Bse futures and options trading
Is there a theoretical way of pricing the Index Futures? The theoretical way of pricing any Future is to factor in the current price and holding costs or cost of carry. Theoretically, the cost of carry is the sum of all costs incurred bse futures and options trading a similar position is taken www best trade development bank of mongolia shareholders cash market and carried to maturity of the futures contract less any revenue which may result in this period.
The costs typically include interest in case of financial futures also insurance and storage costs in case of commodity futures. The revenue may be dividends in the case of Index Futures. Apart from the theoretical value, the actual value may vary depending on demand and supply of the underlying at present and expectations about the future. These factors play a much more important role in commodities, especially perishable commodities, than in financial futures. In general, the Futures price is greater than the spot price.
In special cases, when cost of carry is negative, the Futures price may be lower than the spot prices. The profit or loss would be equal to 15 times the difference in the two rates. What is the contract multiplier? What is the ticker symbol and trading hours? What is the maturity of the Futures contract? What is the tick size? How is the final settlement price determined? What is margin money? Are there different type of margins? What bse futures and options trading the objective of the Initial Margin?
What is Variation or Mark-to-Market Margin? What is the concept bse futures and options trading Basis? What are the profits and losses in case of a Futures position? What happens to the profit or loss due to daily settlement?
How does the Initial Margin affect the above profit or loss? What is bse futures and options trading spread position? Contracted Price of Futures.
What are the important terminologies in Options? What are Call Options? What are Put Options? How are options different from futures? What are Covered and Naked Calls?
What is the Intrinsic Value of an option? Explain Time Value with reference to Options? What are the factors that affect the value of an option bse futures and options trading What are different pricing models for options? Who decides on the premium paid on options and how is it calculated? What are Option Greeks? What is an Option Calculator? Who are the likely players in the Options Market? Why should I invest in options? What do options offer me? How can I use options?
What are the risks for an Options buyer? What are the risks for an Options writer? How can an option writer take care of his risk? Who can write options in the Indian Derivatives market?
What are Stock Index Options? What are the uses of Index Options? Who would use Index Options? What are Options on individual stocks? Which are the stocks on which options are available? What is the market lot size of different stock option contracts? How will introduction of options in specific stocks benefit an investor? Whether the holders of equity options contracts have all the rights that the owners of equity shares have?
What is Over the Counter Options? Where can I trade in Options and Futures contracts? What will be the bse futures and options trading margining system in the case of Options and futures? How will the assignment of options take place? Buys the right to buy the underlying asset at the specified price. Buys the right to sell underlying asset at the specified price.
Has the obligation to sell the underlying asset to the option holder at the specified price. Bse futures and options trading the obligation to bse futures and options trading the underlying asset from the option holder at the specified price.
A portfolio based margining model is adopted by BSE which takes an integrated view of the risk involved in the portfolio of each individual client comprising of his positions in all the derivatives contract traded bse futures and options trading Derivatives Segment.
The parameters for such a model are as follows: The scenarios to be used for this purpose are: The price scan range shall be linked to liquidity, measured in terms of impact cost for an order size of Rs.
This is in addition to the requirement of scaling up for the look-ahead period i. However, the Derivatives Segment may specify a higher price scan range than the said 3. The computation of risk arrays for various stock future contracts is done only at discrete time points each day and the latest available risk arrays is applied to the portfolios on a real time basis.
The risk arrays is updated 5 times in a day taking the closing price of the previous day at the start of trading and taking the last available traded prices at This would be in addition to the look ahead period.
Bse futures and options trading calendar-spread margin is charged in addition to worst-scenario bse futures and options trading of the portfolio. The margin on calendar spread is calculated on the basis of delta of the portfolio consisting of futures and option contracts in bse futures and options trading month. Thus, a portfolio consisting of a near month contract with a delta of and a far month contract with a delta of — will attract a spread charge equal to the spread charge for a portfolio, which is long near month futures and short far month futures.
The spread charge is specified as 0. While calculating the spread charge, the last available closing price of the far month contract is used to determine the spread charge.
For the purpose of computing 1. This value shall be bse futures and options trading for a month and shall be re-calculated at the end of the month by once again taking the price bse futures and options trading on a rolling basis for the past six months. However, BSE may specify higher exposure margin for better risk management. As the near month contract approaches expiry, the spread shall be treated as a naked position in the far month contract three days prior to the expiry of the near month contract.
However, for payment of mark-to-market margin to BSE, the same are netted out at the Member level. The daily closing price of the stock futures contract for mark-to-market settlement is arrived at using the following algorithm: Weighted average price of all the trades in last half an hour of the continuous trading session. If there are no trades during the last half an hour, then the theoretical price is taken as the official closing price.
The theoretical price is arrived at using following algorithm: Final Settlement All open positions in single stock futures on expiry day will result in delivery obligations.
The risk management framework of the equity cash segment shall be applicable to all such delivery based derivatives positions w. The settlement of bse futures and options trading net outstanding delivery based derivatives positions would be settled separately as per the settlement calendar issued for the said Delivery Based Stock Derivatives Segment and as per the delivery mechanism prevalent in the cash segment.
Position Limits a Market Level A market wide limit on the open position in terms of the number of underlying stock on stock options and futures contract of a particular underlying stock is: The limit would be applicable on all open positions in all futures and option contracts on a particular underlying stock. The Market Wide limit is enforced in the following manner: Though the action is taken only at the end of the day, the real time information about the market wide-open interest as a percentage of the market wide position limits is disclosed to the market participants.
At the end of each day during which the ban on fresh positions is in force for any scrip, BSE tests whether any member or client has increased his existing positions, or has created a new position in that scrip. The penalty is recovered along with the Mark-to-Market on the next day. Once a Member reaches the position limit in a particular underlying, he is permitted to take only offsetting positions which results in lowering the open position of the member in derivative contracts on that underlying.
The position limit at trading Member level is computed on a gross basis across all clients of the trading Member. The position is applicable bse futures and options trading the combined positions in all derivatives contracts bse futures and options trading an underlying stock.
Members are advised to disclose the position of the clients in case the client crosses the aforesaid limits. Members are also advised to inform their clients about the disclosure requirement to BSE on part of the client.
The gross open position across all bse futures and options trading contracts on a particular underlying stock of a sub-account of a FII should not exceed the higher of: