Well it has help a lot
but will u please help me step wise
what are futures and options for and which is better one for making money, not for delivery purpose?
for futures there are 3 contract dates, which is the best one to choose?
theres strike price, what is that for and there is -1 mentioned , why is it so?
there are two validity option GFD and IOC, and what are they, and what are they used for?
what is limit and market and trigger price?
and for options there are two option types CA and PA. I guess it call and put. which one to choose for which purpose.
there are strike price mentioned having a specific lower and upper band, which one to choose for what purpose
rest are the same fields as futures
Well i know i have asked a lot of question but i think answering all of these will not only serve my problems but also guide many more novice like me
so please, if you could, kindly help me
regards
abhishek jain
manujain1574@**********
Answering you qs one by one:
Futures and options are for trading and nothing more than that. If you believe that future price of, say, company XYZ will rise in the comming 2-3 months, you buy 2M or 3M call option in XYZ and if you believe that price will fall, you sell put option. Futures are also same. From the practical point of view, you can exercise an option any time within the expiry date, whereas futures are to be exercised only on the expiry date.
There is no such factor like one is better for making money while the other is not.
The time horizon you'll choose will depend on the time span you're studing the underlying asset upon. If all your analysis pertain to one month rise/fall in the value of the underlying asset you'll buy/sell 1M options and so on. But as a beginner, it's always good to focus on the short term. If afterwards, before the expiry date, you feel that you can afford to hold on to your investment with the hope of greater returns. you can always rollover your contract.
Strike price is simply the price at which you, being the buyer of the call option,wish to buy the asset. Say, Infosys which is trading today at Rs 1810 has 3 call options, @ 1760, 1810, 1860 for 1M, 2M and 3M. And you buy 50 contracts of Infy at 1810 strike price @ 150 premium for 2M. If now, after 15 days, Infy rises to Rs 2000, and you want to ecercise the call, you'll gain Rs (2000-1810-150)*100*50 = Rs 2,00,000. And suppose you want to wait till the expiry of the option in the hope that the price will burgeon further. But it plummets down. Then you definitely will let the contract lapsein which case you'll loose the premium paid on the contract.
When u r placing contracts, your call option will always be matched with a put option. So you have to give it some maximum waiting time or queing time before getting lapsed. If you choose the GFD option, it means Good for the Day which implies that your passive contract will be in the queue for the whole day and as soon as it gets a match it'll transform itself into an active contract. On the other hand, IOC means if the match is not found then and there, it'll get lapsed immediately.
Market price: You choose to buy the contract outright at the price prevalent in the market.
Limit price: Suppose you keep Rs X as the limit price, the contract will be bought/sold if the trading price is below/above Rs X.
Trigger: Say you put a trigger of Rs Y on a security. It means, your order will get triggered to the exchange once the security trades at the price Y.
Hope this clears your doubts.
