INDIAN

OPTIONS
MARKET
By Derivative Trading Academy
 * About Derivative Trading Academy
Derivative Training Academy Pvt. Ltd (An ISO 9001: 2015 Certied Organisation) is one
of the pioneers in Stock markets that brings industry domain experts which believes in
imparting the nest trading education with a real-time interactive environment & LIVE
Trading session. We aims to promote & delivers best quality trading platform for options
all over India.

Hence, we never ever try promote the tips; but perhaps we help the trader to remove
prediction & relying on the tips professionally trained by the best F&O trainers in India. To
have a perfect solution, DTA has designed advanced option trading cours online as well
as ofine, where the new entrants / traders will learn & practice the desired requisite skills
to identify, assess and execute trading opportunities in options. We help the option trader
across India to create, manage and evolve various strategies and produce consistent
prots from Options Trading

* Media Appearance

ECONOMIC And More...

TIMES
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 * What are Derivatives?

A derivative is an instrument whose value is derived from the value of

one or more underlying assets.

The underlying asset may be a

Ÿ Commodity – agri-products, bullion etc

Ÿ Foreign exchange rate
Ÿ Bond, loan
Ÿ Shares
Ÿ Stocks index etc

Simply speaking…. Derivatives are deferred delivery contracts. The

actual trade takes place on a future date and delivery as well as
payment is required to be given on a future date.

Example:

A software company enters into a contract with a Bank to sell

$1,00,000 after 3 months against its receivable.

This is an example of a Forward contract.

Instruments Exchange Traded OTC

Forward

Futures

Options

Swap &
exotic contract

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 * Derivative Volumes: Story of a Mature Market

Globally, in developed markets options trade more than futures.

Also, the number of products which are available there are much
more than what we have here. So, yes in terms of products we may be
lagging but not in terms of thought process. The recent budget laid
emphasis introducing on options on commodities as well. This shows
that the government and the regulators are well aware of the fact that
options is a superior product in terms of risk and return to futures.
Lets not forget the fact that our regulators are one of the most
conservative in the world..

If we look at the journey of derivatives volumes in India it has been

very interesting:

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 The above chart shows average daily cash and derivative market
volumes in India. While cash market volumes have stayed in an
average range of 13k - 16k Crores a day. Derivative market volumes
have jumped from 50k Crores to 250k crores. The ratio of
derivatives volume to cash volumes has moved up from 4 to 15 in last
7 years.

The derivative market in India started with launch of index futures in

June 2000, post which we saw index options and stock options being
launched in June 2001 and July 2001. But all this while it was a small
market averaging 3000k crores a day. But it was after the advent of
stock futures that the average volumes shot up to 10k crores. India’s
trading mindset was already used to the “badla" system so could
align with stock options easily. Stock options till 2008 were 60% of
average daily volumes.

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 But the 2008 debacle explained the hazards of crazy punting or
leveraging excessively via futures. So, as a stumble down in life
makes an individual mature, this tumble made the traders matures
and they moved towards options. Specially, index options which are
75% of market volumes. The large towers in the chart above. One
can clearly see than transition from futures to options.

* Exchange Rules :

Ÿ Lot size : predened for each scrip, with minimum contract value at Rs. 5
lakhs.
Ÿ Expiry : Last Thursday of each month
Ÿ A new series comes into existence on the immediately succeeding day.
Ÿ Tick size is 0.05.
Ÿ Contract Cycle : 3 months. For Nifty options, contracts are available upto 3
years.
Ÿ Daily Settlement price is the last half hour volume weighted price. Final
settlement price is last half hour volume weighted price in cash market.
Ÿ Currently all contracts are cash settled
Ÿ Initial Margin
* Paid to Clearing Corporation as performance guarantee -
oneday look ahead
* Paid by futures trader and option seller,
* NOT paid by option buyer – he only pays option premium
* Calculated using SPAN (Standard Portfolio Analysis of Risk)
* Generally 20% in case of stocks and 15% in case of indices
Ÿ Exposure Margins & Additional Margins are leviable by exchange,
generally at 5% - 6%
Ÿ Mark-to-Market : daily MTM of position

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 Day Buy / Sale Qty LOT MKT Price Closing Price MTM

Monday Buy 10 200 1787 1797 +20,000

Tuesday No Trade 10 200 1797 1792 - 10,000

Wednesday Sale 5 200 1792 1802 +10,000

Open 5 200 1802 1807 +15,000

Thursday No trade 5 200 1807 1827 +20,000

Friday Sale 5 200 1827 1837 +10,000

* What are options?

Options are :

Ÿ Deferred delivery contracts

Ÿ Give the buyer the right

Ÿ Not the obligation

Ÿ To either buy or sell

Ÿ A specied underlying

Ÿ At a set price

Ÿ On or before a specied date

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 *
Ÿ
Basic terminologies:

Call option vs Put option:

Ÿ
Ÿ 1) Call Option - Option to buy
Ÿ 2) Put Option - Option to sell

Option Buyer vs Seller:

1) Option Buyer/holder - has the right but not the obligation

2) Option Writer/Seller - has the obligation but not the right

Option Premium:

1) Upfront Price paid by the buyer to acquire the right

Situation of option strike price vs underlying price:

1) In-the-money - Option with intrinsic value

2) At-the-money - Exercise Price = Market Price ; Has max ‘time value’
3) Out-of-the-money - No intrinsic value, Only time value

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 * Topology of Options:

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 * Call Options Vs Put Options

If You are Delta Gamma Theta Vega

Long Positive Zero Zero Zero

Underlying

Short Negative Zero Zero Zero

Underlying
Long Calls Positive Positive Negative Positive

Short Calls Negative Negative Positive Negative

Long Puts Negative Positive Negative Positive

Short Puts Positive Negative Positive Negative

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 Derivative Trading Academy

In recent years, the trading volume of derivatives has been increased to 75% more as
compared to previous decade. The traders who were trading in Intraday, Investing in
long term equity, commodities, Positional Trading, Swing Trading are now looking to
trade in Option market as a new Ball Game together. Derivative Trading Academy is one
of India’s Leading F&O Institute and has been awarded with some of the nancial giants
& widely recognised by CNBC, Bloomberg, Reuters, SEBI, BSE & NSE leaders.

Incepted in the year 2014 with ofces in Mumbai, Banglore & New Delhi, Derivative
Training Academy Pvt. Ltd (An ISO 9001: 2015 Certied Organisation) is one of the
pioneer name in the eld of Stock markets that brings industry domain experts which
believes in imparting comprehensive training on Option Trading Courses with a real-
time interactive environment & LIVE Trading session. Derivative trading Academy aims to
promote & delivers best quality trading platform for options. However, we never ever try
promote the tips; but perhaps we help the trader to remove prediction & relying on the
tips professionally trained by the best F&O trainers in India. To have a perfect solution,
DTA has designed advanced option trading course, where the traders will learn &
practice the desired requisite skills to identify, assess and execute trading opportunities in
options. We help the option trader across India to create, manage and evolve various
strategies and produce consistent prots from Options Trading.

To know More,
Kindly get in touch with our EC today!

(+91) 976-994-3216
or you can mail us at:
[email protected]

Visit us at : www.derivativetradingacademy.com
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