Trading in Stock Market can be done through various manners. While some choose to buy and sell stock/shares, there are others who choose to trade through derivatives.
Derivatives are basically financial instruments or contracts which base their value on the performance of spot market price, (also known as the underlying variable market conditions such as bond, stock or currency. These underlying market conditions may be interest rates, market indexes, equity prices, currency exchange rates, market securities and credit. These transactions can be of different types such as futures, options, swaps, floors, caps, collars, structured debt obligations and deposits, forwards; or any combination.
Derivative Trading in India usually takes place on a separate/individual derivative exchange/a separate segment of an existing stock exchange.
What are Currency Derivatives
These are types of contracts where currencies are traded in the form of futures or contracts and can be traded as assets in their own right. Investors who choose to buy future contracts in currencies are buying the right to exchange a certain amount of a particular commodity at a future date. The currencies used in currency future trading include US Dollar-Indian Rupee (USDINR ), Euro-Indian Rupee (EURINR ), Japanese Yen-Indian Rupee ( JPYINR ) and Pound Sterling-Indian Rupee (GBPINR ). Exchanges such as USE, SX, and MCX-SX provide currency trading in India. Hedging Advantages of Currency Derivatives Trading
Derivatives are basically financial instruments or contracts which base their value on the performance of spot market price, (also known as the underlying variable market conditions such as bond, stock or currency. These underlying market conditions may be interest rates, market indexes, equity prices, currency exchange rates, market securities and credit. These transactions can be of different types such as futures, options, swaps, floors, caps, collars, structured debt obligations and deposits, forwards; or any combination.
Derivative Trading in India usually takes place on a separate/individual derivative exchange/a separate segment of an existing stock exchange.
What are Currency Derivatives
These are types of contracts where currencies are traded in the form of futures or contracts and can be traded as assets in their own right. Investors who choose to buy future contracts in currencies are buying the right to exchange a certain amount of a particular commodity at a future date. The currencies used in currency future trading include US Dollar-Indian Rupee (USDINR ), Euro-Indian Rupee (EURINR ), Japanese Yen-Indian Rupee ( JPYINR ) and Pound Sterling-Indian Rupee (GBPINR ). Exchanges such as USE, SX, and MCX-SX provide currency trading in India. Hedging Advantages of Currency Derivatives Trading
- Hedging: Hedging basically refers to making an investment where you can reduce the risk of price movements in an asset. You can not only protect your foreign exchange exposure but also hedge potential losses by taking necessary positions for the same. For e.g. you could hedge if you had a feeling that the USDINR was going to depreciate.
- Speculation: Speculation refers toengaging in risky financial transactions with an attempt to make profits from short or medium term fluctuations in the market value of a tradable good. For e.g. If you expect that oil prices would rise in the future, impacting India's import bill; accordingly you could buy USDINR in expectation that the INR rate would depreciate.
- Leverage: Leverage basically refers to the use of different financial instruments or borrowed capital such as margin so as to increase the potential return of an investment. By trading in currency derivatives by just paying a % value known as the margin amount instead of the full traded value.
- Arbitrage: Arbitrage refers to the process of purchasing and selling the same security; at the same time in different markets (BSE & NSE). This is done to take advantage of a price difference between the two separate markets.
- Style of Trading: There is transparent online trading and no insider trading involved in currency trading.
Kumar Share Brokers Ltd. is a professionally managed corporate broking house. We offer all financial services like Trading In Stock Market, Equity Trading,Currency Trading, Commodity Trading, Nifty Trading,online Share trading, online trading accounts and free demat account as well.
No comments:
Post a Comment