Risk Management

Yuvraj Sakunde 15 December 2010

1. SPOT TRNASACTION
1. Payment
2. Pay-off

2. FUTURE TRANSACTION
1. Initial Margin
2. Maintenance Margin
3. Margin Call
4. Expiry date
5. Pay-off
6. Lot size
 Futures ( Stock Futures)
SBIN
Instrument Type Underlying Expiry Date Option Type Strike Price Market Lot
FUTSTK SBIN  24SEP2009 - - 132

Price Information Order Book

Open Price 2102.15
Buy Qty Buy Price Sell Price Sell Qty
High Price 2135.55
Low Price 2084.50 264 2094.00 2094.95 528

Last Price 2094.00 132 2093.70 2095.00 792

Prev Close 2083.65
2376 2093.30 2095.65 132
Close Price 2098.60
Change from prev close 10.35 1584 2093.10 2095.90 1452
% Change from prev close 0.50
132 2093.00 2095.95 264
Average Price 2107.63
Underlying Value 2097.00 117612 Total Buy Qty Total Sell Qty 127776

Number of contracts traded 24934 Cost of Carry

Turnover in Rs. Lakhs 69368.17
  Best Buy Best Sell Last Price
Open Interest 3053292
Price 2094.00 2094.95 2094.00
Change in Open Interest -37752
Cost Of Carry -8.71 -5.95 -8.71
% Change -1.22
 Futures ( Index futures)
NIFTY
Instrument Type Underlying Expiry Date Option Type Strike Price Market Lot
FUTIDX NIFTY  24SEP2009 - - 50
Price Information Order Book
Open Price 4992.50
Buy Qty Buy Price Sell Price Sell Qty
High Price 5011.00
Low Price 4955.00 150 4961.50 4962.25 100

Last Price 4961.50 250 4961.00 4962.30 50

Prev Close 4961.85
50 4960.55 4962.45 400
Close Price 4978.05
650 4960.00 4962.70 1000
Change from prev close -0.35
300 4959.00 4962.85 50
% Change from prev close -0.01
552350 Total Buy Qty Total Sell Qty 811200
Average Price 4981.91
Underlying Value 4965.55 Cost of Carry

Number of contracts traded 520228

  Best Buy Best Sell Last Price
Turnover in Rs. Lakhs 1295864.54
Open Interest 27838450 Price 4961.50 4962.25 4961.50

Change in Open Interest -1973650

Cost Of Carry -4.96 -4.04 -4.96
% Change -6.62
 F & O Quote

As on 08-OCT-2010 15:30:19 Hours IST

NIFTY

Instrument Type Underlying Expiry Date Option Type Strike Price Market Lot

OPTIDX NIFTY 28OCT2010 CE 6100.00 50

Price Information Order Book

Open Price 148.40 Buy Qty Buy Price Sell Price Sell Qty

3750 126.00 126.95 50

High Price 148.40
10000 125.60 127.00 1700
Low Price 107.35
50 125.55 127.25 50
Last Price 126.95
3650 125.50 127.40 300
Prev Close 139.85
50 125.40 127.45 50
Close Price 122.70
99700 Total Buy Qty Total Sell Qty 112000
Change from prev close -12.90

% Change from prev close -

VWAP 124.01

Underlying Value 6103.45

Number of contracts traded 106076

Turnover in Rs. Lakhs 330109.04

Open Interest 3032750

Change in Open Interest 214900

% Change 7.63
3. OPTION TRANSACTION
1. Premium
2. Strike price
3. Lot size
4. Expiry Date
5. In the money option
6. At the money option
7. Out of the money option
8. Pay – off
 F & O Quote

As on 08-OCT-2010 15:30:19 Hours IST

NIFTY

Instrument Type Underlying Expiry Date Option Type Strike Price Market Lot

OPTIDX NIFTY 28OCT2010 PE 6100.00 50

Price Information Order Book

Open Price 88.50 Buy Qty Buy Price Sell Price Sell Qty
High Price 109.40
350 85.00 85.50 2000
Low Price 82.60
50 84.95 85.70 500
Last Price 85.00
400 84.90 85.75 1000
Prev Close 95.55
2600 84.70 85.85 50
Close Price -
50 84.30 86.00 750
Change from prev close -10.55
233250 Total Buy Qty Total Sell Qty 209650
% Change from prev close -

VWAP 94.90

Underlying Value 6106.20

Number of contracts traded 246307

Turnover in Rs. Lakhs 762923.62

Open Interest 4108700

Change in Open Interest 542950

% Change 15.23
Long call

A trader who believes that a stock's price will increase might buy the right to purchase the stock (a call option) rather
than just purchase the stock itself. He would have no obligation to buy the stock, only the right to do so until the
expiration date. If the stock price at expiration is above the exercise price by more than the premium (price) paid, he
will profit. If the stock price at expiration is lower than the exercise price, he will let the call contract expire worthless,
and only lose the amount of the premium. A trader might buy the option instead of shares, because for the same
amount of money, he can control (leverage) a much larger number of shares
Short call

A trader who believes that a stock price will decrease, can sell the stock short or instead sell, or "write," a call. The
trader selling a call has an obligation to sell the stock to the call buyer at the buyer's option. If the stock price decreases,
the short call position will make a profit in the amount of the premium. If the stock price increases over the exercise
price by more than the amount of the premium, the short will lose money, with the potential loss unlimited.
 F & O Quote

As on 08-OCT-2010 15:30:19 Hours IST

DLF

Instrument Type Underlying Expiry Date Option Type Strike Price Market Lot

OPTSTK DLF 28OCT2010 CA 380.00 1000

Price Information Order Book

Open Price 19.80
Buy Qty Buy Price Sell Price Sell Qty
High Price 21.50
1000 20.50 21.85 5000
Low Price 14.00
1000 20.30 22.00 3000
Last Price 21.20

Prev Close 18.05 1000 20.10 22.20 1000

Close Price 19.20 2000 20.05 22.30 1000

Change from prev close 3.15 1000 19.80 23.00 1000

% Change from prev close -
160000 Total Buy Qty Total Sell Qty 22000
VWAP 17.20

Underlying Value 385.50

Number of contracts traded 551

Turnover in Rs. Lakhs 2188.57

Open Interest 298000

Change in Open Interest -2000

% Change -0.67
Long put

A trader who believes that a stock's price will decrease can buy the right to sell the stock at a fixed price (a put
option). He will be under no obligation to sell the stock, but has the right to do so until the expiration date. If the stock
price at expiration is below the exercise price by more than the premium paid, he will profit. If the stock price at
expiration is above the exercise price, he will let the put contract expire worthless and only lose the premium paid.
Short put

A trader who believes that a stock price will increase can buy the stock or instead sell a put. The trader selling a put
has an obligation to buy the stock from the put buyer at the put buyer's option. If the stock price at expiration is above
the exercise price, the short put position will make a profit in the amount of the premium. If the stock price at
expiration is below the exercise price by more than the amount of the premium, the trader will lose money, with the
potential loss being up to the full value of the stock. A benchmark index for the performance of a cash-secured short
put option position is the CBOE S&P 500 PutWrite Index (ticker PUT).
 F & O Quote

As on 08-OCT-2010 15:30:19 Hours IST

DLF

Instrument Type Underlying Expiry Date Option Type Strike Price Market Lot

OPTSTK DLF 28OCT2010 PA 380.00 1000

Price Information Order Book

Open Price 15.00 Buy Qty Buy Price Sell Price Sell Qty
High Price 17.50
1000 12.30 12.65 5000
Low Price 12.00
25000 12.25 12.75 1000
Last Price 12.30
1000 12.05 14.00 1000
Prev Close 14.15
22000 12.00 14.50 1000
Close Price 13.40

Change from prev close -1.85 1000 11.55 14.95 1000

% Change from prev close - 96000 Total Buy Qty Total Sell Qty 63000

VWAP 15.01

Underlying Value 385.50

Number of contracts traded 544

Turnover in Rs. Lakhs 2148.85

Open Interest 335000

Change in Open Interest -35000

% Change -9.46
4. OPTIONS STRATEGY

When Market is Bearish

1. Buy Put Options
2. Sell naked Calls
3. Use bear put spreads
4. Use bear call spreads

When Market is Bullish

1. Buy Call Options
2. Sell naked Puts
3. Use bull put spreads
4. Use bull call spreads
 
When the Market is Stable or neutral
1. Straddles
2. Strangles
3. Butterflies
1. Straddles :-
a) Long Straddle :- Buy 5900 Nifty Call and Put at the same time
This position will be in profit if Nifty moves one side in a significant way.
b) Short Straddle :- Sell 5900 Nifty Call and Put at the same time
This position will be in profit if Nifty remains near 5900 on expiry.

2. Strangle :-
a) Long Strangle: - Buy 5700 Nifty Put and 6100 Call at the same time.
This position will be in profit if Nifty moves one side in a significant way.
b)Short Strangle: - Sell 5700 Nifty Put and 6100 Call at the same time.
This position will be in profit if Nifty expires between 5700 and 6100.

3. Butterfly :-
a) Long Butterfly: - Buy 5800 and 6000 Nifty Call and Sell two 5900 Nifty Call.
This position will be in profit if Nifty expires near 5900 on expiry.
b) Short Butterfly: - Sell 5800 and 6000 Nifty Call and Buy two 5900 Nifty Call.
This position will be in profit if Nifty moves away from 5900 on either side.
4. Bull Call Spread :-
Buy 5800 Nifty Call and Sell 6000 Nifty Call.
This position will be in profit as Nifty moves up from 5900.
  
5. Bull Put Spread :-
Buy 6000 Nifty Put and Sell 5800 Nifty Put.
This position will be in profit as Nifty moves down from 5900.
 
6. Bear Call Spread :-
Sell 5800 Nifty Call and Buy 6000 Nifty Call.
This position will be in profit as Nifty moves down from 5900.
 
7. Bear Put Spread :-
Sell 6000 Nifty Put and Buy 5800 Put.
This position will be in profit as Nifty moves up from 5900.

5. FORWARD TRANSACTION

6. SWAP TRANSACTION
 Important websites
1. www.google.com
2. http://www.wikipedia.org/
3. www.bloomberg.com
4. www.reuters.com
5. www.investopedia.com
6. www.googlefinance.com
7. www.yahoofinance.com
8. www.forexfactory.com
9. www.moneycontrol.com
10. www.nseindia.com
11. www.bseindia.com
12. http://www.imf.org/external/index.htm
13. http://www.worldbank.org/
14. http://www.sebi.gov.in/
15. http://www.rbi.org.in/
16. http://www.insidefutures.com/
17. http://www.fxstreet.com/
18. http://www.agriwatch.com/
19. http://www.commodityonline.com/
20. http://www.futuresource.com/
21. http://www.federalreserve.gov/
22. http://www.forex.com/
23. http://www.fxcm.com/
 Job profiles

1. Equity research analyst

2. Business analyst
3. Market research analyst
4. Financial analyst
5. Technical analyst
6. Fundamental analyst
7. Quant analyst
8. Credit analyst
9. Risk analyst
10. Portfolio manager
11. Compliance manager
12. Arbitrager
13. Forex dealer
14. Equity dealer
15. Commodity dealer
16. Relationship manager
17. Wealth manager
18. Investment banking (M&A)
19. Business Consultant (Financial Services)
 Companies that recruit

1. Investment Bankers

2. Fund managers

3. Asset & Portfolio management companies

4. Equity research firms

5. Hedge funds

6. Private Equity companies

7. Banks – Retail Banking, corporate banking

8. Consulting firms

9. Market research firms 

 Important books
Business
1. Rich dad poor dad (series of books)
2. Built to Last
3. Good to great
4. Stay hungry stay foolish
5. Winning
6. Straight form the Gut

Investment
1. Intelligent investor
2. Buffet’s way

Economy
1. Ascent of money
2. False economy
3. World is flat

Logic/Economics
1. Outliers
2. Freakonomics
3. Tipping point
4. Logic of Life
India
1. Freedom at Midnight
2. Imagining India
3. India Unbound
4. In spite of the Gods

Self Help
1. Secret
2. The monk who sold his Ferrari
3. Greatness guide
4. It’s not about the bike
5. Every Second Counts
6. Think and grow rich

Communication
1. How to win friends & Influence people
ALL THE BEST