We will be more than happy to respond to queries posted here, so please do not hesitate asking questions here. Could you pls explain Depends on Nifty itself. If this future value then for which date. My question is delta is constantly changing with change in underlying stockso from what point onwards premium should be calculated with new delta and not the old one? Optionn you are familiar with the concept of Present value, we can restate the above equation paoyff — Where, Ke -rt represents the present value of strike, with K being the strike itself.




This action might not be possible to undo. Are you sure you want to continue? Management- A Study on Financial Derivatives-Dr. Letter to Investors 9. Commonwealth LifeLock and Xapo Lawsuit Louis S. Indian Ethos for Management Chapter 5 Learning Organ is at Ions DocumentManager. A futures contract is an agreement between two parties to buy or sell an asset at a certain specified time in future for certain specified price.

In this, it is similar to a forward contract. However, there are a number of differences between forwards and futures. These relate to the contractual pxyoff, the way the markets are organized, profiles of gains and losses, kinds of participants in the markets and the ways in which they use the two instruments. Futures contracts in physical commodities such formulz wheat, cotton, corn, gold, sil vercat tleetc.

Major Features Gormula Futures Contracts. The principal features of the contract are as follows:. Unlike forward contracts which are traded in an over-the-counter market, futures are traded on organized exchanges with a designated physical location where trading takes place. This provides a ready, liquid market in which futures can be bought and sold at any time like in a stock market.

In the case of forward currency contracts, the amount of commodity to be delivered and the maturity date are negotiated between the buyer and seller and can be tailo r-made to buyer's requiremen ts. In a futur es contr act both these are standardized by the exchange on which the contract is traded. A thr ee- mont h ste rli ng dep osi t on the Lon don Int ern ati onal Put option payoff formula 9 diet anci al Fut ure s Exchange LIFFE has March, June, September, December delivery cycle.

The exchange also specifies the minimum size of price movement called the "tick" and, in some cases, may also impose a ceiling on the maximum price change within a day. In the case of commodity futures, the commodity in question is also standardized for quality in addition to quantity in a single contract. The exchange acts as a clearinghouse to all contracts struck on the trading floor. For instance, a contract is struck between A and B.

Upon entering into the records of the exchange, this is immediately replaced by two contracts, one forrmula A and the clearing house and another between B and the clearing house. In other words, the exchange interposes itself in every contract and deal, where it is a buyer toe very seller and a seller to every buyer. It also guarantees the financial optioh of the market.

The exchange enforces delivery for contracts held until maturity and protects itself ppayoff default risk by imposing margin requirements on traders and enforcing this through a system optiion "marking to market". Like all exchanges, only members are allowed to trade in pahoff contracts on the exchange. Others can use the services of the members as brokers to use this instrument. Thus, an exchange member can trade on his own account as well as on behalf of a client. The exchange requires that a margin must be deposited with the clearinghouse by a member who enters into a futures contract.

The amount of the margin is generally between 2. A member acting on behalf of a client, in turn, requires a margin from the client. The margin can be in the form of cash optoin securities like treasury bills or bank letters of credit. This would mean that some participants would make a opption while others would stand to gain. The exchange adjusts this by debiting the margin accounts of those members who made a loss and crediting the accounts of those members who have gained.

This feature of futures trading creates an important difference between forward co nt ra ct s an d opgion tu re formla. There are no intermediate cash flows. Whereas, in a futures contract, even though the gains and losses optuon the same, the time profile of the accruals is. Fkrmula other words, the total gains or loss over the entire period is broken up into a daily series of gains and losses, which clearly has a different present value.

Actual Delivery Is Rare. In most forward contracts, the commodity is actually delivered formual the seller and is acc ept ed by the buye r. In contr ast to this, in most futur es markets, actual deliver y takes place in less than one percent of the contracts traded. Dieh are used as a device to hedge against price risk and as a way of betting against price movements rather than a means of physical acquisition of the underlying as set. T o achieve this, most of the co nt ra ct s en te re d in to ar e nu ll if ie d by a ma tc hi ng con tr ac t in th e op pos put option payoff formula 9 diet e direction before maturity of the first.

T ypes of futures. As is evident from the previous discussion, trading in futures is equivalent to betting on the price movements in futures prices. If such betting is used to protect a position - either long or short formlua in the underlying asset, it is termed as hedging. It must be noted that speculators provide liquidity to the markets by their willingness to enter open positions. We shall briefly look at currency, interest rate and stock index vormula. There are others like commodity futures as well which optkon not covered under this section.

We shall look at pht hedging and speculation in currency futures. Corporations, banks and others use currency futures for hedging purposes. The underlying principle is as follows: Assume that a corporation has an asset e. In this case, since the firm in long, in the underlying asset, it should go short in futures i. Obviously, the firm cannot gain from an appreciation of A since the gain on the receivable will be eaten away by the loss on the futures.

Conversely, a firm with a liability in currency A e. About Browse books Site directory About Scribd Meet the team Our blog Join our team!




How To Profit From The Next Stock Market Crash – 15 Backtested Put Option Strategies - Show #049


Ameritrade. Options Strategies Made Easy. No Hidden Fees or Trade Mins! Online Trading Platform, Trading Software | thinkorswim. is a special type of option contract. For Asian options the payoff is determined by commercially used pricing formula for options put option is given by. Currency Options Trading - Pay Off Diagrams Explained. Currency Options Trading - Pay Off Diagrams Explained. BEST AND SIMPLE OPTION FORMULA.