Stock Options and Futures

There are call and put options and call and put futures contracts. They work the same, except that with an option contract you can allow the contract to expire worthless, while a futures contract has to either be closed out or settled. Let's use options terms.

A call option gives the purchaser the right, but not the obligation, to buy stock at a certain price on or before a certain date. A put option gives the purchaser the right, but not the obligation, to sell stock at a certain price on or before a certain date.

You buy a call if you think the price of the stock is going up. Calls become worth exercising (or "in the money") when the stock is more expensive than the "strike price" on the contract. So...if you have a call whose strike price is $20, and the stock goes to $23, you exercise the contract, buy for $20 per share and sell at $23. You had to pay a "premium" to buy the option, so subtract the premium from the difference between what you bought it for and what you sold it for to determine your profit.

You buy a put if you think the price of the stock is going down, and a lot of these are bought to stop losses. You have a stock you paid $20 for. It's gone up to $40 and you'd like to keep some of the profits. You therefore buy a put at $38. If the stock drops below $38, you exercise the option, sell the stock, subtract the premium and keep the profits.

Two completely different things.

There are two stock exchanges in India--the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). NIFTY is kinda like the Dow Jones Industrial Average--it's an index of fifty blue-chip stocks that trade on the National Stock Exchange. You can trade against this like you can trade against the S&P 500 or any other stock index.

The standard is 100 shares. If you want more than 100 shares, you've got to buy multiple contracts. This has a big advantage: if you own 10 calls that will be profitable if the stock hits $15 per share and the stock hits $16.50, and you think it'll go higher, you can exercise some of the calls to lock in your profit, and hang onto some to try making more money.

Risk is the probability of an undesired outcome actually coming to pass.

Safety is a condition where the risk is acceptably low.

Pretty much what it sounds like: two investors exchange an equal number of shares of two different companies. This is usually done when a corporation is taking over another one: the investors in the company being swallowed will turn in their shares in the old company for shares in the new one.

It depends on what you consider risk.

A lot of people think selling a stock that cost $20 for $25 when it's trading at $27 or $28 is a risk. If you're one of them, selling the call is definitely riskier. To me, selling stock that cost you $20 for $25 means you made five bucks on the deal plus whatever the premium was, so it's all good.

There are two forms of risk in buying the call. The most obvious is if the call expires out-of-the-money. If so you lose your premium. The other is this: you have to pay for calls. If you bought an Acme call with a strike price of $25 and paid a $1 premium, you need to exercise at no less than $26 to avoid losing money. If the call expires with the stock at $25.50, you lose 50 cents per share.

So...if you absolutely HAVE to make as much money as you possibly can, selling the call is riskier. If not, the buyer is more at risk.

Whenever you want. You collect the premium at the time you sell the call.

I think it's the same

It protects you against "downside risk"--the odds that a stock will trade at a price lower than you want to own it at.

Example: You own HP stock. You bought it at 32 and now it's at 40. You don't want to lose any money if it falls, so you go on the options market and find you can buy a put with a $35 strike price for $3 per share. Subtract the $3 premium from the $35 strike price and you wind up taking home $32, which lets you break even on the security. So...buy a one-year out-of-the-money put to protect yourself from loss.

A spot delivery contract really isn't much of a contract. You're a baker who needs sugar--you buy futures contracts but you've been hit with a huge order for cookies and you don't have enough sugar on hand to deal with the problem. Normally you'll have a line of credit established with a sugar company for just such occurrences. To make a spot contract, you call the sugar company and ask them to bring you a truckload of sugar. It shows up, you get the bill at the end of the month, all is well. That's a spot contract.

A forward delivery contract is for the sugar farmer. You have 500 acres of sugar beets. You have no idea of the exact tonnage of beets you are going to harvest or the exact date the harvest will be. To help manage your risk, you make a contract with a sugar refinery to sell them your whole crop when it is harvested for a specified price per ton.

Selling a naked call. The reason is quite simple: if you sell this thing at $20 and the stock goes to $50, you are going to have to pull out $3000 (puts and calls are in 100-share lots) to buy some stock to satisfy the investor. Naked calls have unlimited risk.

Puts have limited risk. If you look at the investment websites they claim selling puts exposes you to "unlimited risk." Not true. You can only lose the strike price minus the premium; if you sell a put on Acme with a strike price of $10, and the premium (which goes to you) is 50 cents, you can lose $9.50 per share but only if Acme goes out of business. OTOH, if Acme shoots up to $38 per share and stays there, the put won't exercise (because it would be more advantageous to the put's buyer to just put in a sell order with his broker) but you get to keep the premium.

'Spot' refers to standardised settlement. You can have spot FX (not a derivative) but you can also have a spot Interest Rate Swap, which is a derivative.

A share option, or more popularly a stock option, is a contract that lets its buyer either purchase or sell stock to someone else at a certain price. When you exercise an option, you are telling the brokerage that's the intermediary in the transaction to do whatever it is the contract is set up to do. If you bought a call option, or you earned one as part of your pay, exercising it causes you to buy the stock and have it put in your brokerage account.

To get listed on the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) in India, a company must meet specific criteria, including a minimum paid-up capital requirement (typically ₹10 crore for the BSE and ₹10 crore for the NSE), a track record of profitability, and compliance with corporate governance norms. Additionally, companies must submit a detailed prospectus and undergo a due diligence process. They must also have a minimum number of shareholders and adhere to the regulatory guidelines set by the Securities and Exchange Board of India (SEBI).

Implied volatility is the expected volatility of the underlying stock. The higher the implied volatility, the more the underlying stock is expected to move and thus the more expensive an option becomes due to increased extrinsic value.

Now is not the right time to invest. Now gold is going down in price, which means all the people who bought at $1800 and are now holding $1600 gold are REAL upset.

My opinion on this subject, which is NOT shared by a lot of people, is gold is worth $600 per ounce. Period. I don't think it's worth buying once it gets past $650, because gold is like any other investment vehicle: It can, and does, lose value on a moment's notice. There's never been an investment vehicle, since investing was invented, that didn't lose value periodically.

To become an Online Broker, you must be an expert in the field, acquire special licenses, and have technical knowledge. You must pass the General Securities Registered Representative Examination and the Uniform Securities State Law Examination. Once you are licensed to be a broker, you must establish a site on which people can trade, and then perform and monitor your clients' trades.

Stock exchanges in India: NSE is the National Stock Exchange; BSE is the Bombay Stock Exchange.

Does having a business promote economic growth? Does business growth promote economic growth? Investing allows companies to earn capital needed to fund projects. When companies do so and are successful, they grow. This growth allows for more jobs and more money flowing. If an investor no longer wants to be invested in the company, it is more beneficial for them to allow someone else to buy their share from them than to have the company purchase it back (unless the company wants to decrease their outstanding shares) because then the company still has the cash on hand. So yes.