Monday, 18 March 2013

Derivative Trading

Derivative trading can be done in two ways at Indian share market, Future and Option trading. In this type of trading you actually buy a contract that expires within a time limit generally it is one month or three month. In Indian stock market all derivative contracts expires on last Thursday of each month. In derivative segment stocks are bought and sold in lot. The number of stocks in a lot varies from one stock to other and the price of lot is derived by multiplying the number of stocks with the current price of stock in the market. The biggest advantage of derivative trading is that you can get the lot by investing only the 30 to 40% of the actual price of the stocks that you will be holding. Moreover, you can gain by short selling the stocks as well that means you can first sell the stocks at higher price and then make profit by getting the stocks at lower price. The brokerage for derivative trading is generally lower than the cash segment if you consider the amount of investment and the number of stocks you hold.

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