We are showing some questions and answer related to F&O Trading in India.
What is Derivative Trading in Futures and Options?
Derivative trading proceed as like share trading in the cash section (for buy & sell shares), it is another type of trading tool. They are special agreements whose charge gets from a fundamental security. Futures and Options are two categories of derivatives accessible to the India stock markets.
The trader takes appropriate positions in future trading to an index or a stock contract. Throughout the time period of the contract, the price value moves in the favor of trader that mean when rises in case, then you have a buy position and on the other side if falls in case you have a sell position.
The trader should know necessary fundamental things about F&O trading. A trader needs F&O trading accounts for performing major trading with superior Free Option Tips across the main stock exchanges in India. They are the most accepted trading tools worldwide.
To obtain the appropriate buy/sell position on the futures i.e. Index or stock, intelligent trader has to put the definite % of order price already as margin value, that mean if a stock trader buys for the future agreement value of Rs 5 Lakh, they pays just about 10% cash to broker, this money is known as margin money, here it is Rs 50,000. This provides a chance to trade extra with little cash. Both Profit and losses are analyzed every day until the trader sells the bond or it expires.
Margin money is considered every day that means if the condition if the trader doesn't have enough money in his account on any day when the trader is holding on the place, he has to put the margin money to a broker or broker can sell his F&O contract and develop the money. The derivative has an expiry position, traders does not perform to sell until a set expiry date not come, the agreement is terminated and profit or loss of money is shared by you with the broker. Future Trading can be processed on all the indices such as Nifty and Sensex. In index trading, traders need superior index tips such as Nifty Trading Tips, Stock Tips etc. Both are major indices of India. NIFTY Futures are amongst the most traded future agreements in India.
Why should trade in F&O?
In futures trading, investor can influence on trading boundary by receiving buy/sell position more than what you could have settled in cash fragment. Whenever, the risk report of your dealings goes upward. Settlement is made on the regular basis until the agreement terminates. Profits/losses are measured and credited/debited in the investor’s trading account on the closing stages of the day every day. For F&O trading Demat account is not required. All future contact is cash developed. Agreement positions are held by the exchanges until they terminated.
The F&O positions are moving onward to next trading day and can be processed till the termination of the respective agreement and squared off any time throughout the agreement session. This is dissimilar from 'Margin Trading' due to trader has to terminate the position the similar day.
Futures & Options on person Securities
Stock exchanges provide F&O agreements for individual scripts which are preceded in the money Market segment of the Exchange. National Stock Exchange (NSE) provides F&O trading in more than 130 securities predetermined by the SEBI. Therefore the stock exchange explains the characteristics of the future agreement, such as the fundamental security, appropriate market lot, and the maturity date of the agreement.
Why all stocks are not accessible for F&O trading?
F&O agreement of person companies are not accessible for all the firms indexed in stock exchanges. The stocks which fulfill the measure of liquidity and value have been evaluated for futures trading. Or the companies whose shares have high liquidity and value of contract at stock exchanges are appropriate for F&O trading. Stock exchange chooses which company's F&O agreement can be dealt at the exchange.
Future contracts are categorized in two ways:
Daily Mark to Market (MTM) Settlement: - At the end of the trading day the profits/losses are evaluated on a daily basis. MTM set until the open position is terminated.
Final Settlement: - On the termination point of the future agreement; the exchanges point all positions of a CM in the finishing settlement price value and the producing profit / loss are developed in cash.
What is Mark to Market (MTM) in Future Trading?
MTM is the major procedure in F&O trading and extremely little complicated to recognize for conservative stock market traders who trade shares for long periods. On each trading day; the open future agreement are robotically 'marked to market' to the everyday settlement price. This show the profits or losses are evaluated on the difference between the earlier day value and the value of the current day's settlement price. We can say in other words; MTM represents every day the settlement of open futures positions set at the finishing price of the day. The today’s base price is evaluated with the closing price of an earlier day and dissimilarity is cash settled.