Derivatives (F&O)

Derivative trading has gained a great deal of prominence in India. They were first introduced in 2000 and are now being widely traded by investors from diverse backgrounds and industries. A derivative is essentially a financial instrument/contract that gets its value via an underlying financial asset such as indices, stocks, currencies, commodities, rates of exchange or the interest rate. They help investors in earning profits by simply speculating the underlying financial asset’s value in the near future. Hence, these financial instruments are referred to as Derivatives.

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The Benefit of Derivatives

The underlying financial asset's value may alter on a regular basis. For instance, the value of a stock may go up or down. Alternatively, the rate of exchange for a particular currency pair may alter, the prices of the commodities may shoot up or drop and the indices could fluctuate. These varied changes provide investors with the opportunity to earn attractive profits or gains by simply guessing the correct price in future.

Put simply, derivatives provide you with the unique opportunity to earn additional money on stocks that are not being used currently. Thus, when investors don't wish to sell of their shares and retain them for longer period but intend to make the most of the short term pricing fluctuations can utilize derivatives to fulfil their desires.

Apart from this, derivatives also let you take advantage of arbitrage i.e. buying low in one of the financial markets and selling high in another one. Derivatives also prove useful in safeguarding your financial securities from fluctuating prices. This means you can turn to the derivatives market to choose products that permit hedging against a drop in the share prices possessed by you. In fact, the market also provides products that can be used for protecting yourself from an increase in the share prices that you intend to buy. Derivatives also allow investors to transfer the risk to other investors who have the potential to speculate and take risks.

  Derivative Types

Investors can invest in two different types of derivatives including options and futures. Futures are essentially a financial agreement or contract established among two distinct parties for either buying or selling a certain number of assets at a fixed pricing and specific time in future. On the other hand, option is also much similar to the future. The only difference is that the people or parties are under no obligation to meet the agreement terms. Also note that a contract's minimum price or value is approximately Rs 2 lakh.

  The India Advantage Difference

At India Advantage, we make a genuine attempt to educate our clients, especially those who are new to the market, by providing them with useful insights and information about derivatives. We encourage them to gain adequate knowledge and acquire skills or techniques necessary for trading derivatives. Our derivatives consultant also offer daily reports on derivative trading strategies, trends and more that eventually helps you in yielding higher returns. We also provide investors with multiple derivatives accounts to match their trading needs and preferences.