Stock Options and Futures

A short call is also called a naked call--one you wrote on a security you don't have any of. You are hoping that the stock price stays below the strike price. Three things COULD happen in a naked call. The first is the most desirable: you guessed right on the price, and the option goes unexercised. You get to keep the whole premium. The second is the option gets exercised, but the strike price plus the premium is more than the share price of the security. If you sold a naked call at 100 with a $5 premium on 100 shares, and the stock price was $101, you buy the shares with $100 of your money plus $1 of the premium, turn the stock over to the buyer for $100, and retain the $4 profit. Not QUITE as good as keeping the whole $5, but still okay. This is a "slightly in the money" call. Hedge fund guys like this a lot. The third is that the strike price plus the premium is lower than the share price. In the same situation, if the share price is $106 you're out a buck a share. Which is bad.

An arbitrageur is one who practices arbitrage. Arbitrage is really weird. It is the SIMULTANEOUS buying and selling of an asset to profit from the price differential. A lot of arbs do this with currency, taking advantage of varying exchange rates. You'd maybe buy Saudi rials with US dollars, yen with your rials, Korean won with your yen, Singapore dollars with won, Canadian dollars with Singapore dollars, euros with your Canadian dollars, pounds with your euros and finally US dollars with your pounds, and if the exchange rates are right you can make lots of money.

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source:

http://www.iipm.edu/iipm-editorial-1020.html

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OTC stands for Over The Counter. OTC Derivatives are traded OTC and not in an electronic exchange.

The nominal annual rate of return is calculated from the effective interest rate. It is typically a slightly lower percentage, and gives investors an idea of what their investment may return.

The percentage you should pay a financial advisor can run from 0.75% to 1.5% yearly. However, many advisors charge a flat rate so you know up front the cost involved.

You can find the complete list/names of nifty 50 companies along with their current market price, latest P/E, P/BV and can easily analyze the fundamentals of all the nifty 50 companies on Moneyworks4me.

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Selling naked puts against covered calls is about as conservative as options get if you're a short-term investor. If you're a long-term investor and you specialize in one industry, selling naked puts into cyclical downturns is very safe. To do it, you need to really know the industry you're in. I like building materials a LOT. These stocks get soft in the winter because no one in the North is building anything--they can't because it's too cold. If you buy stock in October by selling naked puts, and sell it in April by selling covered calls, not only do you make money on the increase in value of the stock but you got paid to do it twice--once when you bought, once when you sold. Another good conservative option strategy is selling slightly out of the money puts on stocks you like. To see how it works, let's sell a 30-day put on Simpson Manufacturing Co at $27. This is a really good company that doesn't move around much--their 52-week high is $34.36 while their 52-week low is $20.08. Today they closed at $27.87. We'll sell this put for $3 per share. If on or before October 8 the price of Simpson stock drops to $26.95 or less, this option will get exercised. Let's pretend it hits $26. I will pay $27 per share for this $26 stock--BUT! Since the put buyer paid me three bucks a share, I subtract $3 from $27 and wind up paying $2400 for 100 shares (options are generally done in 100-share increments) of a very good, solid company. The only problem here is you need enough money to buy the stock in your option account. A little bit more risk comes from selling in-the-money puts. Here you try to sell the put at a lower strike price than you think the stock will go. If Acme's selling for $10 now and you think it'll stay above $9.50 for the duration, try selling a put at $9. If it doesn't drop below $8.95, the option won't exercise and you keep the premium. This is risky because if the stock DOES drop below $8.95, you need $900 right now.

Are you trying to hedge your portfolio or buy stock cheap? If you're trying to hedge, you buy puts, not sell them. If you've got a stock you really don't want to hold if it goes below $20 and it's heading down, buy a put at $20 and your problem will go away at $19.95. If it turns around, you're not out much. Think of a covered put here as an insurance policy. Buying stock cheap is done by selling puts. If you are convinced that a stock will be good after the recession ends, you'd sell puts and profit from the misery of others. ---- The holder of a put option has the right to sell a stock at a certain price. So the holder makes money of they can buy the stock at a price lower than the strike price for the put option. So if you want to make money from puts in market where the stock prices are headed south, then you buy put options. There are two types of options. One can be exercised at any time before it expires. The other can be exercised only on a certain date (european). Obviously the option values are different depending on which one you are going for.

A stock adviser is a person who is trained to give advice to a purchaser of stocks or bonds. This person is generally licensed as a broker as well.

I work for a financial company and usually DTC transfers take anywhere from 5 to 10 business days. I work for a financial company and usually DTC transfers take anywhere from 5 to 10 business days.

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All other things being equal, usually the most aggressive option straddle is that which has the most gamma. Gamma is the nonlinear feature of an option's value as the underlying stock moves. Straddles with strikes near the stock price that are very short term have the most gamma and thus are the most aggressive per dollar of option value (especially if you sell them since losses are unlimited)

The beta of a portfolio is the weighted average of individual betas of assets in that portfolio. There is an example of portfolio beta calculation here: http://www.riskyreturn.com/portfolio_beta.html

answer: $0.01

A naked call option strategy is one in which an investor writes/sells a call contract without owning the underlying securities. This strategy is sometimes referred to as uncovered call writing or a short call and is much riskier than the covered call alternative. The risk is that by writing the contract you are promising the buyer of the contract the right to buy shares at the strike price. In a covered call you already own the shares and the buyer of the contract simply takes your shares at the strike price if they are in the money. With an uncovered call or naked call you must buy the shares if the contract is executed regardless of the price. That price in effect could go up dramatically leaving you on the hook for a loss that in a sense is unlimited. Many firms will not even allow for the trading of naked calls and those that do often have strict margin requirements that are involved. The advantage of the naked call strategy is the chance to capture the premium from writing the call without the required investment on the underlying security.

The advantage is that it helps us manage our money... The disadvantage is that when it crashes... then we practically lose all our money.

Counterparty risk is the risk that your counterparty will not be able to honour the agreement.

If it is an OTC future, you must assess the ability to fulfil the futures contract, whereas if you trade it on exchange, the exchange will guarantee fulfilment.

It means that one does not get to completely own the shares until specific requirements (such as length of employment) are met. The shares may also be divided into percentage over a period of time before you can obtain the full 100% shares. For example, 50% for 1st year and the remaining 50% on second year to get a full 100%. Another example is one can own 100% of the shares after two years of employment. If one quits within the first two years, then he or she can only own 50%, and the other 50% is owned by the employer.

SEBI is the primary governing/regulatory body for the securities market in India. All transactions in the securities market in india are governed & regulated by SEBI.

The Following are some of the main functions of SEBI:

1. The business that happens in the Indian stock exchanges and other securities markets in India

2. Registering and monitoring of Intermediaries like Brokers who may participate in the securities market

3. Registering and monitoring the work of depository participants, custodians of securities, FII's etc

4. Prohibiting unfair trade practices and fraudulent practices in the markets

5. Promoting Investor education

6. Training of Intermediaries

7. Prohibiting Insider trading

8. Regulating substantial acquisitions and take overs of companies.

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