A PROJECT SYNOPSIS ON

A STUDY ON DERIVATIVES

(FUTURE & OPTIONS)

with reference to

INDIABULLS SECURITIES LTD

Submitted by

MARUTHI PANDRE
H.T No. 15122367035
Under the guidance of

DR..M RADHIKA

Associate professor

Submitted to Osmania University

In Partial Fulfilment for the requirement for the award of Degree of
Master of Business Administration,

DEPARTMENT OF BUSINESS MANAGEMENT

RAJA BAHADUR VENKATA RAMA REDDY INSTITUTE OF TECHNOLOGY

(Affiliated to Osmania University)
Hanuman Tekdi, Abids, Hyderabad – 500001
(2023-2025)
ABSTRACT

The emergence of the market for derivative products, most notably forwards,
futures and options, can be traced back to the willingness of risk-averse
economic agents to guard themselves against uncertainties arising out of
fluctuations in asset prices. By their very nature, the financial markets are
marked by a very high degree of volatility. Through the use of derivative
products, it is possible to partially or fully transfer price risks by locking-in asset
prices. As instruments of risk management, these generally do not influence the
fluctuations in the underlying asset prices. However, by locking-in asset prices,
derivative products minimize the impact of fluctuations in asset prices on the
profitability and cash flow situation of risk-averse investors. Derivative products
initially emerged as hedging devices against fluctuations in commodity prices,
and commodity-linked derivatives remained the sole form of such products for
almost three hundred years. Financial derivatives came into spotlight in the post-
1970 period due to growing instability in the financial markets. However, since
their emergence, these products have become very popular and by 1990s, they
accounted for about two-thirds of total transactions in derivative products. In
recent years, the market for financial derivatives has grown tremendously in
terms of variety of instruments available, their complexity and also turnover. In
the class of equity derivatives, the world over, futures and options on stock
indices have gained more popularity than on individual stocks, especially among
institutional investors, who are major users of index-linked derivatives. Even
small investors find these useful due to high correlation of the popular indexes
with various portfolios and ease of use.

This project deals mainly with futures and options, the terminologies involved,
difference between them, their eligibility criteria, how are they traded, how
futures and options are used for hedging, settlement process strategies, and the
software's used.

TITLE OF THE PROJECT

A Project on “Currency Derivatives and its Future & Options”.

STATEMENT OF THE PROBLEM

The main problem in the derivatives is we can't able to decide that time and
derivative product which is more risky and return depend upon the time and
product only we can earn more returns with taking more risk. In this following
project I came to know that based upon some valuations and time conditions we
can easily identify that which product is more efficient for earning more returns.
In this research I used only two derivative products they are FUTURES and
OPTIONS. Another one is OPEN INTEREST concept it is very new to market.
This additional work proposes based upon open interest and volume we can tell
the when the market is bullish as well as bearish and identifies that price
movements easily when they are going to rise and when they are coming fall
depends upon price volume changes.

INTRODUCTION

Derivatives are a wide group of financial securities defined on the basis of other
financial securities, i.e., the price of a derivative is dependent on the price of
another security, called the underlying. These underlying securities are usually
shares or bonds, although they can be various other financial products, even
other derivatives. As a quick example, let's consider the derivative called a 'call
option', defined on a common share. The buyer of such a product gets the right to
buy the common share by a future date. But she might not want to do so there's
no obligation to buy it, just the choice, the option. Let's now flesh out some of

the details. The price at which she can buy the underlying is called the strike
price, and the date after which this option expires is called the strike date. In
other words, the buyer of a call option has the right, but not the obligation to take
a long position in the underlying at the strike price on or before the strike date.
Call options are further classified as being European, if this right can only be
exercised on the strike date and American, if it can be exercised any time up and
until the strike date.

Derivatives are amongst the widely traded financial securities in the world.
Turnover in the futures and options markets are usually many times the cash
(underlying) markets. Our treatment of derivatives in this module is somewhat
limited: we provide a short introduction about of the major types of derivatives
traded in the markets and their pricing.
Financial derivatives came into spotlight in the year 1970 period due to growing
instability in the financial markets. However, since their emergence, these
accounted for about two- third of totals transactions in derivatives products. In
recent years, the market for financial derivatives has grown tremendously in
terms of variety of instruments available, there complexity & also turn over. In
the class of equity derivatives Futures & options on stock also turn over. In the

class of equity derivatives, futures & options on stock indicates gained more
popularly than individual stocks.
NEED OF THE STUDY

 1. Risk Management: Understand how derivatives can be used to manage

risk.
 2. Investment Opportunities: Learn how derivatives can be used to
speculate and invest.
 3. Financial Innovation: Study derivatives to understand new financial
products and markets.
 4. Career Advancement: Knowledge of derivatives is essential for careers
in finance, banking, and asset management

SCOPE OF THE STUDY

The scope of the study is limited to "DERIVATIVES" with the special reference
to Indian context and the National stock exchange has been taken as a
representative sample for the study. The study includes futures and options.

My analysis part is limited to selecting the investment option it means that

whether we have to invest cash market or derivatives market.

I have taken only four different organizations from four different industries to
analyse and interpret the results.
Based upon four criteria's only open interest is evaluated for analysing the trend
of market as well as price movement.
The study is not Based on the international perspective of derivatives markets,
which exists in NASDAQ, CBOT etc.

This study mainly covers the area of hedging and speculation. The main aim of
the study is to prove how risks in investing in equity shares can be reduced and
how to make maximum return to the other investment.

OBJECTIVES OF THE STUDY

The objectives for my research are as below

To calculate the risk and return of investment in futures and investment in

options

To identifies the market trend and price movement based upon the open interest
changes

To analyse the role of futures and options in Indian financial system

To understand about the derivatives market.

To know why derivatives is considered safer than cash market.

To construct portfolio and analyses the risk return relationship.

To hedge the most profitable portfolio.

RESEARCH METHODOLOGY

Research Methodology is a systematic procedure of collecting information in

order to analyse and verify a phenomenon, the collection of information is done
in two principle sources. They are as follows

1. Primary Data
2. Secondary Data

Primary Data:

It is the information collected directly without any references. In this study it is

gathered through interviews with concerned officers and staff, either individually
or collectively, sum of the information has been verified or supplemented with
personal observation in trading times and conducting personal interviews with
the concerned officers of INDIABULLS SECURITIES LTD.

Secondary Data:

The secondary data was collected from already published sources such as, NSE
websites, internal records, reference from text books and journal relating to
derivatives. The data collection includes:

a) Collection of required data from NSE and BSE websites.

b) Reference from text books and journals relating to Indian stock market system
and financial derivatives.

LIMITATIONS

Share market is so much volatile and it is difficult to forecast anything about it

whether you trade through online or offline

The time available to conduct the study was only 2 months. It being a wide topic
had a limited time.
CHAPTERIZATION

Chapter 1 – Introduction
1.Definition and types of derivatives
2. History and evolution of derivatives
Chapter 2 – Review of Literature, conceptual frame work
Theoretical Foundations,
Chapter 3 -- Derivative pricing Models,
Risk management and Hedging, Empirical Studies.
Chapter 4 - Research Methodology
Qualitative Research, Quantitative Research, Mixed Methods Research
Chapter 5 – Conclusions and Suggestions
1.Summary of key concepts.
2. Future developments and trends in derivatives