hi,
some more queries----
*my broker charges 25% margin irrespective of whether i am dealing in stock options or stock futures, is that the norm? i do not have anybody to guide me amongst my family or friends as they stay out of the stock market,but from reading books i gather that margin for futures is significantly less than that for options,so is my broker charging too much margin?
*i have bought ITC NOV futures at 189 rs,so what happens in OCT expiry? do i have to carry forward my position by telling the broker or will it get done automatically?
* what does carry forward position in futures mean? suppose at nov expiry ITC futures is trading at premium of 6 rupees---does it mean that i now have to pay 6 rupees /share extra to keep my position intact? what if it is trading at a discount of 6 rupees? do i pocket it?
*in the same vein, what is meant by negligible cost of carry?
*to square off my position i can SEll nov ITC futures anytime i want,right?
*Experts in F&O,please tell me what you think of owning futures instead of stock--according to my thinking---
#if i buy ITC1125 shares at 190 it will cost me approx 2 lacs14 thousand Rs,with the advantage fo dividends and 0% long term capital appreciation tax but with the risk of capital erosion in case of a market fall.
#if i buy ITC futures at190,it will cost me 50,000 Rs (Margin that i have actually paid) . If ITC goes up , i get the profit on 1125 shares while i have actually paid capital on only 250 shares (250 X 190 = 47,500).
#if ITC goes down , i need to have the capital to take care of the mark to market requirements---ideally it should be equal to the exposure ie 2 lacs but practically even if the market nose dives it is difficult to imagine ITC losing 50% of its share value--so 75,000-100,000 rs should be enough to keep in reserve in short term fixed deposits and another 1 lac in 3-5 yr FD which can be broken if required.
*what is the effect on futures in case of a large dividend payout?
*do you think keeping futures position intact for months or years in lieu of actually holding the shares is wise given the loss of dividends and 0% long term capital appreciation tax and need to carry forward position at each expiry with resulting increased brokerage costs.
* can brokerage be reduced by taking positions every alternate month--for ex: in oct take nov futures and in the end of nov take jan futures and so on?does it make a difference ?
* my broker asks me to pay margin even on a call option sold against the futures (covered call),inspite of my showing him the book by ashwani gujral(how to make money trading derivatives) and R Mahajan(F&O--introduction to equity derivatives) which state explicitly that no margin is required to be paid on the sale of a call option in case of covered call( in which either shares or futures are owned ). I asked indiabulls but they also said the same---do you know a broker who does not ask for margin on a covered call? what do i do?
------hoping to get some enlightenment from experts
thanks