Derivatives are financial contracts that derive their value from an underlying asset. These could be stocks, indices, commodities, currencies, exchange rates, or the rate of interest. These financial instruments help you make profits by betting on the future value of the underlying asset. So, their value is derived from that of the underlying asset. This is why they are called ‘Derivatives’.
In the Indian markets, Futures and Options are standardised contracts, which can be freely traded on exchanges. These could be employed to meet a variety of needs, Earn money on shares that are lying idle.
Trading in the derivatives market is very similar to trading in the cash segment of the stock markets.
This has three key requisites:
Demat account: This is the account which stores your securities in electronic format. It is unique to every investor and trader.
Trading account: This is the account through which you conduct trades. The account number can be considered your identity in the markets. This makes the trade unique to you. It is linked to the demat account, and thus ensures that YOUR shares go to your demat account.
Margin maintenance: This pre-requisite is unique to derivatives trading. While many in the cash segment too use margins to conduct trades, this is predominantly used in the derivatives segment.
We’d all like our money to grow substantially without risking our original investment amount. Unfortunately, this isn’t possible. Almost all investment involves some degree of risk. What’s important
is that you understand and are comfortable with the risks you’re taking before you choose to invest.
Investment risk is the chance that your money will not perform in the way you want or need it to Investment reward is when your money does at least what you expect it to.
Higher risk often offers the potential for higher rewards, but it also comes with a greater chance of you losing money.
Lower risk normally has a smaller chance of loss, but the growth of your money will usually be less.
Hence, it’s advised to invest only the capital that you can digest to lose.
Our all Share Market Tips services are designed for all types of traders and investors. We request you to kindly consult us in order to know which services are best suitable for your investment strategy.