New markets have opened for investors that are helping to raise such huge amounts of money. It all started with stock markets, forex trading, mutual funds and now trading in equity. It is the best way to invest in order to get best money.
What is equity derivatives according to Finance?
Every term has a practical and theoretical meaning. According to the theory, equity derivatives are a separate class of derivatives whose value is less derived from one or more underlying securities of equity. The two most common equity derivatives are option and futures. Equity and derivatives play a major role in this market.
What is an equity trading?
There are a lot of times, where equity and stock trading are used in similar terms. However, they share minor differences. Equity trading can be defined as the purchase or sale of various company stocks that can be done through one of the major stock exchanges. In an equity trading, a particular trade can be easily placed by the owner of the shares. This is done through brokerage account or by and agent or a particular broker. This is similar to stock trading.
Sometimes this equity derivatives trading is considered to be complex as compared to other trading. The derivative market in our country, just like its counterpart from abroad is gaining huge significance. The equity derivatives was introduced in the year 2000 and it’s become quite popular in our country.
These underlying assets can be stocks, indices, commodities, currencies, various exchange rates. These are all financial instruments that help in order to make profits. The value of these products are derived from various underlying assets.
The value of such underlying assets keep changing every now and then. Let’s take this into consideration that a stock’s value may increase or decrease, then the exchange rate of currencies may change, all the various indices may fluctuate and rise and fall, commodity prices may go up and down. All these changes may help an investor to make profits but they can also cause losses. This is where derivatives come into the picture. This helps you to make additional profits by correctly all the guessing of future prices, or it could act as a safety pad from losses in the stock market, where the underlying assets are traded for in the market.
Following are the participants in the derivatives trading markets :
Hedgers : These are the traders who protect themselves from risk involved in price movements.
Speculators : Look for opportunities to take risk.
Margin Traders : Use payment mechanism for carrying out trade.
Arbitrageurs : Use the imperfections of the market for their advantage
Are you planning to start investing in the equity derivative markets, then it is essential for you to do your research and do proper planning. Suhas is an expert professional in the field of equity markets.