How to use derivative market for your advantage?

Different countries have different national currencies which have different values at different period of time. To trade internationally there had to be a system how all these things can be accounted for all these differences.

How to use derivative market for your advantage

A derivative is a contract that is used to safeguard or protect impartially the fluctuating exchange rates of goods that are traded internationally. In other words, it is a “security of the price” that is derived from underlying assets between two or more parties. This contract based upon the assets. Underlying assets can be bonds, stocks, currencies, commodities, interest rates, and market indexes.

There are many kinds of derivatives in existence. Depending upon the type, they are a variety of functions and applications.

Lets us understand this with an example. Let us say a farmer (one party) in July (during sowing season) agrees (contract agreement) to sell 1 metric ton of rice (underlying asset commodity) in October (after harvesting season) to a miller (second party) for Rs.32,000/- (price consideration) per metric ton. Current price being Rs.35,000/- per metric ton. Now if by October per metric ton of rice costs Rs. 33,000/- Still the farmer will have to sell at Rs 32,000/- per metric ton. In this case, the farmer was at loss of Rs 1000/- and miller is at a profit of Rs 1000/-. What if October price were Rs. 31,000/- in that case farmer would have made profit and miller would have made a loss by Rs 1000/-.

From the above example, we can conclude that whatever will be the price in open market farmer will get Rs 32,000/- per metric ton and miller too knew that he will buy rice for Rs 32,000/- irrespective of market condition. Both knew their rates in July itself.

Certain types of derivatives are used for hedging against risk on the asset. They can be also used for speculation on the future price of underlying asset.

How can you use derivatives? Futures and options are standardized contracts and can be freely traded on exchanges.

  1. Stocks

One can earn money on stocks which are kept ideal for too long. The advantage of price fluctuation can be taken in this case. Derivative markets allow you to conduct transactions. No need to sell shares physically.

  1. Arbitrage

Taking advantage of the difference in prices in different exchanges is called arbitrage. Benefitting by purchasing low from one exchange and selling at high in another exchange.

  1. Protecting securities

One can protect his securities against fluctuating prices. That is you can hedge your securities against falling market by the products that are offered in derivative markets. They also protect you from the rise in prices if you are purchasing securities.

  1. Risk transfer

This is one of the most important uses of the derivative market. It transfers market risk from non-risk taking investor to risk taking investor. Non-risk taking investors use derivatives to increase their safety, whereas risk taking investor conducts risky business to improve his profit. There are many strategies and products available that help in transferring risk both ways.

Derivative participants, types of derivative contracts, trading in derivative market in another blog.

Why Indian Women Are Better Investors?

Indian women nowadays are showing more and more interest in equity markets. It is evident from market chit-chat and share-talk at dining table instead of simple family gossip. One can also see an increasing number of articles by women on finance, in business newspapers, magazines, on TV shows and internet. Expressing their views, participating in debates and along with reasoning why they have to be financially independent.

Why Indian Women Are Better Investors

As educational levels in women are increasing, more and more women are stepping out from their home and joining the work force. To earn extra income for their family and personal needs.

Educational background, increasing divorce rates, financial independence, long-term wealth creation (women tend to live longer than men), working independently as day trader through various channels of internet/SMS, sharing families financial burden etc seems major points why more and more women are attracted towards stock market.

They are trending the path (knowing or unknowing) what most investment gurus say. Maybe it is in their nature. We will take an Indian stock market overview vis-à-vis how women are investing and following stock gurus “advice”.

  1. Product knowledge.

In the maximum household, women are the main purchasers of day to day goods. In other words, they keep their eyes and ears open as to which new product has been launched in the market and get its “practical” review. Or knowledge about which product is in more demand than others.

Unknowingly doing research on products and discovering the winning investment opportunity, when the company is still in its infant stage and has a good potential to grow.

  1. Risk factor

Men and women perceive risk in a different manner. Men usually take more risk. They will hold on to stock that does not perform well and get in more deep crises. Since they have invested in stock they cannot take the defeat. Their ego does not allow them to let go of nonperforming stocks.

Women usually have less risk-taking nature. Women tend to take less risk, just for the sake of higher returns. They are calculative of their investments and no sooner she realizes that she will not get good returns she will sell the stocks against small loss immediately. Usually, she takes one step at a time. She will go more for dividends paying companies instead of lump sum returns. This makes her loss little less.

Even before purchasing of stocks women usually do a lot of research. Is the company profitable, does it give dividend regularly, is it possible to buy the stock at a reasonable price, etc? Investment returns are the combination of dividends, bonuses and price appreciation.

  1. Goals

Women usually before purchasing any stock have a definite goal what they are investing for, like for children higher education, or for house purchase or home renovation, or for buying a household appliance, or for marriage, or for retirement. They chase goals and not returns. Stock gurus have always emphasized to set a goal for the investment made.

  1. Regular savings

It is a well-known fact that women usually save small amounts (husband’s do not have any knowledge of) and that too regularly, for a rainy. This habit is engraved when she purchases shares. She purchases/sell a few shares at regular intervals. This, in turn, averages out her purchase/sell in event of volatile market conditions. Just as market gurus keep on preaching.

  1. Trading frequency

While buying and selling the stock the broker earns a commission. This commission, along with government taxes, eats up on your investment returns. Women trade very sparingly, thus they save upon the commission and government taxes, little by little. This when consolidated over a long period of time, turns out to be a hefty amount.

How to stay updated with stock trends?

Having information of any field helps you to increase your knowledge and make good decisions. Therefore, to increase your knowledge, you have to collect more information. There is the proverb – “To stand out from the crowd, and to achieve something better, you need to improve more knowledge than other. If improved it then you can get it easily.”

stock trends

The same applies to the stock market as well. If you want to get ahead of the market and want success, then you should have a better understanding of the share market and related industry, it will help you to improve your investment decisions and get better results as well. It is the best way to get success in stock market. It is helpful for everyone to understand the stock market very well, collect facts and figure of the stocks and stay updated with stock trends to take the best decision.

The purpose of this article is to guide you as to how to keep updated with stock trends to gain more profit in the stock market through information. Take a look:

  1. NEWS

Stay connected with news channels and read news paper (especially financial) regularly. It is the best way to keep updated with the ongoing news and changes of the stock market. Here, you can get all information related to market and gain your knowledge for a better investment. There are many news channels and news papers, which are really helpful to get complete knowledge of the stock market. Let you know how it is beneficial for you:

  1. Wall Street Journal – It is one of the most popular stock market magazines cum newspaper. It has a large customer base and is available in both print and digital versions. It covers every aspect of financial news for emerging markets as well as for strong developing and developed economies. WSJ provides targeted content for 100+ countries in which India is also involved.
  2. Economy times – It is one of the leading financial newspaper and app, which helps to improve your knowledge base about companies and markets activities. With the help of it, you can easily come to know about market trends and ongoing process of the stock market.
  3. Bloomberg Quint – It is one of the most fabulous news organizations worldwide, which delivers financial news, data, analysis, and videos of the countries all over the world. It helps you to keep updated with stock index and get an overview of major world indexes, current values and stock market data. In India, Bloomberg Quint is one of the most famous news sites to use, which offers the latest Indian stock/share market live news updates. Stay updated with share market statistics, charts and other related information.
  4. Financial Express – The newspaper and site are famous to provide latest market news, stock/share market news, capital market, stock exchange news, market news today, market news live, opinions on related topics and other related and relevant information.

2. MAGAZINES / PERIODICALS

The magazine/periodicals are another resources to gain knowledge. There are many magazines/periodicals that you can read and update important information related to the stock market. But if you want to follow the best magazine, then I will suggest some best of them.

  1. Outlook Business – It is one of the most popular stock market magazines in India, which is especially targeted for Indian and other Asian markets. It gives good coverage of global markets also. This magazine provides maximum points, good coverage, quality of the paper and attractive membership. It is published weekly. This magazine is available at a so-called subscription rate.
  2. Economist – It is unique and different in all stock market magazines. It provides a brief and genuine opinion on world economic events. It does not just report the news, but it provides carefully prepared analytics around the news. The quality of its journalism is high. It is available in both print and digital versions for customer’s benefit and comfort.
  3. Money Today – It provides all information related stock market and used expert tools to predict stock market trends. It is one of the best magazine to keep updated with all information of the stock market.
  1. INTERNET RESOURCES

Now a day’s internet resources (such as social media, company’s website, annual reports via email etc) have become a very popular way to stay connected with the stock market. It’s a fabulous place to get all required information and improve your knowledge, which is being liked by the people in increasing number. Take a look some of the best internet resources.

  1. Twitter – Twitter is the best source to keep up with the market. Some investors also use the trend of tweets to predict the stock market. Its excellent feature helps you make an accurate list of publications/individuals, from which all the tweets will be gathered in one place (aka list feed).
  2. Facebook – Best part about Facebook is that it is a great place for start discussion about current general trends in your group. Sometimes, it may awesome source to gain knowledge.
  3. Quora – It’s an excellent place to achieve knowledge. From where you can collect your information by questions and answers related to current trends and topics.
  4. Emails – On several sites, they ask to fill in your email ID for the free subscription to their newsletter. You will get a current update on the stock market in your mail box, reading and analyzing them will be profitable. You will always be able to keep up to date related information of current stock trends. It will help you to collect stock related information and you will gain knowledge.

So, it’s time to start: Read.! Read.! Read.! And stay connected with the world of stocks. I hope this will be helpful for you.

How to invest in share market in India?

Nowadays, Indian economy is increasing faster. There is no doubt; it is one of the best rising economies of the world. A stock market is the best indication of the economy because the stock market of India is roaring. The Indian share market is no doubt a profitable platform to increase investment.

Most of the people want to invest in shares and due to this, they search “how to invest in share markets” over the internet. The best benefit of investing in the share market is that you do not require a huge investment. You can start with little investment and go for big ones later on. There are some share market tips that will solve your all queries related with how to invest in share market of India.

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Get a Broker

First of all, you need to take help of individuals or companies which have licensed by SEBI to buy and sell shares. These are registered to buy and sell shares on the markets and well-known as brokers. Brokers can be companies, individuals and online agencies that are registered and certified by Securities and Exchanges Board of India (SEBI) that control the share market. You need to search a reliable broker to invest in the share market. You also can approach different companies, which are qualified to deal with securities in the market.

Open Demat and Trading Account

You will require a demat & trading account. This account will include the stocks or shares on your name that same will reflect in your stock collection. You can’t hold shares in physical form or store them physically. It will add the shares you purchase from the market through your broker in your account in your name. These accounts are necessary to invest in the share market.

Depository Applicant

You also need to be aware of a depositary participant. There are 2 depositories in India means NSDL that stand for National Securities Depository Limited and CDSL that stands for Central Depository Services Limited. These depositories have agents in the type of depository participants who provide an account to collect the shares you have.

Buying and Selling

You need to tell your broker for buying or selling shares about which share and what quantity you want to purchase at which cost. The buying and selling are done in two exchanges that are BSE mean Bombay Stock Exchange and NSE, National Stock Exchange. These are the merely two exchanges in the India where shares’ buying & selling and happen.

A good economic knowledge is a major key to the profit in the stock market. You need to know the fundamentals earlier entering in the stock world. Moreover, stock trading tips are extremely necessary for all the traders to have a superior idea about the stocks that are valuable to be investing in. If you do not track the flow of the stock marketplace, then you are possible to get yourself on the wrong way. You can take the help of stock advisory company or the stock person that deal in diverse stocks such as a broker.