FAQ and Online Trading Videos
What are the key advantages of participating in a depository?
The key advantages are:
- You tend to eliminate the risk which is usually associated with physical securities such as theft, fake securities, damages..etc.
- One can transfer the securities immediately.
- Stamp Duty is not applicable on securities transfer.
- Paperwork gets reduced greatly as everything gets updated online.
- When there is a change in the address recorded with DP the same gets updated with all the companies where the investor holds the securities
- Transaction cost also gets reduced.
- You can nominate.
- Even transmission is also done by depository participant thereby correspondence with companies is eliminated.
- All in single account where it is investments in equity, government securities and debt instrument
- Share credits get automatically added to the Demat account
What are the facilities one can enjoy in a DP account?
Facilities in a DP account are the following:
- Dematerialisation which means conversion of physical share certificates into electronic / online form
- Rematerialisation which means conversion of electronic demat from to physical share certificates
- It helps in repurchase or redemption of mutual funds units
- It settles the trades through online process
- It facilitates the pledging or hypothecation of dematerialized securities
- In public issues it enables electronic credit of secutities
- Non-cash benefits such as bonus from securities are automatically credited
- One can also freeze a demat account so that the debits can be stopped
- Nomination is possible
- Facilities related to change of address is possible with utmost ease
- Facilities such as stock lending, borrowing options, debt instrument holding ..etc
Is there any minimum prescribed balance of securities to hold in my AliceBlue demat account?
As such there is no prescribed balance of securities one can hold. You may even have zero securities in your account.
If I have to change the signature, what is the procedure with AliceBlue?
A request in writing stating the same has to be submitted to us. Your signature has to be attested by your banker in whose bank the dividend is credited
A single account for holding my and my spouse’s shares permitted?
It is not permitted. If the shares are in your name you can hold but if the shares have joint ownership which can be in your and spouse name is also not permitted in that case two different accounts only have to be opened.
If I have physical share certificates with different sequence of names of me and my spouce what should be done in such case?
In such cases you can open only one account with your name and your spouse name as the account holder and then you may apply for demateralization.you may prefer to change the order of ownership preference you may fill an additional form called “Transposition cum Demat” which will needful.
Can I authorize someone to operate my account on my behalf as power of attorney?
Yes it is possible. You can authorize someone to operate your account on your behalf through a power of attorney submitted to us. And at anytime you may wish to gain back the control you can give your request in writing for the same.
Is it compulsory to give my bank account details during demat account opening?
Yes it is mandatory to share your bank details. And moreover your bank account number will be mentioned on the interest or dividend warrant you are entitled to receive – in this way it helps.
What if I have to change the details of my bank account?
Yes it is possible. You can give us a request with the bank account details you desire in the requested format and same will be updated in the DP.
What does “Standing Instruction” mean and how it is helpful for me?
Just like in any bank for the amount to get credited we have to give a paying slip along with cash / cheque, similarly in case of buying shares we gave to give “receipt in “ request slip. For the convenience of investors if “Standing Instruction”option is opted the investors need not fill in the receipt every single time while buying shares.
Is it possible to operate my joint account on “either or survivor” basis?
No it is not possible with demat account. All instructions in a joint account has to be passed jointly. It is unlike a bank account where this is possible.
Is it possible to add or delete account holders or change ownership preference?
A demat account does not allow you to do so. If you may prefer you can open a new account and transfer the shares to the new account and subsequently close the old account.
If my address gets changed should I update to all the companies of which I hold shares?
You may not have to inform all the companies you just have to inform your DP who will take care of the rest. The address gets automatically updated with all the companies you hold shares.
Can I make use of the nomination facility?
Nomination facility can be used only by individuals holding account singly or jointly. Non-individuals like corporate, partnership firm ..etc cannot nominate
Can Joint account holders nominate?
Yes they can. In case of the death of one holder the ownership is transferred to the surviving partner. When all holders are dead it is transferred to the nominee in the account.
Can a NRI nominate his demat account?
Yes its possible. NRI can nominate his account only directly, his / her power of attorney do not have the power to nominate on behalf of the NRI.
Is it possible for a minor to nominate for this demat account?
No it is not possible.
Who is eligible to be a nominee?
A nominee has to be an individual. It cannot be a non-individual like partnership firm, karta, power of attorney etc..
Is it possible for a minor to be a nominee?
Yes its possible. A minor can be a nominee in such cases the guardian of the minor has to sign on behalf of the minor and the details of the minor and the guardian both have to be submitted to the DP .
Is it possible to have more than one nominee?
No its not possible. Only one nominee is allowed per account.
Is it possible to make separate nomination for every security held in a depository account?
No its not possible. Nomination can be made only account wise and definitely not on security wise.
Is it possible for a NRI to be a nominee?
Yes it possible for a NRI to be a nominee but it will as per the regulations in effect as per the exchange norms.
Can you tell me the procedure for nomination?
The procedure to nominate is in two simple steps :
- Filling of nomination form with nominee details.
- The nominee has to sign the form and share the photo & contact details. In case of minor, guardian details have to be additionally submitted.
Can I change a nominee?
Yes you can change a nominee by filling the nomination form with a request stating the change with the current nominee details submitted.
When does transmission happen in demat accounts?
If a holder is deceased his shares are transferred to the living holder / nominee by submitting relevant documents this process of transmission is really very simple and easy with DP.
When an account holder is deceased, how can the nominee initiate the transmission process to his name?
In case of death of the account holder, the nominee has to submit documents like transmission form, notarized copy of death certificate and an affidavit as per the requested format. After careful scrutiny the DP will initiate the transmission..
Is it possible to have an account with no nomination and what would happen to the account after the account holder is deceased?
Yes its possible that account holder may not mention any nominee. But the death of such account holder it will be transferred to the legal heir as decided by the court of law. In case of shares worth less than 5 lacs with relevant document submission like letter of surety, indemnity, affidavits and no objection certificate.
Can you brief the procedure for transmission in case of Joint Accounts?
When the surviving account holder submits the transmission form and a notorised copy of the deceased account holder he can claim the same. You have to make sure the surviving holder has his / her name mentioned in the same sequence as mentioned in the account.
What is the meaning of dematerialization?
Dematerialization is the process in which the physical share certificates are converted into electronic form which can be done by submitting a Demat Request Form to the DP with all the requested details filled.
Is it possible to dematerialize any share certificate?
You will be allowed to dematerialize only those shares which are registered in your name and the listed securities admitted for dematerialization at CSDL.
Precautionary measures to be taken while defacing a share certitificate?
It has to be dematerialized before its defaced therefore taking due care is necessary with the DP before doing so.
How much time does it take to dematerialize?
It usually take 30 days for dematerialization process to complete..
How to demat shares with Premarital or maiden names?
If you may prefer so then you will have to submit true / original marriage certificate along with the Demat Request Form with new specimen signature.
What are the different types of securities available for dematerialization?
The different types are as follows :
- Shares, bonds debentures, debenture stock, scrips, or other marketable securities of similar nature of any incorporated company or body corporate including underlying shares of ADRs and GDRs.
- Units of mutual funds, certificate of deposit, rights under collective investment schemes and venture capital funds, commercial paper, securitised debt, money market instruments and unlisted securities are the securities available for dematerialisation.
Is it possible to dematerialize my shares which are pledge in bank who is also a DP?
Yes its possible to dematerialize your shares with the permission of your banker.
Is it possible to dematerialize odd lot of shares?
Yes its possible to dematerialize odd lot of shares.
What deoes Rematerialization mean?
Rematerialization is the process in which the dematerialized shares in electronic format are converted back to physical form which happens with the help of a Remat Request Form (RRF) filled and duly signed by the account holder.
What do these terms mean “ Market Trades” and “ Off Market Trades”?
- “Market Trades” are those trades where in the trades have taken place with the involvement of a clearing corporation. These type of trades are done by stock brokers on a stock exchange.
- “Off Market Trades” are those trades which are done between the two parties directly without the involvement of the clearing corporation.
in either cases same delivery instruction slip is used.
What type of settlements are required on the delivery instruction slip?
It is always occupied by the market type and the settlement no. You just got to mention the appropriate settlement details as requested in the contract note given by the broker
How would I be getting my cash entitlements in the form of dividends and interests to my account?
All the companies of which you are a share holder do hold the details of your bank account which is as per your demat account. And all the cash benefits are transferred to your account directly and automatically whenever such cases arise.
Then how my bonus shares or other non-cash entitlement benefits reach me?
All the non-cash benefits are passed to your CDSL depository account directly whenever such benefits are to be transferred to you.
Who will an investor confirm that the bonus / rights entitlements are credited to his account?
The issuer R&T agent who issues bonus / right entitlements will send an allotment advice to the investor and the DP will share a transaction statement carrying the same. The investor can compare both and confirm.
How to freeze my account?
Yes it is possible to freeze the account against any further debits. And no further debits will be permitted till it is frozen. Only after a request letter is given it will be unfrozen.
Does it become necessary to have a depository account if I apply for shares in Rights Issue / IPO?
It is not necessary to have a depository account in case if you applying for shares in Rights Issue / IPO. But however it is highly recommended through demat account which is very safe and fast and you can avoid the losses caused due to physical damages, bad deliveries, fake, theft.. etc
Is it possible to have the other securities in my same demat account?
Yes it is possible to have other securities in the same demat account.
Is it possible to buy and sell shares through AliceBlue demat?
Yes it is possible to buy and sell shares through AliceBlue in the most easy way. And we welcome you to do so.
Is it possible to dematerialize all my securities through the same account?
Yes its possible to dematerialize all your securities through the same account provided the account holder details are the same.
Why do we invest in stock market?
- Basically earning and saving is insufficient in today’s world. We have to ensure for enough funds to be arrange for the future development. Expansion of your business in today’s price increasing world will eats into the estimation of your money. To compensate loss through inflation, we contribute in stock market to gain extra amount. The share trading system is one such venture fundament but easy to earn extra money.
- Earlier in 1800’s, stockbrokers do the direct exchanges of stocks under the Banyan trees. As the quantity of the brokers was expanded, they just had no real option they just migrating from one place to another. At long last in 1854, they moved to Dalal Street, which was the oldest stock trade in Asia – Currently we naming it as Bombay Stock Exchange (BSE). Also, this is the India’s first stock exchange and since it has played a vital part in Indian stock market.
- In thee year 1993, the National Stock Exchange or NSE was established. Within a couple of years, exchanging on both the trades moved from an open outcry system to a computerized trading environment.Once you begin, you will understand that the fundamental in investments and it is not too complicated.
What is share market?
A Share Market which is like a Stock Market. The key contrast is that a stock market offers you some assistance with financial purposes like securities, bonds, mutual funds, etc. A Share market just permits exchanging/trading of shares. A Share Market is a place where the shares are either issued or exchange.
- Stock Exchange is the fundamental stage that gives the facilities used to trade the company stocks and other mutual funds or bond which is related to company. Either you can buy or sell the stock only when it is listed on an exchange. India’s top stock exchanges are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). That is the place where the stock buyers and sellers can meet.
- THERE ARE TWO KINDS OF SHARE MARKETS – PRIMARY AND SECONDARY MARKETS.
- Primary Market: Here the company gets register to issue the share amount and raise moneyof each share. This is additionally called getting listed in a stock exchange. A firm enters in primary markets is to raise the capital amount. For the first time the company selling the shares then, it is called an Initial Public Offering (IPO).
- Secondary Market: Once new securities have been sold in the primary market, these shares are traded in the secondary market. This is a chance for investors to exit his/her investment and he/she can sell the shares for their profit.Secondary market transactions are referred to trades where one investor(buyer) purchases shares from another investor (seller) at the overall market price or at whatever the price, two gatherings concur upon. Formally, investors direct such transactions by utilizing a broker who does the transactions for them.
How to buy shares in share market?
- Initially, you have to open a trading account and a demat account. These accounts will be connected to your bank account for the smooth exchange of cash as well as shares.
- Bonds: Companies need money to buy/ do some projects. They will pay back you by the money earned through the task. They are using bonds to raising the funds. If the company borrows the amount from the bank means it is loan. Correspondingly, when a company gets from investors in return for convenient instalments of interest, it is known as a bond. Thus, a bond is a method for lending the money from others (investment). There is lots of benefit when you invest in bond, it will demonstrate the face value of the measure of money being borrowed by the company, the loan amount that the borrower (Company) needs to pay, and the due date for paying the money back called as the maturity date.
Secondary Market: In return for the cash, companies issue shares. Owning a share is much the same as holding a part of the company (i.e)., you also a one of investors in the company. These shares are then traded in the share market. If the project gets completed you will get a part of share from the profit.Shares are in this manner, a declaration of responsibility for company. In this way, as a stockholder, your share benefits the company. As the company continues improving, your stocks will increment in quality.
- Mutual Funds: These are investment that permits you to in an indirect way put invest into stocks or bonds. Each mutual fund plan issues units, which have a certain value quite related to share. When you contribute, you consequently turn into a unit-holder. At the point when the instruments that the MF plans invest into profit, as a unit-holder you also get your share.
- Derivatives: The value of shares keeps unpredictable then it is difficult to fix a particular price. Here the derivatives instruments that help you trade in the today’s price for the future purpose. Simply mention in an agreement to either buy or sell a share or other instrument at a certain price which was fixed earlier.
What does the SEBI (Securities and Exchange Board of India) do?
The Security and Exchange Board of India (SEBI) is ordered to supervise the primary and secondary markets in India. SEBI has the obligation of both development and regulation of the company markets. It routinely turns out with far reaching regulatory measures for aiming the end financial benefits for company in securities.
Its basic objectives are:
- Protecting the interests of investors in stocks
- Improvement the stock market by advertising
- stock market regulating
How are derivative contracts linked to stock prices?
Suppose assume you buy a Futures contract of Microsoft shares at Rs 2,000, the stock cost of the IT company right now in the spot market. The agreement is slated to lapse after a month. As of now, the stock is trading at Rs 2,500. (i.e.) You make a benefit of Rs. 500 for each share. You are getting the stocks at cheaper rates. If the price is unchanged, you have gotten nothing. Similarly, if the stock price fell, you would have lost the same. As we see everything is depends on the underlying asset.
What are the pre-requisites to invest?
This has three key necessities for pre-requisites to investing:
- Demat account: It is the unique account for every investor and trader. And this is the account which stores your securities in electronic configuration methods. Thus, no one can access your account without your permission.
- Trading account: Here we conduct trades by this account. The account number can be viewed as your identity in the trading sectors. It is connected to the demat account, and in this manner guarantees that your shares go to your demat account.
- Margin maintenance: This pre-requisites trading. While large number of money uses margins to conduct traders, this is transcendently used in derivatives segment. Margins are act as a risk containment measure for the exchanges and serve to preserve the integrity of the market.
- You are required to deposit initial margin at very beginning. The amount you need to deposit is chosen by the stock exchange. This initial margin is balanced daily by relying available market value of your open positions.
- The exposure margin is used to control unpredictability in the derived markets.
- Besides the initial and exposure margin, you have additionally needed to maintain the Mark-to-Market (MTM) margin. This covers the daily differences between the price of the contract and its closing price on the day of purchase. By this way, the MTM margin differs in day by day.
What are futures contracts?
A future contract is an assertion between two parties a buyer and a seller. The previous agrees the purchase from the last, a fixed number of shares or a index at a particular time in future at a pre-determined price. These will be decided at the time of transactions. As future contracts are standardized as far as expiry dates and contract sizes, they can be traded on exchanges. A buyer may not know the identity of the seller and the vice versa. Further, every contract is ensured by the stock exchange. Future contracts are accessible on various kinds of assets such as stocks, indices, commodities, currency pairs, et cetera.
What are index futures?
A stock list is used to view the changes happened in the price of a group stocks over a certain timeframe. It is developed by selecting the stocks of similar companies. Some files represent to a certain segment or the general market thus helps the value of company. Future contracts are likewise accessible on these lists. Here are a few elements of index futures:
- Contract size: Similar to stock future, these contracts are additionally managed in lots of parts. In any case, how could that be the point at which the index is basically a non-physical number? No, you don’t need to buy futures of the stocks fitting in with the index. Rather, stock indices points in the estimation of the index are changed over into rupees.
- Expiry: A open position in index futures can be settled by directing a opposing exchange prior to the day of expiry.
- Duration: As on account of stock futures, index futures too have three contract arrangement open for trading at anytime – the near month (1 month), middle month (2 months) and far-month (3 months) index futures contracts.
What are futures contracts pricing?
Futures are derivative products whose quality depends to a great extent on the price of the fundamental stocks or indices. On the other hand, the pricing is not direct. There remains a difference between the price of the fundamental models in the trade and out the derivative segment. This distinction can be comprehended through two simple pricing models for futures contracts. These will permit you to assess how the pricing of a stock future or index futures contract may carry on. These are:
- The Cost of Carry Model
- The Expectancy Model
What is basis?
A difference between the futures price and the spot price is known as the basis. On the off chance that the future price of an asset is trading higher than its spot value, then the basis for the asset is in negative stage. That is, the markets are relied upon to the rise in the asset value in future. Otherwise, if the spot price of the asset is higher than its future price, the basis for the asset is in positive stage. That is, is indicative of a bear run on the market in the future.
What are options?
It is a kind of security that can be buy or sell at a predefined price within a predetermined time, in exchange for a non-refundable forthright deposit. An options contract offers the buyer the privilege to buy, not the commitment to buy at the predetermined price. Options are a kind of derivative product. The right to sell a security is known as a ‘Put Option’, and the right to buy is known as the ‘Call Option’. The usage of the options is as follows:
- Leverage: Options offer you profiting from some changes in offer prices without putting down the maximum of the share.
- Hedging: Similarly they can be used to protect yourself from changes in the price of a share and giving you a chance to buy or sell the shares at a pre-decided price. Generally as future contracts reduces the risks for buyers by setting a pre-decided future price for an underlying asset, Option contracts do the same and then, without the commitment to buy that exists in a future contract. The seller of an option contract is known as the ‘options writer’. There is no physical exchange of reports or documents in options contract.
IMPORTANT TERMS IN OPTIONS CONTRACTS:
STRIKE PRICE:It is also known as “exercise price”. The price at which a particular derivative contract can be exercised. Strike price is used to portray stock and index options, in which strike prices are settled in the contract. For call options, the strike price is the place the where the security can be purchased, while for put options the strike price is the price at which shares can be sold.
STRIKE PRICE INTERVALS: These are the diverse in strike prices at which an options contract can be exchanged. These are controlled by the exchange on which the assets are traded. There are regularly no less than 11 strike prices declare for each kind of option in a given month – 5 prices over the spot price, 5 prices beneath the spot price and one price proportional to the spot price.
For option contracts the following strike parameters are applicable on all individual securities in NSE Derivative segment:
The Strike price would be:
Closing Price Strike Price
Interval Number of Strikes Provided
In the price-
On the price- Out of the price Number of additional strikes which
may be enabled in the day in
Less than or equal to Rs.50 2.5 5-1-5 5
> Rs.50 to = Rs.100 5 5-1-5 5
> Rs.100 to = Rs.250 10 5-1-5 5
> Rs.250 to = Rs.500 20 5-1-5 5
> Rs.500 to = Rs.1000 20 10-1-10 10
> Rs.1000 50 10-1-10 10
STRIKE PRICE INTERVALS FOR NIFTY INDEX*
The quantity of contracts provided in options on index depends on the range in earlier day’s end closing value of the underlying index and applicable according to the accompanying table:
Index Level Strike Interval Scheme of Strike to be introduced
upto 2000 50 4-1-4
>2001 upto 4000 100 6-1-6
>4001 upto 6000 100 6-1-6
>6000 100 7-1-7
EXPIRATION DATE: A future date is on or before which the options contract can be expired. Options contracts have three different durations as we mentioned earlier:
- Near-month (1 month)
- Middle-Month (2 months)
- Far-Month (3 months)
*Please note that long terms options are available for Nifty index. Futures & Options contracts typically expire on the last Thursday; if it is holiday then it will take the previous business day as the working day.
AMERICAN AND EUROPEAN OPTIONS:
The expressions in terms of “American” and “European” refers to the sort of underlying asset in a options contract and when it can be executed/expires. ‘American options’ are Options that can be executed whenever at the time before their close date. ‘European options’ are Options that must be executed on the expiration date.
Indian market follows only the European market.
LOT SIZE: Lot size is a fixed number of units of the underlying asset that frame a portion of a single F&O contract. The standard lot size is distinctive for every stock and is chosen by the exchange on which the stock is traded. E.g. Reliance Industries options contracts have a great lot size of 250 shares for each contract.
OPEN INTEREST: Open Interest refers to the aggregate number of extraordinary positions on a specific options contract over all members in the market at any given purpose of time. Open Interest becomes the nil past of the expired date for a specific contract. For example: In the event that trader A buys 100 Nifty options from trader B where, both of them A and B are entering the in the market surprisingly for the very first time, the open interest would be 100 futures or two contract. The following day, Trader A offers his/her contract to Trader C. This does not change the open interest, as a decrease in A’s open position is balanced by an increment in C’s open position for this specific asset. Now, if A buys 100 more Nifty Futures from another trader D, the open interest for the Nifty Futures contract would get to be 200 futures or 4 contracts.
TYPES OF OPTION: As we discussed earlier, options are two types call option and put option.
CALL OPTION: A call option, basically named a “call”, is a financial contract between two gatherings, the buyer and the seller of this sort of option. The buyer of the call option has the privilege, however not the commitment, to buy a number of a specific product or financial related instrument (the underlying) from the seller of the option at a certain time say, the close date at a certain price (the strike price). The seller is committed to sell the product (commodity) or financial related instrument to the buyer if the buyer wants to buy. The buyer pays an money (premium) for this right.
PUT OPTION: The Put Option gives the holder the privilege to sell a specific asset at the strike cost at whatever time before it expires for a premium paid in advance. Since you can sell a stock at any given purpose of time, if the spot price of a stock falls amid the contract period, the holder must protected from this fall in price. This clarifies why put options turn out to be more important when the price of the basic stock falls. Also, if the price of the stock rises amid the contract period, the seller just loses the premium pay and does not endure lost the whole price of the asset. Put options are curtailed as “P” in market criteria.
EXAMPLES FOR THE OPTIONS CONTRACTS: There is a contract in which, Rajesh has the rights to buy one lot of 100 Infosys shares at Rs 3000 for each share at whatever time in the middle of now and the month of May. He paid a premium of Rs 250 for every share. He therefore pays an aggregate amount of Rs 25,000 to appreciate this privilege to share. Assume the share price of Infosys ascends over Rs 3,000 to Rs 3200, Rajesh can consider practicing the option and buying at Rs 3,000 for every share. He would be sparing Rs 200 for each share; this can be viewed as a tentative profit. Notwithstanding, despite everything he makes a notional net loss of Rs 50 for every share once you mull over the premium sum. Consequently, Rajesh may decide to really exercise the option once the share value crosses over more than Rs 3,250. Else, he can decide to let the option expire without being worked out. Rajesh trusts that the shares of Company X are presently overrated and wagers on them falling in the following couple of months. Since he needs to secure his position, he takes a put option on the shares of Company X. STOCK X Month Price Premium
February (Current month) Rs 1040 Spot NA
May Rs 1050 Put Rs 10
May Rs 1070 Put Rs 30 Rajesh buys 1000 shares of Company X Put at a strike price of 1070 and pays Rs 30 for each share as premium. His aggregate premium paid is Rs 30,000. In the event that the spot price for Company X falls underneath the ‘Put option’ Rajesh brought Rs 1020; Rajesh can protect his cost by deciding to share the put option. He will make Rs 50 for each share (Rs 1070 short Rs 1020) on the exchange, making a net profit of Rs 20,000.
Then again, if the spot price for Company X rises higher than the Put Option, say Rs 1080; he would be at a loss on the off chance that he chose to exercise the put option at Rs 1070. In this way, he will pick, for this situation, to not exercise the put option. Simultaneously, he just loses Rs 30,000 – the premium amount; this is much lower than if he had exercised his option.
How are options contracts priced?
- options can be purchased for an underlying asset at a small amount of the price of the asset in the spot market by paying a forthright premium. The amount paid as a premium to the seller is the cost of entering an options contract. We need to know some fundamental terms like In-The-Money, Out-Of-The-Money and At-The-Money. We should examine you may be confronted with any of these situations while trading options:
- You will get profit by practicing the option.
- Out-of-the-money: You will make no money (no profit) by practicing the option.
- A no-profit, no-loss situation in the event that you decide to practice the option. A Call Option is ‘In-the-money’ when the spot price of the advantage is higher than the strike price. A Put Option is ‘In-the-money’ when the spot price of the advantage is lower than the strike price.
How the premium pricing is arrived?
The price of an Option in the Premium is controlled by two variables they are intrinsic value and time value of the option.
- VALUE It is the distinction between the strike price of a option and cash market spot price. It can either be positive (on the off chance that you are in-the-money) or zero (in the event that you are either at-the-money or out-of-the-money). A profit can’t have negative Intrinsic Value.
- TIME VALUE The time value is the time left between the present date and the expiration date of Contract. For example Contract A is longer than that of Contract B, Contract A has higher Time Value. Because of the contract value with longer expiration date which gives the holder more adaptability on when to exercise their option. This more extended time window brings down the risk for the contract holder and keeps them from arriving in a tight spot. Toward the start of a contract period, the time estimation of the contract is high. In the event that the options remains in-the-money, the option cost for it will be high. If the option goes out-of-money or stays at-the-money this influences its intrinsic value, which gets to be zero. In such a case, just the time value of the contract is considered and the option value goes down. As the expiration date of the contract approaches, the time estimation of the contract falls, contrarily influencing the option price.
What is Marked to Market (MTM)?
On contract date, it is the difference of the passage esteem and shutting cost for that day. If there should be an occurrence of carry forward position, MTM is the difference of the market price value less yesterday’s end cost.
What is derivatives markets?
It is the financial business sector for derivatives, financial instruments like future contracts, which are derived from different types of assets.
The derived market in India, similar to abroad, is progressively picking up centrality. Since the time derivatives were presented, their popularity has developed enormously. This can be seen from the way that the day by day turnover in the derivatives segment on the National Stock Exchange.
What is the use of derivatives?
The two most widely recognized benefits attributed to derivative instruments are price discovery and risk management.
Earn cash on shares:
So you would prefer not to sell the shares that you purchased for long term, however need to earn money for the short term process. Derivatives market permits you to direct trade without selling any share. This process is also called as physical settlement.
Advantage from arbitrage:
Arbitrage trading is nothing but buys the share in fewer prices and sells the same in high price.
The most imperative utilization of these derivatives is transfers the risk from one to another. Risk-averse investors use derivatives to upgrade the safety, while the same risk loving investors like the risks, contrarian trades to enhance their profit.
Who are the participants in derivatives markets?
- derivative markets is like whatever other financial market and the participates of derivatives markets can be classified into four categories – hedgers, speculators, margin traders and arbitrageurs. They are explained as follows: HEDGERS: These are investors with a present or expected exposure to the hidden asset which is liable to price risk. Hedgers utilize the derivative markets fundamentally for the price risk management of asset.
- SPECULATORS:These are people who take a perspective on the future direction of the markets. They take a perspective whether prices would rise or fall in future and as needs be buy or sell the shares to attempt and make a benefit from the future price movements of the basic resource.
- MARGIN TRADERS: There are large numbers of speculators trade use of the payment mechanism to the derivative markets. This is called margin trading. When you want to trade in derivative products, you are not required to pay the aggregate amount of your position in advance. Rather, you are just required to deposit just a small amount of the total amount called margin. With a small deposit, you have the capacity to keep up a huge exceptional position. The leverage factor is fixed; there is a limit to the amount you can borrow. The speculators can buy four to five times the amount that his capital investments have permitted him to buy in the cash market. This kind of trade is called settlement.
- They take positions in financial related markets to acquire riskless profits. The arbitrageurs take short and long term process, in the same or different contracts, in the meantime to make a position which can create a riskless profit.
How to trade in derivatives market?
- Research: This is the first most and more important for the derivatives market. The techniques are differing from that of the stock market. For instance, you may wish you buy stocks that are liable to ascend later on. Then, you buy a transaction. This would require you to go into a sell transaction in derivatives market.
- for the requisite margin amount: Stock market rules oblige you to always keep up your margin amount. You can’t withdraw this amount from your trading account anytime until the trade is well-settled. Also, the margin amount may vary as the price changes. So, we recommend you to keep additional amount in your account.
- Conduct the transaction through your trading account: You will need to first ensure that your account allows you to trade in derivatives market. If not, counsel your broker and get the required services to be initiated. When you do this, you can submit a order either in online or on phone with your broker. Select your stocks and their contract basics amount you have, the margin requirements, the price of the basic shares, and the price of the contracts. You need to pay a little amount of money to buy the contract. You have to hold up until the contract is schedule to expiry to settle the trade. You can pay the whole amount or you can entre in opposing trade. For example, you put a “buy trade” for Infosys futures at Rs 3,000 a week prior to expiry. If you leave the trade before, you can put a ‘sell trade’ future contract. On the off chance that this amount is higher than Rs 3,000, you can get profit otherwise, it may end up with loss.
What are stock futures?
Stock futures are derivative contracts that give you the ability to buy or sell a contract of stocks at a fixed cost within a specific date. When you buy the contract, you are committed to maintain the terms and conditions. Qualities of future contracts:
- Contract size: In the derivatives market, contracts can’t be traded for a solitary share. Rather, every stock future contract comprises of a fixed lot of the basic share. The span of this lot is controlled by the exchange markets on which it is traded on. For example, a Reliance Industries Ltd. (RIL) future contract has a lot of 250 RIL shares, i.e., when you buy one future contract of RIL, you are really trading 250 shares of RIL.
- Expiry: All three maturities are traded at the same time on the exchange and lapse on the last Thursday of their individual contract months. On the off chance that the last Thursday of the month is an occasion/any formal holiday for exchanges, they expire on the previous business day. In this way as close month contracts expires, the middle-month (2 months) contracts get to be close in a month (near-month)(1 month) contracts and the far-month (3 month) contracts becomes middle-month contracts.
- Duration: Contract is an agreement for transactions. How far future contract is chosen by the contract duration. Future contracts are available in duration of 1 month, 2 months and 3 months. These are called near month, middle month and far month respectively. When the contract expires, another contract is presented for each of the three durations. The month in which it expires is known as the contract month.
What are the advantages and risks of futures contracts?
Advantages of future contracts:
- the risks to speculators.
- gives idea to traders of what the futures price of a stock or estimation the index value.
- Based on the present future value, it helps in deciding the future demand and supply of the shares
- it depends on margin trading, it permits small speculators to participate and exchange the futures market by paying a small margin rather than the whole value of physical property. Then again, you must know about the risks in the future contracts. The principle risk stems from the enticement to speculate unnecessarily because of a high leverage factor, which could open up losses in the same way as it increases profits.
What is the cost of carry model?
The Cost of Carry Model expects that market trends have a tendency to be superbly productive. This implies that there are no differences in the cash and future price. This, accordingly, eliminates the arbitrage; by there the traders exploit price differences in two or more markets. The contract is held till maturity, so that a reasonable price can be achieved. The price of a futures contract (FP) will be equivalent to the Spot Price (SP) in addition to the net expense caused in carrying the asset till the maturity date of the futures contract. FP = SP + (Carry Cost – Carry Return) Here Carry Cost alludes to the cost of holding the asset till the future contract develops. This could include storage expense, interest paid to secure and hold the asset, financing expenses and so on. Carry Return refers to any income got from the profit while holding it like dividends and so on. A net of these two is known as the net cost of carry. The primary concern of this pricing model is that keeping a position open in the cash market can have benefits or losses.
Enter Answer …
What is the expectancy model of futures pricing?
The Expectancy Model of future pricing states that the future price of an asset is fundamentally what the spot price of the asset is relied upon to be in future. That is, if the overall market towards a higher price for an asset in future, the future price of the asset will be increase and profitable. Same way, if the market fell down the future price of asset also in loss. Not at all like the Cost of Carry model, has this model trusted that there is no relationship between the current spot price of the asset and its future price. Only difference is what the future spot price of the asset is relied upon in future.
What is initial margin?
It is the base rate of the contract value required to be stored by the individuals/customers to the trade before starting any new purchase or sell position. This must be kept up for the duration of the time their position is transparent returnable at conveyance, activity, expiry or closing out.
What is Stop Loss (SL)?
It is a request to restrain a investor’s loss on the position he holds. By putting in a Stop Request, Investor really set a loss level which the investor is willing to attempt.
What are the Prerequisites of trading?
Resident: Indian PAN
Related Bank investment account
Aliceblue Trading Account
How finUno New Features works in Aliceblue Mobile App?
The finUno New Features works are listed below. Check and make use of the feature Effectively.
Home Page :
1) When user launches the application Default Dashboard with only Index Watch,
My News and Quotes cards will be shown.
2)After user has successfully logged in, the following home page window gets displayed, where the
user has the option to get quotes, news, index watch, market watch, trade book and other information
in the form of cards.
3)Other options like market alerts, personalize, settings etc. are presented in form of side menu that
can be seen by clicking on more options on the top toolbar.
It displays the quotes for selected contracts
It displays the trades which has been for the contracts
User can set the alerts for the contracts as well as for index
It will displays the index values
User needs to click on market watch to watch live rates of contract added
To customize the user wise settings i.e font , color etc.
It displays the account details of user
Margin Intraday Square-Off Order
Margin Intraday Squareoff is an exclusive feature for intraday trading that facilitates you to make the most out
of market movements. Unlike CNC instead of blocking 100% as margin, it only blocks a prespecified percentage as margin.Clients can buy and sell specific stocks during the day. Clients need to square off their positions
before 3.20pm OR RSL will square-off such open position before market closes. MIS is preferably done for
intraday square off positions in cash market.
The user can set alerts for an index or scrips by clicking on ‘Market List’ option in side menu.
The user can create a new alert or see all the alerts in this screen.
User can click on ‘Personalize’ from the side menu for personalizing Home screen. User can enable or disable
any card by toggling switch buttons and also re-organize card position by dragging items. Then click on ‘Save’
button for saving changes made.
User can revert to default state by clicking on ‘Reset’ button.
Set Trade options and LTP refresh duration
User can preset values for trade options like quantity, price-type, product-code for any exchanges. These values
will be pre-populated while placing order.
LTP refresh duration setting indicates that user can set the values of LTP refresh time in seconds. LTP value in
trade form will get refreshed automatically for the duration set.
The user can view the entire News and their details by clicking on the ‘My News’ card on the home screen
or ‘MY News’ option in side menu.List of available news are shown. User can see the variety of news by
selecting news category from the list.
Risk Management validation will be done by the system at Individual Order level, Client Level.
What is a commodity market?
It is a market that exchanges primary products instead of manufactured items. Soft commodities are horticultural products, for example, wheat, espresso, cocoa and sugar. Hard commodities are mined, for example, gold and oil. Investors’ accesses around 50 noteworthy commodity markets worldwide with absolutely financial transactions progressively dwarfing physical trades which traders are conveyed. Futures contracts are the most seasoned method for putting resources into products. Futures are secured by physical assets.
Why invest in commodities?
Diversification: Commodity returns have verifiably had low or negative connections with the profits of other significant assets, and may be utilized to differentiate a portfolio. Different variables staying same, differentiated portfolios with low total correlation have a tendency to have lower unpredictability of profits. Thusly, expansion may enhance risk balanced returns. Transparent: The transparent is the huge cooperation has guaranteed commodity futures.
- Simple: Product exchanging is about the simple financial aspects of demand and supply. More the demand for a commodity to higher is its cost and vice versa Trade on Low Margin: Commodity trading are required to store low margins, around 5 to 10% of the aggregate estimation of the contracts, much lower contrasted withother assets classes.Inflation protection:
- Changing macroeconomic variables tend to effect items uniquely in contrast to other budgetary items. Costs of goods and services ascend in pair with input costs, while costs of stocks and bonds tend to decay due to rising commodity input costs which put more pressure on the economy and lower the estimation of future cash flows.
- Wide Participation: The online exchanging stage and the transparent policy strategy has pulled in a wide support in commodity market.
- Reasonable Pricing: The evaluating characterizes for commodities would be more handy practical and less nonsensical prompting to Fair Price Discovery Mechanism in light of the quantity of members in the market.
- Hedging: It gives a stage to makers to hedge of their positions as indicated by development of the prices of the commodity..
What are the tradable commodities?
- Bullion: Gold and Silver
- Oil and Oilseeds: Castor Seeds, Soy Seeds, Castor Oil, Refined Soy Oil, Soy supper, Crude Palm Oil, Groundnut Oil, Mustard Seed, Mustard Seed Oil, Cottonseed Oilcake, Cottonseed
- Flavors: Pepper, Red Chili, Jeera, Turmeric, Cardamom Metals: Steel Long, Steel Flat, Copper, Nickel, Tin, Steel, Aluminum, Zinc ingots
- Fiber : Kapas, Long Staple Cotton, Medium Staple Cotton
- Beats: Chana, Urad, Yellow Peas, Tur, Yellow Peas Grains: Rice, Basmati Rice, Wheat, Maize, Sarbati Rice, Jeera
- Vitality: Crude Oil, Natural Gas, Brent Crude
- Others: Rubber, Guar Seed, Guar gum, Cashew, Cashew Kernel, Sugar, Gur, Coffee, Silk, Sugar.
What is a futures contract in commodity market?
Future Contract is a kind of forward contract. Futures are trade exchanged contracts to sell or purchase standardized financial instruments or physical
items for conveyance on a predetermined future date at a concurred cost.
What are the charges in commodity trading?
- Service Tax as per the rates applicable
- Exchange Transaction Charges
- Stamp Duty: As per State Law
Who regulates the commodity market?
SEBI which regulates the stock market and the Forward Markets Commission (FMC) which regulates the commodity market.
Which are the major commodity exchanges in india?
There are 24 commodity trades in India. There are three national level commodity trades to exchange all allowed commodities. They are:
- Multi Commodity Exchange of India Ltd, Mumbai (MCX) www.mcxindia.com MCX is a free and de-mutualised multi thing trade. MCX highlights amongst the world`s main three bullion trades and main four vitality trades. Its key shareholders are Financial Technologies (I) Ltd., State Bank of India and its partners, National Bank for Agriculture and Rural Development (NABARD), National Stock Exchange of India Ltd. (NSE), Fid Fund (Mauritius) Ltd. – a member of Fidelity International, Corporation Bank, Union Bank of India, Canara Bank, Bank of India, Bank of Baroda, HDFC Bank and SBI Life Insurance Co. Ltd.
- National Commodity and Derivative Exchange, Mumbai (NCDEX) www.ncdex.com A consortium of establishments advances NCDEX. These incorporate the ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSE).
- National Multi Commodity Exchange of India Ltd, Ahmedabad (NMCE) www.nmce.com It is the first de-mutualised electronic multi-commodity Exchange of India. Some of its key promoters are Central Warehousing Corporation (CWC), National Agricultural Co Operative Marketing Federation of India Limited (NAFED), Gujarat Agro Industries Corporation Limited (GAIC) and Punjab National Bank (PNB).
- National Spot Exchange Limited (NSEL) National Spot Exchange Ltd (NSEL) is a best in class electronic, de-mutualised commodity spot market. The Exchange is advanced by Financial Technologies (India) Ltd (FTIL) and National Agricultural Cooperative Marketing Federation of India Limited (NAFED).
What is a forward contract in commodity market?
A forward contract is an understanding for conveyance of goods or the underlying asset on a particular date in future at a cost concurred on the date of contract. Under Forward Contracts (Regulation) Act, 1952, every one of the contract for conveyance of products, which are settled by installment of cash contrast or where conveyance and installment is made following a time of 11 days, are termed as forward contracts.
Can I take delivery of the commodity?
- A settlement happens either through squaring off your position or with money settlement or physical delivery. Squaring off is taking an inverse position to the beginning position, which implies on account of a unique purchase get a investor would need to take an sell contract.
- Investor who plans to plus or minus delivery would need to advise his agent of the same before they begin of delivery period. In the event of delivery, a stockroom receipt is given. Delivery is at the option of the seller; a buyer can take delivery just if there should arise an occurrence of an eager seller. All unmatched/rejected/excess positions are money settled; every single open position for which no delivery data is submitted are additionally money settled. Under money settlement, the different between the contract cost and settlement cost is to be paid or got from them. In online commodity exchanging, customer can’t go for delivery and all positions are cash settled.
Equity trading account
Equity is also known as stock or share, which is part (share) of the company. A type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. When an investor buys shares of a company, (s) he basically owns a part of that company. Stocks are a type of financial instrument issued by a corporate organization with a view to raise capital.