Are you aware of online derivative trading in India? Have you
ever known about the benefits of derivatives trading? If not, let's have a brief
look on what is derivative trading and what are its types. The derivative is
nothing but a contract between two or more parties that is purely based on a
single or set of financial assets. Traders generally prefer derivatives to
monitor the future price movement of the underlying assets in the hope of
booking a profit.
We can classify the financial market of India into two
categories as cash segment and derivative segment. In the past years, India has
witnessed a big turnover in the trading volume of derivatives. You can start
buying and selling derivatives with just a DEMAT account and a trading account.
If you have any queries on how to open a trading account, get connected with
Goodwill - India's best trading commodity broker. Open your DEMAT account now with
Goodwill!
Firstly, we'll have a brief on what are derivatives and what
are the types of derivatives trading followed in India.
WHAT IS DERIVATIVES TRADING?
As discussed earlier, derivatives are contracts that derive
the value based on the underlying asset. The underlying assets mentioned here
could be stocks, commodities, currencies, indices, exchange rates, or even
interest rates. You can buy and sell financial assets in derivative trading.
You will be able to derive profits from derivative trading by predicting the
future value of the underlying asset.
TYPES OF DERIVATIVES TRADING:
There are four major types of financial derivatives adopted
in India, they are listed below. Have a look at it to gain detailed information
on it.
Options:
An option is a contract provided to the buyer where the buyer
has the right to sell the underlying asset within the period as mentioned in
the bond. The price will be set by both the parties and it's called a strike
price. In this option, the buyer has the right to choose either to buy or sell
the assets, or do nothing.
Futures:
Future is a financial contract that obligates both the
parties to transact an asset within the discussed future date and price
mentioned in the contract. As per the contract either the buyer must purchase
or the seller must sell the underlying asset at the set price within the
expiration date. These contracts detail the quantity of underlying assets and
facilitate trading on a future exchange.
Forwards:
Forward is also similar to future but provides an opportunity
to both contracting parties to customize the contract as per their
requirements. This contract can be used for hedging and speculation because of
its non standardized nature. We cannot trade forward contracts on a centralized
exchange as it is done through over-the-counter (OTC) instruments.
Swaps:
Swap is a derivative
contract where two parties would exchange their cash flows and liabilities over
two different financial instruments. In general, one cash flow is fixed while
the other is variable and it is based on the benchmark interest rate, index
price or floating currency exchange rate.
BENEFITS OF DERIVATIVE TRADING:
The advantages of derivative tradings are:
Supporting: Helps you protected against future value vulnerabilities.
Leverage: Allows higher exchanging presentations
Better Returns: No matter what the financial situation is, one can bring in
cash
Derivative trading is complex but interesting. Seeking expert
advice from India's No.1 trading brokerage would help you in analyzing the
assets in derivative trading.
Being an award-winning brokerage firm in India,
Goodwill has been awarded MCX - Best
Retail Broking House award for the past 3 years (2017-2019), therefore
investing your money with Goodwill will be a trustworthy option. Stay connected
with Goodwill, visit Facebook Page to get live updates on trading.
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with Goodwill!
Start your trade with Goodwill Wealth Management
for a victorious trade journey. Contact today on +91 80122 78000 to trade your
stocks in a smart and efficient way.
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