-10

2165

2184

2150

2179.65

2180.5

2179.65

70

304.04

107000 1000

2182.2

24-Jun-10

2170

2170.1

2122.7

2134.8

2137.05

2134.8

103

442.6

112400 5400

2141.65

24-Jun-10

2150

2170

2130

2139

2136

2139

130

559.73

121400 9000

2136.4

24-Jun-10

2012.65

2130

2012.65

2106

2108.1

2106

152

641.63

126000 4600

2098.75

24-Jun-10

2120

2149.25

2050

2061.1

2060

2061.1

575

2428.47

140400 14400

2052.45

24-Jun-10

2050

2050.85

2010

2033

2033

2033

1013

4107.92

213000 72600

2018.55

24-Jun-10

2040.2

2109.9

2024

2089.3

2087.6

2089.3

1316

5407.28

376800 163800

2082.75

24-Jun-10

2090

2130

2071

2117.8

2115

2117.8

1233

5170.14

427200 50400

2114.8

24-Jun-10

2140

2179

2125.65

2166.45

2169

2166.45

1000

4302.69

426200 -1000

2163.4

24-Jun-10

2173.2

2220

2160.1

2206.55

2213.2

2206.55

715

3133.7

424400 -1800

2209.35

1-Jun-10

24-Jun-10

2212.2

2213

2162

2168.4

2170

2168.4

1094

4784.24

424800 400

2163.6

2-Jun-10

24-Jun-10

2177.9

2218

2170.35

2210.55

2213.35

2210.55

781

3425.53

446000 21200

2205.35

54

BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO

3-Jun-10

24-Jun-10

2220

2246.7

2202.2

2209.25

2213.7

2209.25

1002

4462.36

464600 18600

2198.5

4-Jun-10

24-Jun-10

2224

2229.9

2191.5

2197.95

2197.1

2197.95

557

2454.76

475000 10400

2185.1

7-Jun-10

24-Jun-10

2160

2199

2156.15

2187.55

2184.4

2187.55

599

2610.09

461400 -13600

2184.3

8-Jun-10

24-Jun-10

2187

2218.95

2186.1

2195.65

2192.4

2195.65

754

3324.31

450200 -11200

2194.65

9-Jun-10

24-Jun-10

2209

2218.65

2194

2203.8

2209

2203.8

428

1888.31

460000 9800

2194.4

10-Jun-10

24-Jun-10

2209.1

2285

2200

2259.85

2280

2259.85

992

4440.45

505800 45800

2242.7

11-Jun-10

24-Jun-10

2275

2310

2256

2301.5

2306

2301.5

1037

4741

548200 42400

2294.95

14-Jun-10

24-Jun-10

2310

2313.25

2280

2291

2288.5

2291

841

3858.04

542400 -5800

2283.3

15-Jun-10

24-Jun-10

2281

2306.5

2272

2291.6

2286.15

2291.6

758

3474.48

526400 -16000

2288.1

16-Jun-10

24-Jun-10

2308.75

2313.8

2275

2288.75

2289

2288.75

450

2061.09

514400 -12000

2285.3

17-Jun-10

24-Jun-10

2288

2295

2260

2291

2288.1

2291

645

2945.49

485800 -28600

2290.1

18-Jun-10

24-Jun-10

2295.05

2304

2277.7

2281.8

2287

2281.8

666

3053.5

452200 -33600

2281.55

21-Jun-10

24-Jun-10

2300

2325

2300

2312.35

2312.5

2312.35

778

3601.38

413000 -39200

2316.85

22-Jun-10

24-Jun-10

2306

2340

2298.25

2331.2

2336

2331.2

919

4262.8

352200 -60800

2330.65

23-Jun-10

24-Jun-10

2328.9

2367.1

2323.25

2355.05

2366

2355.05

975

4567.19

286600 -65600

2351.45

24-Jun-10

24-Jun-10

2366

2433.9

2342

2410

2410

2409

1887

8954.35

122600 -164000

2409

Data analysis: From the above table it is analysed that on 17th may 2010 the Bajaj automobiles future stock price opened with 2152 and increased to 2366 on 24rd june 2010. Because of Bajaj vehicles demand increased continuously in positive way.
55

Interpretation: Bajaj automobiles future stock price opened with a negative index and fluctuated up and down during the period and ended with a positive index at the end of the contract period.

Graph No: 1

Open Price
2400

P r i c e s

2300 2200 2100 2000 1900 1800

17-May-10

31-May-10

19-May-10

21-May-10

23-May-10

25-May-10

27-May-10

29-May-10

2-Jun-10

4-Jun-10

6-Jun-10

8-Jun-10

10-Jun-10

12-Jun-10

14-Jun-10

16-Jun-10

18-Jun-10

20-Jun-10

22-Jun-10

Dates

56

24-Jun-10

2. STATEMENT SHOWING MOVEMENT OF CALL OPTION STOCKS OF BAJAJ AUTOMOBILES DURING THE PERIOD FROM 17-052010 TO 24-06-2010:

Table No: 2
Symbol BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO Date Expiry Strike Price Settle Open High Low Close LTP Price No. of Turnover contracts in Lacs Open Int Change in OI Underlying Value

17-May- 24-Jun10 10 18-May- 24-Jun10 10 19-May- 24-Jun10 10 20-May- 24-Jun10 10 21-May- 24-Jun10 10 24-May- 24-Jun10 10 25-May- 24-Jun10 10 26-May- 24-Jun10 10 27-May- 24-Jun10 10 28-May- 24-Jun10 10 31-May- 24-Jun10 10 24-Jun1-Jun-10 10 24-Jun2-Jun-10 10 24-Jun3-Jun-10 10 24-Jun4-Jun-10 10

2150

43.85 0

99.75

2166.95

2150

43.85 0

105.4

2182.2

2150

43.85 0

82.4

2141.65

2150

43.85 0

76.05

2136.4

2150

43.85 0

57.75

2098.75

2150

43.85 0

38.65

2052.45

2150

43.85 0

27.4

2018.55

2150

43.85 0

52.6

2082.75

2150

43.85 0

64.45

2114.8

2150

43.85 0

89.5

2163.4

2150

43.85 0

113.6

2209.35

2150

43.85 0

85.15

2163.6

2150

43.85 0

108.9

2205.35

2150

43.85 0

100.6

2198.5

2150

43.85 0

88.65

2185.1

57

BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO

24-Jun7-Jun-10 10 24-Jun8-Jun-10 10 24-Jun9-Jun-10 10 10-Jun10 11-Jun10 14-Jun10 15-Jun10 16-Jun10 17-Jun10 18-Jun10 21-Jun10 22-Jun10 23-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10

2150

43.85 0

80.95

2184.3

2150

43.85 0

84.2

2194.65

2150

43.85 0

80.9

2194.4

2150

43.85 0

115.2

2242.7

2150

43.85 0

158.05

2294.95

2150

43.85 0

143

2283.3

2150

43.85 0

145.5

2288.1

2150

43.85 0

141.25

2285.3

2150

43.85 0

144.4

2290.1

2150

43.85 0

135.05

2281.55

2150

43.85 0

168

2316.85

2150

43.85 0

181.4

2330.65

2150

43.85 0

201.85

2351.45

2150

43.85 0

2409

Data analysis: rom the above table it is analysed that on 17th may 2010 the Bajaj automobiles call option stock settle priced open 99.75 and increased to 201.85 on 23rd june 2010.

58

Interpretation: Bajaj automobiles call option stock settle price opened with positive settle price and fluctuated up and down during the period and settled on maturity date.

Graph No: 2

Settle Price
250

P r i c e s

200 150 100 50 0

27-May-10

17-May-10

19-May-10

21-May-10

23-May-10

25-May-10

29-May-10

31-May-10

14-Jun-10

2-Jun-10

4-Jun-10

6-Jun-10

8-Jun-10

10-Jun-10

12-Jun-10

16-Jun-10

18-Jun-10

20-Jun-10

22-Jun-10

Dates

59

24-Jun-10

3. STATEMENT SHOWING MOVEMENT OF PUT OPTION STOCKS OF BAJAJ AUTOMOBILES DURING THE PERIOD FROM 17-05-2010 TO 24-06-2010:

Table No: 3
Symbol BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO Date 17May-10 18May-10 19May-10 20May-10 21May-10 24May-10 25May-10 26May-10 27May-10 28May-10 31May-10 1-Jun10 2-Jun10 3-Jun10 4-Jun10 7-Jun10 Expiry 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 Strike Price Settle Open High Low Close LTP Price No. of Turnover in Open contracts Lacs Int Change in Underlying OI Value

2100

244.8 0

50.75

2166.95

2100

244.8 0

43

2182.2

2100

244.8 0

56.95

2141.65

2100

244.8 0

55.7

2136.4

2100

244.8 0

71.5

2098.75

2100

244.8 0

94.6

2052.45

2100

244.8 0

114.85

2018.55

2100

244.8 0

82.8

2082.75

2100

244.8 0

66.05

2114.8

2100

244.8 0

47.4

2163.4

2100

244.8 0

30.8

2209.35

2100

244.8 0

43.5

2163.6

2100

244.8 0

30.1

2205.35

2100

244.8 0

28.85

2198.5

2100

244.8 0

29.65

2185.1

2100

244.8 0

24.2

2184.3

60

BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO BAJAJAUTO

8-Jun10 9-Jun10 10-Jun10 11-Jun10 14-Jun10 15-Jun10 16-Jun10 17-Jun10 18-Jun10 21-Jun10 22-Jun10 23-Jun10 24-Jun10

24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10

2100

244.8 0

19.15

2194.65

2100

244.8 0

16.6

2194.4

2100

244.8 0

8.45

2242.7

2100

244.8 0

3.7

2294.95

2100

244.8 0

2.2

2283.3

2100

244.8 0

1.3

2288.1

2100

244.8 0

0.8

2285.3

2100

244.8 0

0.35

2290.1

2100

244.8 0

0.25

2281.55

2100

244.8 0

2316.85

2100

244.8 0

2330.65

2100

244.8 0

2351.45

2100

244.8 0

2409

Data analysis: From the table it is analysed that on 17th may 2010 the Bajaj automobiles put option stock settle price opened with 50.75, increased to 114.85 on 25th may 2010 and later on decreased.

61

Interpretation: Hcl technologies call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on expiry date.

Graph No: 3

Settle Price
140

P r i c e s

120 100 80 60 40 20 0 17-May-10 19-May-10 21-May-10 23-May-10 25-May-10 27-May-10 29-May-10 31-May-10

18-Jun-10

2-Jun-10

4-Jun-10

6-Jun-10

8-Jun-10

10-Jun-10

12-Jun-10

14-Jun-10

16-Jun-10

20-Jun-10

22-Jun-10

Dates

62

24-Jun-10

4.

STATEMENT SHOWING MOVEMENT OF FUTURE STOCKS OF HCL TECHNOLOGIES DURING THE PERIOD FROM 17-05-2010 TO 24-06-2010:

Table No: 4
Symbol Date Expiry Open High Low Close LTP Settle Price No. of Turnover in Open contracts Lacs Int Change in OI Underlyi ng Value

HCLTECH

17-May- 24-Jun10 10 18-May- 24-Jun10 10 19-May- 24-Jun10 10 20-May- 24-Jun10 10 21-May- 24-Jun10 10 24-May- 24-Jun10 10 25-May- 24-Jun10 10 26-May- 24-Jun10 10 27-May- 24-Jun10 10 28-May- 24-Jun10 10 31-May- 24-Jun10 10 24-Jun1-Jun-10 10 24-Jun2-Jun-10 10 24-Jun3-Jun-10 10 24-Jun4-Jun-10 10 24-Jun7-Jun-10 10

398.05

398.95

394

395.85

395

395.85

66

339.84

174200 11700

394.35

HCLTECH

398.3

403

395.95

397.35

398

397.35

62

322.04

183300 9100

396.2

HCLTECH

393.3

393.3

366

373.6

372.05

373.6

174

858.88

271700 88400

371.85

HCLTECH

378

379

358

363

366

363

108

516.73

301600 29900

361.4

HCLTECH

356

371.4

351.2

369.1

371

369.1

161

758.97

266500 -35100

367.45

HCLTECH

374

374

360

369.95

369.65

369.95

390

1869.97

520000 253500

371

HCLTECH

361.25

365.3

352

355.5

358

355.5

843

3931.54

856700 336700 142350 0 566800 223860 0 815100 236340 0 124800 252720 0 163800 262210 0 94900 268060 0 58500 266370 0 -16900 268060 0 16900 265200 0 -28600

355

HCLTECH

364.95

368.9

356.45

365.25

366.2

365.25

869

4087.27

366.5

HCLTECH

365.4

372.3

361

366.85

365.1

366.85

1423

6761.5

370.15

HCLTECH

371.5

376.45

367.7

374.05

372.65

374.05

788

3812.38

377.1

HCLTECH

374.5

383.3

366.45

380.05

380.3

380.05

1017

4947.76

382.35

HCLTECH

378.25

379.1

363.3

365.3

363.4

365.3

702

3394.5

364.95

HCLTECH

365.5

373.7

365.5

371.05

371.9

371.05

772

3712.91

369.9

HCLTECH

378

381.85

376.2

380.05

380.5

380.05

597

2947.55

378.6

HCLTECH

381

389.8

376.3

387.9

387.35

387.9

901

4510.75

386.9

HCLTECH

379.2

379.35

370.9

375.4

375

375.4

664

3229.58

373.7

63

HCLTECH

24-Jun8-Jun-10 10 24-Jun9-Jun-10 10 10-Jun10 11-Jun10 14-Jun10 15-Jun10 16-Jun10 17-Jun10 18-Jun10 21-Jun10 22-Jun10 23-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10

376.15

377.85

364.75

365.5

365.5

365.5

850

4095.13

274170 0 89700 277550 0 33800 277680 0 1300 280280 0 26000 275080 0 -52000 265980 0 -91000 267280 0 13000 257270 0 -100100 253500 0 -37700 231400 0 -221000 175630 0 -557700 118430 0 -572000

365.05

HCLTECH

362.5

368.8

360.2

364.05

365.5

364.05

654

3098.25

363.85

HCLTECH

363

369.9

361.05

368.55

368.85

368.55

424

2017.36

366.9

HCLTECH

373

373.5

367.9

370.4

369.95

370.4

455

2191.88

369.6

HCLTECH

371.65

382.9

371.1

381.9

382.45

381.9

1259

6207.85

380.55

HCLTECH

381

390.9

381

385.8

384.8

385.8

1175

5899.46

384.55

HCLTECH

390.7

390.7

381.3

382.8

382

382.8

483

2409.53

382.45

HCLTECH

382

389.8

375.25

387.2

385.55

387.2

863

4288.85

385.65

HCLTECH

385.2

396.7

384.6

388.75

386.1

388.75

1721

8774.89

389.25

HCLTECH

391

393.5

385.1

388.45

388.7

388.45

1099

5560.25

388.25

HCLTECH

387

395.05

378.75

380.95

379.15

380.95

1452

7343.29

380.05

HCLTECH

375.2

382.15

371.65

374.1

375

374.1

1360

6663.37

372.75

HCLTECH

367

367

353.05

364

364

364.15

3639

17001.84

687700 -496600

364.15

Data analysis: From the above table it is analysed that on 17th may 2010 the Hcl technologies future price opened with 398.95 and decreased to 367 on 24th june 2010.

64

Interpretation: Hcl technologies future settle price opened with a positive index and fluctuated up and down during the period and ended with a negative index at the end of the contract period.

Graph No: 4

Open Price
410

P r i c e s

400 390 380 370 360 350 340 330 17-May-10 19-May-10 21-May-10 23-May-10 25-May-10 27-May-10 29-May-10 31-May-10 2-Jun-10 4-Jun-10 6-Jun-10 8-Jun-10

12-Jun-10

10-Jun-10

14-Jun-10

16-Jun-10

18-Jun-10

20-Jun-10

22-Jun-10

Dates

65

24-Jun-10

5. STATEMENT SHOWING MOVEMENT OF CALL OPTION STOCKS OF HCL TECHNOLOGIES DURING THE PERIOD FROM 17-052010 TO 24-06-2010: Table No: 5
Symbol Date Expiry 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 Strike Price Settle Open High Low Close LTP Price No. of Turnover contracts in Lacs Open Int Change in OI Underlying Value

17MayHCLTECH 10 18MayHCLTECH 10 19MayHCLTECH 10 20MayHCLTECH 10 21MayHCLTECH 10 24MayHCLTECH 10 25MayHCLTECH 10 26MayHCLTECH 10 27MayHCLTECH 10 28MayHCLTECH 10 31MayHCLTECH 10 1-JunHCLTECH 10 2-JunHCLTECH 10 3-JunHCLTECH 10 4-JunHCLTECH 10

380

21.05 0

30.4

394.35

380

21.05 0

30.75

396.2

380

21.05 0

20.5

371.85

380

21.05 0

15.55

361.4

380

21.05 0

17.4

367.45

380

21.05 0

17.45

371

380

21.05 0

11.6

355

380

21.05 0

16.1

366.5

380

21.05 0

16.8

370.15

380

21.05 0

19.5

377.1

380

21.05 0

20.7

382.35

380

21.05 0

13.15

364.95

380

21.05 0

14.45

369.9

380

21.05 0

18.05

378.6

380

21.05 0

22.05

386.9

66

7-JunHCLTECH 10 8-JunHCLTECH 10 9-JunHCLTECH 10

24-Jun10 24-Jun10 24-Jun10

380

21.05 0

13.95

373.7

380

21.05 0

9.7

365.05

380

21.05 0

8.35

363.85

1024-JunHCLTECH Jun-10 10 1124-JunHCLTECH Jun-10 10 1424-JunHCLTECH Jun-10 10 1524-JunHCLTECH Jun-10 10 1624-JunHCLTECH Jun-10 10 1724-JunHCLTECH Jun-10 10 1824-JunHCLTECH Jun-10 10 2124-JunHCLTECH Jun-10 10 2224-JunHCLTECH Jun-10 10 2324-JunHCLTECH Jun-10 10 2424-JunHCLTECH Jun-10 10

380

21.05 0

8.65

366.9

380

21.05 0

8.85

369.6

380

21.05 0

12.4

380.55

380

21.05 0

13.75

384.55

380

21.05 0

11.55

382.45

380

21.05 0

12.55

385.65

380

21.05 0

14

389.25

380

21.05 0

10.9

388.25

380

21.05 0

4.7

380.05

380

21.05 0

0.85

372.75

380

21.05 0

364.15

Data analysis: From the above table it is analysed that on 17th may 2010 the Hcl technologies call option stock settle price opened with 30.40, increased to 30.75 on 18th may 2010 and decreased later on fill the maturity.

67

Interpretation: Hcl technologies call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on expiry date.

Graph No: 5

Settle Price
35

P r i c e s

30 25 20 15 10 5 0 17-May-10 19-May-10 21-May-10 23-May-10 25-May-10 27-May-10 29-May-10 31-May-10

16-Jun-10

2-Jun-10

4-Jun-10

6-Jun-10

8-Jun-10

10-Jun-10

12-Jun-10

14-Jun-10

18-Jun-10

20-Jun-10

22-Jun-10

Dates

68

24-Jun-10

6. STATEMENT SHOWING MOVEMENT OF PUT OPTION STOCKS OF HCL TECHNOLOGIES DURING THE PERIOD FROM 17-05-2010 TO 24-06-2010:

Table No: 6
Symbol Date 17-May10 18-May10 19-May10 20-May10 21-May10 24-May10 25-May10 26-May10 27-May10 28-May10 31-May10 Expiry 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 Strike Price Open High Low Settle Close LTP Price No. of Turnover contracts in Lacs Open Int Change in OI Underlying Value

HCLTECH

360

13.8

7.45

394.35

HCLTECH

360

13.8

6.4

396.2

HCLTECH

360

13.8

16.7

371.85

HCLTECH

360

13.8

20.8

361.4

HCLTECH

360

13.8

17.55

367.45

HCLTECH

360

13.8

14.7

371

HCLTECH

360

13.8

22.65

355

HCLTECH

360

13.8

17.35

366.5

HCLTECH

360

13.8

15.05

370.15

HCLTECH

360

13.8

11.9

377.1

HCLTECH

360

13.8

8.95

382.35

HCLTECH

1-Jun-10

360

13.8

15.85

364.95

HCLTECH

2-Jun-10

360

13.8

13.05

369.9

HCLTECH

3-Jun-10

360

13.8

9.6

378.6

HCLTECH

4-Jun-10

360

13.8

6.85

386.9

HCLTECH

7-Jun-10

360

13.8

9.8

373.7

69

HCLTECH

8-Jun-10

24-Jun10 24-Jun10

360

13.8

12.55

365.05

HCLTECH

9-Jun-10

360

13.8

12.1

363.85

HCLTECH

24-Jun10-Jun-10 10 24-Jun11-Jun-10 10 24-Jun14-Jun-10 10 24-Jun15-Jun-10 10 24-Jun16-Jun-10 10 24-Jun17-Jun-10 10 24-Jun18-Jun-10 10 24-Jun21-Jun-10 10 24-Jun22-Jun-10 10 24-Jun23-Jun-10 10 24-Jun24-Jun-10 10

360

13.8

10.05

366.9

HCLTECH

360

13.8

8.25

369.6

HCLTECH

360

13.8

3.9

380.55

HCLTECH

360

13.8

2.55

384.55

HCLTECH

360

13.8

2.3

382.45

HCLTECH

360

13.8

1.35

385.65

HCLTECH

360

13.8

0.65

389.25

HCLTECH

360

13.8

0.1

388.25

HCLTECH

360

13.8

0.2

380.05

HCLTECH

360

13.8

0.2

372.75

HCLTECH

360

2.15

2.7

0.1

0.1

0.1

28

131.78

19500

19500

364.15

Data analysis: From the above table it is analysed that on 17th may 2010 the Hcl technologies put option stock settle price opened with 7.45, increased to 22.65 on 25th may 2010 and decreased later on.

70

Interpretation: Hcl technologies put option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled at the end of the contract period.

Graph No: 6

Settle Price
25

P r i c e s

20 15 10 5 0 17-May-10 19-May-10 21-May-10 23-May-10 25-May-10 27-May-10 29-May-10 31-May-10

18-Jun-10

2-Jun-10

4-Jun-10

6-Jun-10

8-Jun-10

10-Jun-10

12-Jun-10

14-Jun-10

16-Jun-10

20-Jun-10

22-Jun-10

Dates

71

24-Jun-10

7. STATEMENT SHOWING MOVEMENT OF FUTURE STOCKS OF KOTAK BANK DURING THE PERIOD FROM 17-05-2010 TO 24-062010:

Table No: 7
Symbol KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK Date Expiry Open High Low Close LTP Settle Price No. of Turnover contracts in Lacs Open Int Change in OI Underlyi ng Value

17-May- 24-Jun10 10 18-May- 24-Jun10 10 19-May- 24-Jun10 10 20-May- 24-Jun10 10 21-May- 24-Jun10 10 24-May- 24-Jun10 10 25-May- 24-Jun10 10 26-May- 24-Jun10 10 27-May- 24-Jun10 10 28-May- 24-Jun10 10 31-May- 24-Jun10 10 24-Jun1-Jun-10 10 24-Jun2-Jun-10 10 24-Jun3-Jun-10 10 24-Jun4-Jun-10 10 24-Jun7-Jun-10 10

750

780

750

778.75

780

778.75

73

308.01

161700

18700

784.5

780

785

767.5

779.45

781

779.45

108

462.5

187000

25300

783.4

777.55

781

739.75

742.5

745

742.5

279

1170.87

256850

69850

743.8

768.35

768.35

739.15

744.25

744.75

744.25

153

631.44

277750

20900

749.55

729.55

757.75

726.75

741.55

742.45

741.55

943

3861.59

640200

362450

740.25

751.4

756.5

735.65

738.35

737

738.35

557

2292.61

757350

117150

740.5

730.85

733.8

707.85

715.2

720.1

715.2

4038

16004.92

1798500

1041150

725.4

725.9

740.95

713.7

734.3

739.4

734.3

1594

6369.2

1994850

196350

743.4

739.9

750

729.6

748

746.4

748

3101

12626.25

2411750

416900

755.7

757.8

759.5

744.05

755

753.1

755

2409

9974.03

2588850

177100

759.4

755

755.45

741.8

751.5

754

751.5

1432

5903

2754400

165550

758.55

747.7

774

743

748.65

744.9

748.65

3190

13337.71

2889700

135300

755.6

748.1

753.15

736

749.9

751.55

749.9

1710

7020.5

2949650

59950

754.35

757.3

767

754.6

756.5

755.1

756.5

1587

6644.47

2953500

3850

759.55

750

760.6

748.5

751.05

751.1

751.05

1420

5903.11

2987600

34100

752.15

735.95

750.8

731.85

747.1

747.9

747.1

1498

6110.51

3007950

20350

754.4

72

KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK KOTAK BANK

24-Jun8-Jun-10 10 24-Jun9-Jun-10 10 10-Jun10 11-Jun10 14-Jun10 15-Jun10 16-Jun10 17-Jun10 18-Jun10 21-Jun10 22-Jun10 23-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10

752.9

755.8

730

735.85

737.4

735.85

1516

6211.1

3073400

65450

739.9

732.1

746.55

732.1

737.05

738.7

737.05

1358

5523.98

3119600

46200

738.9

741.7

746.7

732.15

744.65

746.05

744.65

1703

6931.03

3115750

-3850

744.1

748.8

759

743.25

753.1

753.4

753.1

2303

9521.76

3242250

126500

759.35

756.1

768.6

754.75

767.25

766.05

767.25

1992

8347.13

3362700

120450

770

769.9

772.5

760.65

769.55

769.35

769.55

1992

8409.25

3466650

103950

770.65

768

772.7

758.2

761.65

761

761.65

1542

6488.74

3476550

9900

764.75

760.25

774.5

750.4

771.65

770.4

771.65

3416

14348.41

3640450

163900

772.8

772

777.9

764.5

769.1

769.45

769.1

2622

11133.1

3257100

-383350

773.05

777

795.8

776.5

790.15

791

790.15

3069

13309.47

2925450

-331650

793.4

788

805.6

785

795

792

795

5383

23668.19

1788050

-1137400 793.35

791.45

803.9

782.6

785.4

786

785.4

3245

14126.43

1251250

-536800

784.1

774

774

753.95

756.05

756.05

756.1

6116

25634.13

1142350

-108900

756.1

Data analysis: From the above table it is analysed that on 17th may 2010 the Kotak bank future stock price opened with 750, increased to 803.9 and decreased to 756.10 on 24th june 2010. Because of Reserve Bank of India introduced the new lending rate system to ensure the longer borrower do not bargain for cheaper rates from banks, distorting their asset liability management.

73

Interpretation: Kotak bank future stock price opened with a negative index and fluctuated up and down during the period and ended with a positive index at the end of the contract period.

Graph No: 7

Open Price
800

P r i c e s

780 760 740 720 700 680 17-May-10 19-May-10 21-May-10 23-May-10 25-May-10 27-May-10 29-May-10 31-May-10 2-Jun-10 4-Jun-10 6-Jun-10 8-Jun-10 10-Jun-10 12-Jun-10 14-Jun-10 16-Jun-10 18-Jun-10 20-Jun-10 22-Jun-10 24-Jun-10

Dates

74

8. STATEMENT SHOWING MOVEMENT OF CALL OPTION STOCKS OF KOTAK BANK DURING THE PERIOD FROM 17-05-2010 TO 2406-2010:

Table No: 8
Symbol Date Expiry 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 Strike Price Open High Low Close LTP Settle Price No. of Turnover Open contracts in Lacs Int Change Underlying in OI Value

KOTAK 17-MayBANK 10 KOTAK 18-MayBANK 10 KOTAK 19-MayBANK 10 KOTAK 20-MayBANK 10 KOTAK 21-MayBANK 10 KOTAK 24-MayBANK 10 KOTAK 25-MayBANK 10 KOTAK 26-MayBANK 10 KOTAK 27-MayBANK 10 KOTAK 28-MayBANK 10 KOTAK 31-MayBANK 10 KOTAK BANK 1-Jun-10 KOTAK BANK 2-Jun-10 KOTAK BANK 3-Jun-10 KOTAK BANK 4-Jun-10 KOTAK BANK 7-Jun-10

800

30.95

42.3

784.5

800

30

30

30

30

30

30

4.57

550

550

783.4

800

10

10

10

10

10

10

4.46

550

743.8

800

10

10

27.1

550

749.55

800

10

10

22.2

550

740.25

800

10

10

19.3

550

740.5

800

12

15

12

15

15

15

8.95

1650

1100

725.4

800

15

15

18.65

1650

743.4

800

15

15

21.6

1650

755.7

800

10

10

9.9

9.9

9.9

9.9

8.91

2750

1100

759.4

800

15

15

15

15

15

15

4.48

3300

550

758.55

800

20

21

19.5

21

21

21

22.55

5500

2200

755.6

800

21

21

13.7

5500

754.35

800

21

21

13.95

5500

759.55

800

11

11

10.1

10.55

10.1

10.55

8.92

4400

-1100

752.15

800

10

10

10

10

10

10

8.91

4400

754.4

75

KOTAK BANK 8-Jun-10 KOTAK BANK 9-Jun-10

24-Jun10 24-Jun10

800

10

10

5.2

4400

739.9

800

10

10

6.25

6.25

6.25

6.25

13.34

2750

-1650

738.9

KOTAK 24-JunBANK 10-Jun-10 10 KOTAK 24-JunBANK 11-Jun-10 10 KOTAK 24-JunBANK 14-Jun-10 10 KOTAK 24-JunBANK 15-Jun-10 10 KOTAK 24-JunBANK 16-Jun-10 10 KOTAK 24-JunBANK 17-Jun-10 10 KOTAK 24-JunBANK 18-Jun-10 10 KOTAK 24-JunBANK 21-Jun-10 10 KOTAK 24-JunBANK 22-Jun-10 10 KOTAK 24-JunBANK 23-Jun-10 10 KOTAK 24-JunBANK 24-Jun-10 10

800

6.25

6.25

4.2

2750

744.1

800

4.42

2750

759.35

800

7.2

2750

770

800

6.2

2750

770.65

800

3.85

2750

764.75

800

4.42

2750

772.8

800

3.6

2750

773.05

800

6.65

2750

793.4

800

3.05

3.05

3.05

3.05

3.05

3.05

4.42

2750

793.35

800

5.15

5.25

5.15

5.2

5.25

5.2

8.86

2750

784.1

800

5.2

5.25

2750

756.1

Data analysis: From the above table it is analysed that on 17th may 2010 the Kotak bank call option stock settle price opened with 42.30 and later on decreased.

76

Interpretation: Kotak bank call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date.

Graph No: 8

Settle Price
45

P r i c e s

40 35 30 25 20 15 10 5 0

25-May-10

17-May-10

19-May-10

21-May-10

23-May-10

27-May-10

29-May-10

31-May-10

16-Jun-10

2-Jun-10

4-Jun-10

6-Jun-10

8-Jun-10

10-Jun-10

12-Jun-10

14-Jun-10

18-Jun-10

20-Jun-10

22-Jun-10

Dates

77

24-Jun-10

9. STATEMENT SHOWING MOVEMENT OF PUT OPTION STOCKS OF KOTAK BANK DURING THE PERIOD FROM 17-05-2010 TO 24-062010:

Table No: 9
Symbol Date Strike Expiry Price Open Settle High Low Close LTP Price No. of Turnover contracts in Lacs Open Int Change in OI Underlying Value

KOTAK 17-May- 24-JunBANK 10 10 760 KOTAK 18-May- 24-JunBANK 10 10 760 KOTAK 19-May- 24-JunBANK 10 10 760 KOTAK 20-May- 24-JunBANK 10 10 760 KOTAK 21-May- 24-JunBANK 10 10 760 KOTAK 24-May- 24-JunBANK 10 10 760 KOTAK 25-May- 24-JunBANK 10 10 760 KOTAK 26-May- 24-JunBANK 10 10 760 KOTAK 27-May- 24-JunBANK 10 10 760 KOTAK 28-May- 24-JunBANK 10 10 760 KOTAK 31-May- 24-JunBANK 10 10 760 KOTAK 24-JunBANK 1-Jun-10 10 760 KOTAK 24-JunBANK 2-Jun-10 10 760 KOTAK 24-JunBANK 3-Jun-10 10 760 KOTAK 24-JunBANK 4-Jun-10 10 760 KOTAK 24-JunBANK 7-Jun-10 10 760

55.45 0

33.75

784.5

55.45 0

32.25

783.4

55.45 0

53.8

743.8

55.45 0

49.05

749.55

55.45 0

52.2

740.25

55.45 0

49

740.5

55.45 0

56.95

725.4

55.45 0

46.2

743.4

55.45 0

38.7

755.7

55.45 0

35.2

759.4

31.1

31.1

31.1 31.1

31.1

31.1

4.35

550

550

758.55

31.1

31.1

32.35

550

755.6

31.1

31.1

31.4

550

754.35

31.1

31.1

27.45

550

759.55

31.1

31.1

29.85

550

752.15

31.1

31.1

26.05

550

754.4

78

KOTAK 24-JunBANK 8-Jun-10 10 760 KOTAK 24-JunBANK 9-Jun-10 10 760 KOTAK 10-JunBANK 10 KOTAK 11-JunBANK 10 KOTAK 14-JunBANK 10 KOTAK 15-JunBANK 10 KOTAK 16-JunBANK 10 KOTAK 17-JunBANK 10 KOTAK 18-JunBANK 10 KOTAK 21-JunBANK 10 KOTAK 22-JunBANK 10 KOTAK 23-JunBANK 10 KOTAK 24-JunBANK 10 24-Jun10 760 24-Jun10 760 24-Jun10 760 24-Jun10 760 24-Jun10 760 24-Jun10 760 24-Jun10 760 24-Jun10 760 24-Jun10 760 24-Jun10 760 24-Jun10 760

31.1

31.1

33.45

550

739.9

31.1

31.1

32.7

550

738.9

31.1

31.1

28.4

550

744.1

29.1

29.1

29.1 29.1

29.1

29.1

4.34

-550

759.35

29.1

29.1

12.5

770

29.1

29.1

10.95

770.65

29.1

29.1

12.1

764.75

29.1

29.1

7.9

772.8

29.1

29.1

6.6

773.05

29.1

29.1

0.75

793.4

29.1

29.1

0.25

793.35

29.1

29.1

0.15

784.1

1.85

1.85

1.85 1.85

1.85

12

50.28

4400

4400

756.1

Data analysis: From the above table it is analysed that on 17th may 2010 the Kotak bank put option stock settle price opened with 33.75, increased to 25th may 2010 and later on decreased.

79

Interpretation: Kotak bank put option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date.

Graph No: 9

Settle Price
60

P r i c e s

50 40 30 20 10 0 17-May-10 19-May-10 21-May-10 23-May-10 25-May-10 27-May-10 29-May-10 31-May-10 2-Jun-10 4-Jun-10 6-Jun-10 8-Jun-10 10-Jun-10 12-Jun-10 14-Jun-10 16-Jun-10 18-Jun-10 20-Jun-10 22-Jun-10 24-Jun-10

Dates

80

10. STATEMENT SHOWING MOVEMENT OF FUTURE STOCKS OF RANBAXY LABS DURING THE PERIOD FROM 17-05-2010 TO 24-062010:

Table No: 10
Symbol Date 17May10 18May10 19May10 20May10 21May10 24May10 25May10 26May10 27May10 28May10 31May10 1-Jun10 2-Jun10 3-Jun10 4-Jun10 Expiry Open 24-Jun10 454 24-Jun10 455.2 24-Jun10 447.1 24-Jun10 428.9 24-Jun10 418.25 24-Jun10 425 24-Jun10 412.75 24-Jun10 412.2 24-Jun10 418 24-Jun10 419.7 24-Jun10 427.5 24-Jun10 428.8 24-Jun10 426.05 24-Jun10 437 24-Jun10 432.2 High Low Close LTP Settle Price No. of Turnover contracts in Lacs Open Int Change in Underlying OI Value

RANBAXY

457.2

443.65

455.2

455

455.2

106

383.04

216000

33600

454.25

RANBAXY

456.85

448.5

450.95

448.5

450.95

92

332.86

257600

41600

449.4

RANBAXY

447.4

422.95

425.75

425.3

425.75

271

950.03

400800

143200

423

RANBAXY

435

417

427.3

428.1

427.3

319

1094.71

460800

60000

425.15

RANBAXY

422.55

410.35

418.4

418

418.4

730

2430.91

787200

326400

416.6

RANBAXY

428.05

411.25

415.55

411.8

415.55

1457

4928.83

1500800 713600

412.85

RANBAXY

418.5

405.5

408

408.85

408

1934

6379.49

2216000 715200

405.9

RANBAXY

419

411.7

417.6

415.25

417.6

1993

6615.44

2938400 722400

414.85

RANBAXY

420.8

414.45

417.05

417.5

417.05

2747

9176.14

3936000 997600

414.05

RANBAXY

429.6

419

428.15

428

428.15

1743

5921.42

3798400 -137600

427.1

RANBAXY

432

420.5

430.55

431.25

430.55

1550

5313.24

3800800 2400

429.8

RANBAXY

431.4

424

429

428.5

429

1126

3851.74

3700800 -100000

428.95

RANBAXY

436.8

426.05

432.45

434

432.45

1914

6624.06

3754400 53600

429.95

RANBAXY

438.4

431.9

433.25

433.3

433.25

1486

5173.28

3789600 35200

431.55

RANBAXY

436.4

430.05

431.7

432

431.7

744

2581.93

3762400 -27200

430.5

81

RANBAXY

7-Jun10 8-Jun10 9-Jun10 10Jun-10 11Jun-10 14Jun-10 15Jun-10 16Jun-10 17Jun-10 18Jun-10 21Jun-10 22Jun-10 23Jun-10 24Jun-10

24-Jun10 421.3 24-Jun10 427 24-Jun10 418.8 24-Jun10 422 24-Jun10 430.9 24-Jun10 437.1 24-Jun10 439 24-Jun10 437 24-Jun10 435.9 24-Jun10 444.1 24-Jun10 444.8 24-Jun10 448 24-Jun10 457.9 24-Jun10 460.65

426.5

417.3

423.4

424.15

423.4

869

2942.3

3680000 -82400

422.7

RANBAXY

428.9

415.25

416.25

416.8

416.25

998

3374.6

3802400 122400

414.7

RANBAXY

422.85

416

419.05

419.75

419.05

846

2842.23

3816800 14400

417.95

RANBAXY

428

418.15

426.75

427.5

426.75

1443

4885.51

3838400 21600

424.6

RANBAXY

436.7

426.25

432.75

432.6

432.75

2056

7126.93

3674400 -164000

431.65

RANBAXY

442

434.2

439.9

439

439.9

1642

5758.26

3607200 -67200

438.55

RANBAXY

439.8

431.25

436.75

435.55

436.75

1001

3486.64

3524800 -82400

436

RANBAXY

444.5

432.65

434

433.75

434

1686

5921.03

3596000 71200

432.35

RANBAXY

446.45

432.5

444.85

445.05

444.85

2248

7923.97

3409600 -186400

442.7

RANBAXY

445.9

437.5

441

441.5

441

1575

5567.52

3109600 -300000

440.45

RANBAXY

449

441

447.55

448.5

447.55

2195

7839.12

2384000 -725600

446.95

RANBAXY

462.3

448

458.55

458.65

458.55

3581

13088.9

1746400 -637600

458.4

RANBAXY

464

457

458.4

458.8

458.4

1562

5753.72

1317600 -428800

457.85

RANBAXY

460.8

452.75

454.4

454.4

454.6

1987

7243.07

484800

-832800

454.6

Data analysis: From the above table it is analysed that on 17th may 2010 the Ranbaxy labs future stock price opened with 454 and increased to 457.2 on 24rd june 2010. Because of fluctuations in the stock prices due to rise in the price of pharmaceutical.

82

Interpretation: Ranbaxy labs future stock price opened with a negative index and fluctuated up and down during the period and ended with a positive index at the end of the contract period.

Graph No: 10

Open Price
P r i c e s
470 460 450 440 430 420 410 400 390 380 17-May-10 19-May-10 21-May-10 23-May-10 25-May-10 27-May-10 29-May-10 31-May-10 2-Jun-10 4-Jun-10 6-Jun-10 8-Jun-10 10-Jun-10 12-Jun-10 14-Jun-10 16-Jun-10 18-Jun-10 20-Jun-10 22-Jun-10 24-Jun-10

Dates

83

11. STATEMENT SHOWING MOVEMENT OF CALL OPTION STOCKS OF RANBAXY LABS DURING THE PERIOD FROM 17-05-2010 TO 24-06-2010:

Table No: 11
Symbol Date Expiry 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 Strike Price Open High Low Close LTP Settle Price No. of Turnover contracts in Lacs Open Int Change in OI Underlying Value

17-MayRANBAXY 10 18-MayRANBAXY 10 19-MayRANBAXY 10 20-MayRANBAXY 10 21-MayRANBAXY 10 24-MayRANBAXY 10 25-MayRANBAXY 10 26-MayRANBAXY 10 27-MayRANBAXY 10 28-MayRANBAXY 10 31-MayRANBAXY 10

420

64.95 0

40.85

454.25

420

64.95 0

36.55

449.4

420

64.95 0

23.75

423

420

64.95 0

24.1

425.15

420

15

18.4

14.5

18.4

18.4

18.4

27

94.17

13600

13600

416.6

420

19.7

19.7

17.55 17.55 17.55 17.55

31.59

6400

-7200

412.85

420

14.9

16.45 12.75 12.95 12.75 12.95

11

38.2

11200

4800

405.9

420

14.4

16.5

13.5

16.45 16.4

16.45

20

69.52

21600

10400

414.85

420

14.9

17.3

13.95 15.85 17

15.85

45

156.89

40800

19200

414.05

420

17

21.25 16.3

20.2

19

20.2

54

189.33

40000

-800

427.1

420

22

22

15.3

20.45 20.9

20.45

18

63.3

42400

2400

429.8

RANBAXY 1-Jun-10

420

19.45 19.85 16.5

19.5

18.85 19.5

26

91.19

36000

-6400

428.95

RANBAXY 2-Jun-10

420

20

24

19.3

19.9

21.35 19.9

22

77.73

37600

1600

429.95

RANBAXY 3-Jun-10

420

22.15 25.15 20.5

20.5

20.5

20.5

31.92

40800

3200

431.55

RANBAXY 4-Jun-10

420

20.15 22.35 20.15 21.55 21.55 21.55

12

42.4

41600

800

430.5

84

RANBAXY 7-Jun-10

24-Jun10 24-Jun10 24-Jun10

420

19

19

12.05 13.7

13.7

13.7

25

87.04

56000

14400

422.7

RANBAXY 8-Jun-10

420

13.95 14.55 9.95

10.2

10.2

10.2

26

89.74

60800

4800

414.7

RANBAXY 9-Jun-10

420

11.2

12.35 10.5

10.5

10.5

10.5

13

44.86

63200

2400

417.95

24-JunRANBAXY 10-Jun-10 10 24-JunRANBAXY 11-Jun-10 10 24-JunRANBAXY 14-Jun-10 10 24-JunRANBAXY 15-Jun-10 10 24-JunRANBAXY 16-Jun-10 10 24-JunRANBAXY 17-Jun-10 10 24-JunRANBAXY 18-Jun-10 10 24-JunRANBAXY 21-Jun-10 10 24-JunRANBAXY 22-Jun-10 10 24-JunRANBAXY 23-Jun-10 10 24-JunRANBAXY 24-Jun-10 10

420

10.5

15.25 10.05 14.2

15.25 14.2

17

58.66

64000

800

424.6

420

14

23.5

13.3

19.25 19.25 19.25

66

232.4

84000

20000

431.65

420

22

24.5

21.5

22.95 22.5

22.95

16

56.7

86400

2400

438.55

420

17.1

18.35 16.1

18.35 18.35 18.35

10.49

86400

436

420

20.3

24.5

20.25 22.25 22.25 22.25

35

123.4

77600

-8800

432.35

420

18.4

26.5

18.4

25.65 26.5

25.65

16

56.87

73600

-4000

442.7

420

26

26

21.1

22

22

22

21.28

72800

-800

440.45

420

25.5

25.5

25.5

25.5

25.5

25.5

3.56

72000

-800

446.95

420

32.25 41

32.25 37.15 37.15 37.15

25.56

68000

-4000

458.4

420

43.9

43.9

43.9

43.9

43.9

43.9

3.71

67200

-800

457.85

420

34

35

34

35

35

7.27

66400

-800

454.6

Data analysis: From the above table it is analysed that on 17th may 2010 the Ranbaxy labs call option stock settle price opened with 40.85 and later on decreased.

85

Interpretation: Ranbaxy labs call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date.

Graph No: 11

Settle Price
P r i c e s
50 45 40 35 30 25 20 15 10 5 0

27-May-10

17-May-10

19-May-10

21-May-10

23-May-10

25-May-10

29-May-10

31-May-10

18-Jun-10

2-Jun-10

4-Jun-10

6-Jun-10

8-Jun-10

10-Jun-10

12-Jun-10

14-Jun-10

16-Jun-10

20-Jun-10

22-Jun-10

Dates

86

24-Jun-10

12. STATEMENT SHOWING MOVEMENT OF PUT OPTION STOCKS OF RANBAXY LABS DURING THE PERIOD FROM 17-05-2010 TO 2406-2010:

Table No: 12
Symbol Date Expiry Strike Price Open High Low Close LTP Settle Price No. of Turnover in Open contracts Lacs Int Change in OI Underlying Value

1724-JunRANBAXY May-10 10 1824-JunRANBAXY May-10 10 1924-JunRANBAXY May-10 10 2024-JunRANBAXY May-10 10 2124-JunRANBAXY May-10 10 2424-JunRANBAXY May-10 10 2524-JunRANBAXY May-10 10 2624-JunRANBAXY May-10 10 2724-JunRANBAXY May-10 10 2824-JunRANBAXY May-10 10 3124-JunRANBAXY May-10 10 1-JunRANBAXY 10 2-JunRANBAXY 10 3-JunRANBAXY 10 4-JunRANBAXY 10 7-JunRANBAXY 10 24-Jun10 24-Jun10 24-Jun10 24-Jun10 24-Jun10

400

5.7

1.6

454.25

400

5.7

1.8

449.4

400

5.7

10.5

423

400

11.3

11.3

10.8

10.8

10.8

10.8

9.86

2400

2400

425.15

400

11.5

11.5

11.45 11.45 11.45 11.45

9.88

1600

-800

416.6

400

10

7.8

9.35

9.35

9.35

22

72.06

16000

14400

412.85

400

11.75 13.95 10

12.9

12.9

12.9

21

69.28

10400

-5600

405.9

400

10.25 11.15 9

11

36.09

17600

7200

414.85

400

8.8

9.25

8.15

9.05

8.9

9.05

26.16

21600

4000

414.05

400

5.9

6.5

4.6

4.9

4.9

4.9

25

81.12

30400

8800

427.1

400

4.5

4.3

4.5

21

68.02

40000

9600

429.8

400

4.35

4.9

4.45

4.45

4.45

19

61.48

48000

8000

428.95

400

2.8

3.25

3.25

3.25

33

106.51

51200

3200

429.95

400

2.7

2.7

2.1

2.5

2.5

2.5

25.76

52800

1600

431.55

400

2.05

2.55

2.4

2.55

2.4

25.73

53600

800

430.5

400

3.8

4.1

3.5

25.84

54400

800

422.7

87

8-JunRANBAXY 10 9-JunRANBAXY 10

24-Jun10 24-Jun10

400

3.1

5.2

5.1

5.1

19

61.44

55200

800

414.7

400

4.35

3.5

3.5

23

74.35

68800

13600

417.95

10-Jun- 24-JunRANBAXY 10 10 11-Jun- 24-JunRANBAXY 10 10 14-Jun- 24-JunRANBAXY 10 10 15-Jun- 24-JunRANBAXY 10 10 16-Jun- 24-JunRANBAXY 10 10 17-Jun- 24-JunRANBAXY 10 10 18-Jun- 24-JunRANBAXY 10 10 21-Jun- 24-JunRANBAXY 10 10 22-Jun- 24-JunRANBAXY 10 10 23-Jun- 24-JunRANBAXY 10 10 24-Jun- 24-JunRANBAXY 10 10

400

2.6

1.8

1.9

1.8

1.9

16

51.54

68800

424.6

400

1.45

2.25

1.45

2.05

2.05

2.05

25.72

73600

4800

431.65

400

0.9

1.25

0.8

0.8

0.8

0.8

22.45

75200

1600

438.55

400

0.8

0.8

0.35

75200

436

400

0.65

0.65

0.65

0.65

0.65

0.65

6.41

75200

432.35

400

0.8

0.8

0.15

0.15

0.15

0.15

16.02

74400

-800

442.7

400

0.15

0.15

0.05

74400

440.45

400

0.15

0.15

74400

446.95

400

0.05

0.05

0.05

0.05

0.05

0.05

16

70400

-4000

458.4

400

0.05

0.05

70400

457.85

400

0.05

0.05

70400

454.6

Data analysis: From the above table it is analysed that on 17th may 2010 the Ranbaxy labs put option stock settle price opened with 1.60, increased to 12.90 on 25th may 2010 and later on decreased.

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Interpretation: Ranbaxy labs put option call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date.

Graph No: 12

Settle Price
14

P r i c e s

12 10 8 6 4 2 0 17-May-10 19-May-10 21-May-10 23-May-10 25-May-10 27-May-10 29-May-10 31-May-10 2-Jun-10 4-Jun-10 6-Jun-10 8-Jun-10

22-Jun-10

10-Jun-10

12-Jun-10

14-Jun-10

16-Jun-10

18-Jun-10

20-Jun-10

Dates

89

24-Jun-10

SUMMARY, FINDINGS AND SUGGESTIONS

Summary:
1. Derivates market is an innovation to cash market. Approximately its daily turnover reaches to the equal stage of cash market. The average daily turnover of the NSE derivative segments. 2. In cash market the profit/loss of the investor depend the market price of the underlying asset. The investor may incur huge profits or he may incur huge profits or he may incur huge loss. But in derivatives segment the investor the investor enjoys huge profits with limited downside. 3. In cash market the investor has to pay the total money, but in derivatives the investor has to pay premiums or margins, which are some percentage of total money. 4. Derivatives are mostly used for hedging purpose. 5. In derivative segment the profit/loss of the option writer is purely depend on the fluctuations of the underlying asset.

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Findings: The above analysis of futures and options of BAJAJ AUTOMOBILES, HCL TECHNOLOGIES, KOTAK BANK and RANBAXY LABS had shown a positive market in the during period.

1. Bajaj automobiles future stock price opened with a negative index and fluctuated up and down during the period and ended with a positive index at the end of the contract period. 2. Bajaj automobiles call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date. 3. Bajaj automobiles put option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date. 4. Hcl technologies future stock price opened with a positive index and fluctuated up and down during the period and ended with a negative index at the end of the contract period. 5. Hcl technologies call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on expiry date. 6. Hcl technologies put option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled at the end of the contract period. 7. Kotak bank future stock price opened with a negative index and fluctuated up and down during the period and ended with a positive index at the end of the contract period.

91

8. Kotak bank call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date. 9. Kotak bank put option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date. 10.Ranbaxy labs future stock price opened with a negative index and fluctuated up and down during the period and ended with a positive index at the end of the contract period. 11.Ranbaxy labs call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date. 12. Ranbaxy labs put option call option stock settle price opened with a positive settle price and fluctuated up and down during the period and settled on maturity date.

92

Suggestions:
Some of the suggestions mentioned below may improve the working of Sharekhan Private Limited and further may increase its market share.

1.

The clients of Sharekhan Private Limited who come to trade in capital market segment must be made aware of the derivatives market segment by conducting seminars to them.

2.

All the employee of Sharekhan Private Limited must be provided full knowledge of the Futures and Options market and classes must be conducted to them in this regard.

3.

Feed back must be taken by Sharekhan Private Limited from their client about the working of Futures and Options trading system and their clearing and settlement.

4.

It is good for Sharekhan Private Limited to conduct workshops and seminars and to increase awareness of futures and options market among the investing public.

93

Conclusion:
Futures and Options market plays a vital role in todays economy and India through lately entered this segment is now improving and the Government should provide more assistance for the improvisation of the derivatives market. Sharekhan Private Limited is the one among the few which provides trading in futures and options volume traded would be doubled compared to the present traded volumes in India. Let us hope that India would make its mark in the Derivatives market and hope that Sharekhan Private Limited role in it would be remarkable in this effort. The clients of Sharekhan Private Limited who come to trade in capital market segment must be made aware of the derivatives market segment by conducting seminars to them., All the employee of Sharekhan Private Limited must be provided full knowledge of the Futures and Options market and classes must be conducted to them in this regard., It is good for Sharekhan Private Limited to conduct workshops and seminars and to increase awareness of futures and options market among the investing public.

94

Bibliography:
1. Options, Futures and other derivatives 2. Financial derivatives 3. Financial Management 4. Futures and Options 5. Review of derivatives research 6. The journal of business 7. Business line 8. The Economic Times 9. www.nseindia.com 10.www.bseindia.com 11.www.sebi.gov.in 12.www.888options.com 13.www.bambooweb.com 14.www.wikipedia.com John C. Hull S.L.Gupta I.M.Pandey N.D.Vohra, B.R.Bagri

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