“EVALUATION STUDY ON PERFORMANCE AND

PRACTICES OF SELECTIVE FUTURES AND

OPTIONS”

Dissertation submitted in partial fulfilment of the requirements for

the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

of
BANGALORE UNIVERSITY

By
PARAMESHWAR BHAT
P03AD21M0160

Under the guidance of

Dr. RAMAMURTHY B.M
Department of Management Studies - MBA

Bangalore University

2022–2023
 DECLARATION BY THE STUDENT

I hereby declare that “EVALUATION STUDY ON PERFORMANCE AND

PRACTICES OF SELECTIVE FUTURES AND OPTIONS” is the result of
the project work carried out by me under the guidance of Dr. Ramamurthy
B.M, Associate Professor Department of Management Studies - AIMS Institutes
Bangalore in partial fulfilment for the award of Master’s Degree in Business
Administration by Bangalore University.

I also declare that this project is the outcome of my own efforts and that it has
not been submitted to any other university or Institute for the award of any other
degree or Diploma or Certificate.

Place: Bangalore Name: Parameshwar Bhat

Date: Register Number: P03AD21M0160

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Name of the Student : Parameshwar Bhat

Registration Number : P03AD21M0160

Title of Project :“Evaluation study on performance and

practices of selective futures and options”

Name of the Guide : Dr. Ramamurthy B.M

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(Acceptable maximum limit of similarity 25%)

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 ACKNOWLEDGEMENT

I convey my sincere gratitude to Project Guide Dr. Ramamurthy B.M Associate

Professor - Department of Management Studies, AIMS Institutes Bangalore as
my instructor for his timely guidance and continued inspiration and
encouragement for accomplishing qualitative internship project.

I sincerely express my profound gratitude Dr. Sarvana Kumar V. Program

Manager - AIMS Institutes Bangalore for extending greater support and
assistance to complete internship project.

I wish to express my profound gratitude to the AIMS Institutes for invaluable

support and guidance throughout the duration of this project. I extend my
heartfelt thanks to Dr. Kalpana Venugopal, The Program Director of AIMS
Institutes and the entire MBA department for their unwavering commitment to
the successful execution of this project. Without their mentorship and
supervision, this endeavour would have remained an unattainable aspiration.

I also extend my wholehearted thanks to Mr. Subray Anant Hegde, Managing

Director at Shalmala Securities Private.Ltd, Project Guide as my instructor for his
timely guidance and continued inspiration and encouragement for accomplishing
qualitative internship project.

Finally, I convey my sincere regards and thankfulness to all those, who had
supported in my internship journey.
 TABLE OF CONTENTS

PARTICULARS
CHAPTER PAGE NO.
NO.
01 Introduction 2-35
1.1. Theoretical background of the study
1.1.1. Introduction of Derivatives
1.1.2. Meaning of Derivatives
1.1.3. Dimensions of the study
1.1.4. Contributions of the study
1.2. Overview of Derivatives
1.2.1. Major players in derivative market
1.2.2. Risks involved in derivatives
1.2.3. Derivatives Exchanges in India
1.2.4. Need for derivatives in India
1.2.5. Factors driving the growth of derivatives
1.2.6. History of derivative Markets in India
1.3. Overview of Futures and Options
1.4. Futures contract
1.5. Options contract
1.6. Internal and external factors influencing
the futures and options

02 Company Profile 36-47

2.1. Company History
2.2. Vision, Mission and Service Profile
2.3. Product / Service profile
2.4. Competitors profile
2.5. Organisational Structure
2.6. Swot analysis
2.7. Company achievements / awards
2.8. Future growth and prospects
 PARTICULARS
CHAPTER PAGE NO.
NO.

03 Research Design and Methodology 48-60

3.1. Literature Review

3.1.1. List of findings from literature Review
3.2. Statement of the Problem
3.3. Need of the Study
3.4. Scope of the Study
3.5. Research Questions
3.6. Objectives of the study
3.7. Operational Definitions of the Study
3.8. Research Methodology
3.9. Data Collection
3.10. Sampling Design
3.10.1. Sampling Plan
3.10.2. Sampling Method
3.10.3. Sampling Frame
3.10.4. Sampling Unit
3.10.5. Sampling Size
3.10.6. Plan of Analysis
3.11. Limitations of the Study
3.12. The Chapter Scheme

04 Data Analysis and Interpretations 61 - 109

05 Summary of Findings, Conclusions and

Recommendations
110 - 115
5.1. Findings
5.2. Conclusions
5.3. Recommendation
5.4. Management Lessons learned

Bibliography 116 - 117

Annexures 118 - 121

Plagiarism Report 122

 List of Tables

Table Description / Particulars Page No.

No.
4.1 Have you ever invested in derivatives? 62

4.2 Age group you belongs to? 63

4.3 Your occupation? 64

4.4 What is your annual income? 65
4.5 How would you rate the risks associated with Options 66
and Futures?
4.6 How familiar are you with the concepts of futures and 67
options trading?
4.7 Have you actively traded futures and options in the past 68
2 year?
4.8 What factors influenced your decision to trade futures 69
and options?
4.9 How often do you engage in trading futures and options? 70

4.10 How would you rate the overall performance of the 71

futures and options you've traded?

4.11 What metrics do you use to assess the performance of 72

your trades?
4.12 Do you track and analyse your trading data to improve 74
yourperformance?
4.13 How important is back testing in your trading strategy 75
development?
4.14 What factor do you consider for trading in Options and 77
Futures?
4.15 What types of futures and options do you typically 79
trade?
4.16 What trading strategies do you commonly employ? 80

4.17 Table showing the market and futures prices of State 86

Bank of India
4.18 Table showing the market and futures prices of ICICI 92
Bank
4.19 Table showing the market and futures prices of Axis 98
Bank
4.20 Table showing the market and futures prices of Kotak 104
Mahindra Bank
 List of Graphs / Figures
Graph /
figure No. Description / Particulars Page No.

4.1 Graph showing the no.of respondents who invested in 62

derivatives
4.2 Graph showing age group of the respondents 63

4.3 Graph showing occupation of investors 64

4.4 Graph showing investors income level 65

4.5 Graph showing risks associated with options and futures? 66

4.6 Graph showing how much familiar respondents with the 67

concepts of futures and options trading
4.7 Graph showing respondents who actively traded futures 68
and options in the past 2 year
4.8 Graph showing factors influenced the respondents to 69
trade futures and options
4.9 Graph showing how often the respondents engage in 70
trading futures and options
4.10 Graph showing rate of overall performance of the 71
futures and options investors traded
4.11 Graph showing the metrics respondents use to assess the 73
performance of their trade
4.12 Graph showing the investors performance after tracking 74
and analysis of trading data
4.13 Graph showing the importance of back testing in trading 76
strategy development
4.14 Graph showing the factors respondents consider for 78
trading in Options and Futures
4.15 Graph showing the types of futures and options 79
investors typically trade
4.16 Graph showing trading strategies investors commonly 80
employ
4.17 Graph showing the price movement of Spot and Futures 91
of State Bank of India
4.18 Graph showing the price movement of Spot and Futures 97
of ICICI Bank
4.19 Graph showing the price movement of Spot and Futures 103
of Axis Bank
4.20 Graph showing the price movement of Spot and Futures 109
of Kotak Mahindra Bank
Evaluation study on performance and practices of selective Futures and Options

Executive Summary
This project report provides the outcomes through assessment study that was carried
out to evaluate the performance and procedures related to certain futures and options
on the financial markets. This study's main goals were to evaluate the performance
results of particular derivatives instruments and to look at the strategies used by
market players in risk management and trading.

The approach for the study involves a thorough gathering of information from
dependable sources, including previous pricing information, trade volume, and
economic indicators. Key financial parameters, including as returns, volatility
measures, and risk-adjusted returns, were calculated in order to analyse
performance. The research also explored the underlying causes of performance,
such as market trends, macroeconomic data, and legislative changes.

The study revealed that risk management practises are crucial, highlighting the
significance of market players' use of hedging, diversification, and other risk
reduction techniques. In order to increase the general appeal of futures and options
as investment and trading instruments, the study investigated how these methods
helped to stabilise returns and manage possible downside risks.

The study also looked at the liquidity dynamics of the chosen derivatives instruments,
assessing how trading volumes affected price effectiveness and bid-ask spreads. We
emphasise informed decision-making as the key to success in these markets, driven by
a thorough grasp of the underlying assets and market trends.

In conclusion, this assessment research helps to advance knowledge of the

performance dynamics and best practises related to certain futures and options. This
study provides helpful insights for investors, traders, and financial professionals
aiming to navigate the complexities of derivative markets and optimise their trading
and investment outcomes by illuminating the interaction between market
conditions, risk management tactics, and regulatory influences.

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Evaluation study on performance and practices of selective Futures and Options

CHAPTER 1
INTRODUCTION

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Evaluation study on performance and practices of selective Futures and Options

1.1. THEORETICAL BACKGROUND OF THE STUDY:

1.1.1. INTRODUCTION OF DERIVATIVES:

The market for derivative goods, most notably forwards, futures, and options, came
into existence as a result of risk-averse economic actors' need to protect themselves
against uncertainties brought on by changes in asset values. The financial markets
are notorious for having extremely high levels of volatility by nature. By fixing asset
prices, derivative products allow for the partial or complete transfer of price risks.
These often have little effect on the variations in the pricing of the underlying assets
as risk management tools. Derivative products, on the other hand, reduce the effect
of asset price volatility on the profitability and cash flow condition of risk-averse
investors by locking in asset prices.

1.1.2. MEANING OF DERIVATIVES:

Derivative is a financial product whose value is derived from the value of one or
more basic variables, called bases (underlying asset, index, or reference rate), in a
contractual manner. The underlying asset can be equity, forex, commodity or any
other asset.

A derivative is a product whose value is 'derived' from another underlying asset or

a group of securities. These incredibly adaptable products allow traders to take on
highly leveraged bets at cheap transaction costs. Recent years have seen a rise in the
importance of derivative products including index futures, stock futures, index
options, and stock options as tools for price discovery, portfolio diversification, and
risk hedging in stock markets throughout the globe.

Introduction of derivative products, however, has not always been perceived in a

positive light all over the world. In reality, it is viewed as a market for speculators,
and there has long been fear that this may negatively affect the spot market's
volatility. Recent studies, however, support the claim that the introduction of these
products not only expanded markets but also had a key role in lowering volatility in
the spot markets.

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Evaluation study on performance and practices of selective Futures and Options

1.1.3. DIMENSIONS OF THE STUDY:

• Market Performance Analysis: This dimension involves assessing the historical
and current performance of the selected futures and options in terms of returns,
volatility, and risk-adjusted metrics.

• Trading Strategies and Practices: Examining the trading strategies employed by

market participants, their risk management techniques, and how these strategies
impact the performance of the derivatives.

• Regulatory Compliance: Evaluating the adherence of market participants to

regulatory requirements and investigating the impact of regulatory changes on
the derivatives' performance.

• Market Microstructure Analysis: Investigating the structure of the market,

including order flow, market makers, and the impact of order book dynamics on
derivatives performance.

• Risk Management Practices: Assessing how market participants manage and

mitigate risks associated with futures and options trading.

• Derivatives Education and Awareness: Examining the level of knowledge and

awareness among traders and investors regarding the selected derivatives, and
how this influences their practices and performance.

• Investor Behaviour and Sentiment: Analysing investor behaviour and sentiment

related to these derivatives, including speculative activities and sentiment-
driven trading.

• Comparative Analysis: Comparing the performance and practices of the selected

futures and options with other similar instruments or markets to identify relative
strengths and weaknesses.

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Evaluation study on performance and practices of selective Futures and Options

1.1.4. CONTRIBUTIONS OF THE STUDY:

Here are the potential contributions of the study on the performance and practices
of selective Futures and Options to business, society, and academia.

➢ BUSINESS:
1) Risk Management and Strategy Improvement:
Businesses and financial institutions can benefit from insights into effective risk
management strategies and trading practices in futures and options. This knowledge
can help them enhance their risk mitigation efforts and trading strategies.

2) Investment Decision-Making:
Investors and fund managers can make more informed investment decisions based
on the study's findings, potentially leading to better returns and reduced risks in their
portfolios.

3) Enhanced Market Participation:

The study can encourage businesses to participate more actively in derivatives
markets, potentially boosting market liquidity and economic growth.

➢ SOCIETY:
1) Market Transparency:
A better understanding of the derivatives market can contribute to market
transparency, reducing the potential for market manipulation and unethical
practices.

2) Financial Literacy:
The study's outcomes can contribute to improved financial literacy among the
general public. Understanding the dynamics of futures and options can empower
individuals to make better financial decisions and secure their financial future.

3) Consumer Protection:
Insights from the study can inform policymakers and regulatory authorities on
necessary consumer protection measures, ensuring that financial products are
transparent and accessible to all without excessive risks.

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➢ ACADEMIA:
1) Research Advancement:
The study can serve as a valuable addition to academic research on derivatives and
financial markets. It can provide data, methodologies, and insights for scholars and
students to further their understanding of complex financial instruments.

2) Educational Resources:
The study can be utilised as a tool at academic institutions to introduce to students
to the concept of the futures and options. It helps the students to gain knowledge in
the field.

1.2. OVERVIEW OF DERIVATIVES:

Financial products known as derivatives get their value from underlying assets,
indices, or reference rates. They are frequently used for risk management,
speculating, and hedging purposes. The four main types of derivatives are as
follows:

DERIVATIVE MARKET

OTC Derivatives Exchange - Traded

Market Derivatives Market

Forwards Swaps Options Futures

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Types of Derivatives:
1. Forwards:
Forwards are agreements between two parties to buy or sell an asset at a specified
price on a future date. Unlike futures contracts, forwards are not standardized and
are often customized to suit the needs of the parties involved.
• Customization: Since forwards are negotiated directly between the parties, they
offer more latitude in terms of contract size, expiration period, and other
parameters.
• Over-the-Counter (OTC): Forwards are typically traded over-the-counter,
meaning they are privately negotiated rather than being traded on an exchange.

2. Swaps:
Agreements between two parties to exchange cash flows based on various financial
instruments or indices are known as swaps. Using swaps, one may manage risk,
change cash flow patterns, or benefit from competitive advantages.
• Interest Rate Swaps: The most common type of swap, involving the exchange
of fixed-rate and floating-rate interest payments.
• Currency swaps: Involve exchanging interest and principal payments made in
one currency for payments made in a different currency.
• Commodity swaps: Involve the trading of cash flows dependent on changes in
a commodity's price.

3. Options contracts:
Options provide the holder with the right, but not the obligation, to buy (call option)
or sell (put option) an underlying asset at a predetermined price (strike price) on or
before a specified expiration date. Options are versatile and can be used for various
strategies.
• Call Options: Give the holder the right to buy the underlying asset at the strike
price before or on the expiration date.
• Put Options: Give the holder the right to sell the underlying asset at the strike
price before or on the expiration date.

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• Types: Options can be categorized further into American options (exercisable at

any time before the expiration date) and European options (exercisable only on
the expiration date).

4. Futures contracts:
Futures contracts are standardised agreements to purchase or sell an item at a
defined price on a future date. These contracts are exchanged on exchanges and are
employed for speculative or risk management objectives. Various commodities
(such as crude oil, gold, and agricultural goods), financial instruments (including
stock indices, interest rates, and foreign exchange rates), and even cryptocurrencies
can be used as the basis for futures contracts.
Futures contracts are suited for exchange trading because of their standardisation in
terms of contract size, expiration date, and other features.

KEY DEVELOPMENTS:

• Regulatory Framework: The SEBI plays a crucial role in regulating the

derivatives market in India. It continuously updates rules and regulations to
ensure transparency, risk management, and investor protection.

• Market Expansion: Over the years, the derivatives market in India has expanded
to include a wide range of instruments beyond equity derivatives, such as
commodity derivatives and currency derivatives.

• Market Participation: The availability of derivatives has attracted a diverse

group of participants, including retail investors, institutional traders, hedgers,
and speculators.

• Innovations: The introduction of innovative products like weekly options and

options on volatility indices (VIX) has provided traders with more sophisticated
tools to manage risk and speculate.

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• Technology Advancements: The Indian derivatives market has embraced

technology, with electronic trading platforms and advanced risk management
systems becoming integral to the market's functioning.

• Global Linkages: The Indian derivatives market has started to gain recognition
internationally, with efforts to establish linkages between Indian and global
exchanges.

1.2.1. MAJOR PLAYERS IN DERIVATIVE MARKET:

Different parties participate in the derivatives market, each with specific roles,
objectives, and motives. Some of the major players in the derivatives market are
listed below:
1. Hedgers
2. Speculators
3. Arbitrageurs

1. Hedgers:
Derivatives are used by hedgers to manage and reduce risks related to fluctuations
in the value of the underlying assets. They are often the primary reason behind the
creation of derivatives.

2. Speculators:
Speculators seek to profit from changes in the value of the underlying assets without
necessarily having a direct interest in those assets. They take risks in the expectation
that they would earn by properly predicting market trends.

3. Arbitrageurs:
The main objective of arbitrageurs is to make risk free profits. These possibilities
frequently appear in the market but last for only a very little period of time, so they
could be generating money without investing any of their own money. They
specialise in simultaneous buying and sales in various markets, gaining money off
the price discrepancy between the two centres.

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1.2.2. RISKS INVOLVED IN DERIVATIVES:

A variety of risks are associated with derivatives because of their complexity and
potential for large financial exposure. Here are some of the risks associated
with derivatives:

1. Market Risks:
Derivatives are sensitive to changes in the value of the underlying assets, indexes,
or benchmarks. You run the risk of suffering losses if the market swings against your
position. Dealing with heavily leveraged derivatives increases market risk
significantly.

2. Liquidity Risk:
Some derivatives might not be as liquid as others, making it difficult to buy or sell
them at desired prices. This can lead to challenges when trying to close out positions
quickly, potentially resulting in losses.

3. Credit Risk:
A counterparty risk exists in derivative trades. The opposing party may sustain
losses if one side fails to uphold its obligations. When derivatives are exchanged
through clearinghouses, which serve as middlemen and manage counterparty risk,
this risk is reduced.

4. Regulatory Risk:
Regulatory modifications may have an effect on how derivatives are used, traded,
and priced. The trading of derivatives, the margin requirements, and the reporting
requirements may all be impacted by new rules.

5. Legal and Documentation Risk:

Derivative contracts are subject to the terms and conditions set forth in legal
agreements. These agreements should be clear and unambiguous to avoid conflicts
and financial losses.

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1.2.3. DERIVATIVES EXCHANGES IN INDIA:

Exchange traded equity and commodity derivatives markets are regulated by

Securities and Exchange Board of India (SEBI). The Forward Markets Commission
(FMC) oversaw the Indian exchange traded commodity derivatives market before it
merged with SEBI. Futures on foreign exchange and interest rates are jointly
governed by SEBI and the Reserve Bank of India (RBI).

These exchanges are essential in providing market players a platform to trade and
manage risk using derivative products. The major derivatives exchanges in India
are:
1. National Stock Exchange of India (NSE):
The National Stock Exchange is one of India's biggest and most well-known stock
exchange. It provides a wide variety of derivative products, such as index
derivatives like Nifty futures and options as well as equity derivatives like stock
futures and options. The NSE is renowned for the liquidity of its derivative markets
and for its cutting-edge trading technologies.

2. Bombay Stock Exchange (BSE):

The Bombay Stock Exchange is another major stock exchange in India. It also
provides a platform for trading various derivative instruments, including equity
derivatives and index derivatives. BSE has been actively working to enhance its
derivatives segment to attract market participants.

3. Multi Commodity Exchange of India (MCX):

MCX is a well-known commodities exchange in India. It offers a variety of
commodity derivatives, including futures and options contracts, for a variety of
commodities, including metals, energy, agricultural products, and more. It primarily
concentrates on trading commodities.

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1.2.4. NEED FOR DERIVATIVES IN INDIA:

The Indian financial system heavily relies on derivatives to meet the needs of
investors, companies, and market participants. Here are a few factors emphasising
the demand for derivatives in India:
• Risk management: Derivatives offer a powerful instrument for controlling
monetary risks. Businesses can utilise derivatives to protect themselves from
price fluctuations that could negatively affect their profitability and operations
by hedging against price volatility in commodities, currencies, and interest rates.
• Price Discovery: In markets, derivatives help with effective price discovery.
Derivatives pricing assist investors and companies in predicting future price
fluctuations and making wise decisions by reflecting market expectations and
opinions.
• Opportunities for Hedging: Indian firms, especially those that are linked to
international markets, suffer risks due to currency changes and volatile
commodity prices. Businesses can manage these risks and concentrate on their
core business activities without being excessively exposed to market swings by
using derivatives like currency futures and commodity futures.
• Diversification: Derivatives provide investors a way to diversify their portfolios
beyond conventional asset types like equities and bonds. Investors may increase
their total portfolio diversification and improve their risk-adjusted returns by
adding derivatives like index futures or options.
• Enhancement of Liquidity: Trading in derivatives increases market liquidity,
making it simpler for participants to enter or leave positions without having a
large impact on prices. This liquidity may seep into the underlying markets,
aiding in more seamless market operation.
• Investment and speculation: Through the use of derivatives, traders and
investors can make predictions about price changes without having to hold the
underlying assets themselves. This may draw traders looking for quick profits
and increase market liquidity.

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• Reduced Transaction Costs: In some circumstances, using derivatives to get

exposure to specific asset classes might be more affordable than making direct
investments in the underlying assets. For small enterprises and retail investors
in particular, this may be important.
• Risk Transfer: The transfer of risk from those who are risk-averse to those who
are prepared to take on risk is made possible via derivatives. This risk transfer
mechanism may help maintain market stability in general.
• Global Integration: Derivatives provide ways for Indian participants to
manage risks related to foreign trade and investment operations as India's
economy becomes more connected with global markets.

1.2.5. FACTORS DRIVING THE GROWTH OF DERIVATIVES:

The market for derivatives has experienced extraordinary expansion during the
past three decades. At exchanges across the world, a wide range of derivative
contracts have been introduced.
• Increased volatility in asset prices in financial markets,
• Greater integration of domestic and global financial systems;
• Marked improvement in communication facilities and sharp decline in their
costs,
• The creation of risk management instruments with greater sophistication that
give economic agents a wider range of risk management techniques, and
• Derivatives market innovations that best balance risk and profits over a larger
financial asset base resulting in better returns, lower risk, and more transactions
relative to individual financial assets expenses.
• Restructuring of the corporate sector.
• The privatization of state-owned enterprises.

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1.2.6. HISTORY OF DERIVATIVE MARKETS IN INDIA:

Derivatives have a long history in India. Indian markets have seen derivatives since
the late 19th century, even though the contemporary form of derivative trading has
barely been active for two decades. However, there were some bumps along the
way. Here is a timeline of events that occurred in the Indian derivative market over
time.
1875 Bombay Cotton Trade Association started Futures trading
Early 1900s India becomes one of the largest Futures Market
1952 Indian government banned cash settlement and options trading
and derivatives trading shifted to informal forwards markets
1956 Enactment of the Securities Contracts (Regulation) Act which
prohibited all Options in securities

1969 Issue of Notification which prohibited forward trading in

securities

1995 Promulgation of the Securities Laws (Amendment) Ordinance

which withdrew prohibition on options
1996 SEBI setting up of L. C. Gupta Committee to develop
regulatory framework for Derivatives trading in India

1998 L. C. Gupta Committee turns in their report & Constitution of

J, R. Varma Group to develop measures for risk containment
for derivatives

2000 Withdrawal of 1969 Notification

May 2000 SEBI granted approval to NSE and BSE to commence trading
of derivatives
June 2000 Trading in index futures commenced
April 2001 Clearing Corporation of India limited (CCIL) was set up
June 2001 Trading in Equity index options commenced (NSE)
July 2001 Trading in stock options commenced (NSE)
Nov 2001 Trading in stock futures commenced
June 2003 Trading of Interest rate futures commenced (NSE)
2008 Trading of Currency Futures commenced
Sep 2015 Subsequent to the passing of the Finance Act 2015, Forward
Markets Commission (FMC) was merged with SEBI

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1.3. OVERVIEW OF FUTURES AND OPTIONS:

The history of futures and options in the Indian market dates back to the early 2000s
when these derivatives were introduced to provide investors with tools for risk
management, speculation, and hedging. Here's a brief historical view of the
development of futures and options in the Indian market:

Futures Market:
Early Years and Introduction (2000-2002): The National Stock Exchange of India
(NSE) launched index futures trading on June 12, 2000, with the introduction of
S&P CNX Nifty futures. This marked the first step towards derivatives trading in
India. The introduction of index futures allowed market participants to speculate on
the future direction of the stock market without actually buying or selling individual
stocks.
• Single Stock Futures (2001): In November 2001, the NSE introduced single
stock futures, enabling investors to trade futures contracts on individual stocks.
This brought more diversity to the derivatives market and allowed investors to
hedge or speculate on the performance of specific companies.
• Regulatory Framework (2002-2004): The regulatory framework for derivatives
trading was being developed during this period. The SEBI issued guidelines for
risk containment measures in the derivatives segment in 2003, focusing on
position limits, margining, and surveillance mechanisms to ensure market
stability.
• Commodities Derivatives (2003): The Commodities Derivatives Act, 2003, was
enacted to regulate commodities derivatives markets in India. This paved the
way for the introduction of futures and options contracts on commodities such
as gold, silver, and agricultural products.
• Mini Contracts and Expansion (2008-2014): The NSE introduced "Mini"
contracts in 2008, aimed at retail investors. These contracts had smaller contract
sizes and lower margin requirements, making derivatives trading more
accessible to a wider range of participants. During this period, the Indian
derivatives market continued to expand in terms of the number of contracts and
participants.

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• Innovations (2015-2016): The NSE introduced "Weekly Options" in 2015,

allowing traders to speculate on short-term market movements. Additionally,
SEBI allowed the introduction of options on individual stocks in 2016,
providing more trading opportunities and strategies for investors.

Options Market:
• Introduction of Stock Options (2001-2006): The NSE introduced stock options
in July 2001, allowing investors to trade options on individual stocks. This
provided an avenue for market participants to hedge their positions or speculate
on the price movements of specific stocks. The options market gained traction
over the next few years.

• Index Options and Regulatory Changes (2007-2013): In June 2007, SEBI

allowed options trading on the NSE in index options. This marked a significant
development as investors could now use options contracts to hedge or speculate
on the broader market's performance. Regulatory changes were made to ensure
adequate risk management measures in the options segment.

• Options on Individual Stocks (2016 and beyond): SEBI's decision to allow

options trading on individual stocks in 2016 further enhanced the options
market's depth and breadth. Traders could now utilize options on both indices
and individual stocks to implement various trading strategies.

These historical developments highlight the gradual evolution of the Indian

derivatives market, from the introduction of basic index futures to the introduction
of options on various asset classes and the continual refinement of risk management
mechanisms. The growth of this market has been influenced by regulatory changes,
technological advancements, and market participants' increasing understanding of
derivatives' potential benefits and risks.

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1.4. FUTURES CONTRACT:

➢ INTRODUCTION TO FUTURES CONTRACT:

A futures contract is a standardised agreement to purchase or sell a certain
underlying instrument at a predetermined price at a future date, exchanged on a
futures exchange. The delivery date is the date in the future when date of final
settlement. The term "futures price" refers to the fixed price. The price of the
underlying asset on the delivery date is called the settlement price. Typically, the
settlement price moves closer to the futures price on the date of delivery. A futures
contract offers the holder the right and obligation to buy or sell, as opposed to an
options contract, which provides the buyer with the right, but not the obligation, and
the option writer's (seller's) the obligation, but not the right. The holder of a stake in
futures may terminate the commitment by: effectively, he must either sell his long
position or buy back his short position. Completing the contract obligations and the
futures position. Futures contracts are exchange traded derivatives. Exchange serves
as counterparty on all contracts, which also establishes margin requirements, etc.

➢ BASIC FEATURES OF FUTURES CONTRACT:

1. Lot Size:
In the equities market, we can only purchase bundles of shares of a specific script;
for example, if we want to buy future of reliance, the lot size is 250 shares, therefore
you cannot buy a single share. Have to purchase whole lot. For example: - in NIFTY
lot size is 50 shares.

2. Settlement:
The process by which the financial obligations of a derivative contract are met,
resulting in the transfer of money or other assets between the parties, is referred to
as settlement in derivatives. Financial instruments known as derivatives derive their
value from underlying assets like stocks, bonds, commodities, currencies, or interest
rates. Depending on the type of derivative and the contract's provisions, different
settlement procedures may be used. In the world of derivatives, there are primarily
two types of settlement: cash settlement and physical settlement.

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• Cash Settlement:
In a cash settlement, rather than trading the underlying asset itself, the parties to the
derivative contract exchange cash payments based on changes in the price of the
underlying asset. This approach is frequently employed in derivatives contracts
where it may be challenging to physically deliver the underlying product or where
the main goal of the contract is to speculate on price movements.

• Physical Settlement:
When a contract reaches its expiration date or settlement date, the parties exchange
the actual underlying asset. In derivatives contracts involving commodities or other
tangible assets that may be physically delivered, physical settlement is frequently
used.

3. Margin:
Both buyers and sellers must make margin deposits for futures contracts. A
clearinghouse, which serves as a third party to the contract and ensures performance,
holds this margin deposit. Margin deposits help to reduce risk and ensure that both
parties to the contract fulfill their obligations.

4. Expiry:
Every futures contract has a delivery date, also known as an expiration date, that
indicates when the contract will mature. The contract holder must decide on or
before this date whether to settle the contract by making the underlying asset
available for delivery (for sellers) or taking delivery (for buyers), or by closing out
the position with an offsetting trade. For many equity index and interest rate futures
contracts, this happens on the Last Thursday of certain trading month.

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➢ TYPES OF FUTURES:

The futures are split into two categories based on the underlying asset from which
they are derived:
1. Index Futures
2. Stock Futures

1. Index Futures:
A futures contract is a standardised contract to purchase or sell a particular security
at a predetermined price at a future date. As the name implies, an index future is a
future based on the index, meaning that the index itself serves as the underlying.
Since index futures are cash settled, there is no underlying security or equity that
must be delivered to complete the obligations. The contract's value is derived from
the underlying index, just as other derivatives. In this instance, the underlying
indices will be the various eligible indices and as occasionally permitted by the
Regulator.

2. Stock Futures:
A standardized contract to purchase or sell a certain stock at a predetermined price
and future date is known as a stock futures contract. As the name implies, a stock
future is a future on a stock, meaning that a stock serves as the underlying. The
underlying stock is what gives the contract its value. Single stock futures are cash
settled.

➢ PARTIES IN THE FUTURES CONTRACT:

The buyers and the seller are the two parties in a futures contract. The person who
purchases a futures contract is one who is LONG on it, while the person selling a
futures contract is one who is SHORT on it.

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Following are the pay-off for the buyers and the sellers of the futures contracts:

1. Pay-off for a buyers of futures:

• Case 1: The buyers bought the futures contract at (F); if the futures price goes
to (E1) then the buyer gets the profit of (FP).
• Case 2: The buyers get loss when the futures price goes less than (F); if the
futures price goes to (E2) then the buyer the loss of (FL).

2. Pay-off for a sellers of futures:

F = Futures Price
E1, E2 = Settlement Price

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• Case 1: The sellers sold the futures contract at (F); if the futures price goes to
(E1), then the sellers gets the profit of (FP).
• Case 2: The sellers gets loss when the futures price goes greater than (F); if the
futures price goes to (E2), then the sellers gets the loss of (FL).

➢ PRICING FUTURES:
The process of pricing futures includes determining the right price for a futures
contract depending on a number of variables, such as the current spot price of the
underlying asset, interest rates, the remaining time before expiration, storage fees
(if any), and market expectations.

The basic principle behind pricing futures is that the futures price should reflect the
expected future value of the underlying asset at the contract's expiration. This
concept is known as the "cost of carry" model. The following factors are considered
when calculating the cost of carry:

• Spot Price (S): This represents the underlying asset's current market value.

• Interest Rates (r): The price of borrowing money and keeping the asset until
the end of the contract. If interest rates are high, the cost of carry will also be
higher.

• Dividends (d): For assets that pay dividends, the expected dividends during the
contract's duration are subtracted from the cost of carry.

• Time to Expiration (T): The remaining time before the contract expires. The
longer the time to expiration, the higher the cost of carry.

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The cost of carry model can be expressed in a formula:

Futures Price = Spot Price × e^[(r - d) × T]

Where:
"e" is the base of the natural logarithm (approximately 2.71828)
"r" is the risk-free interest rate
"d" is the expected dividend yield
"T" is the time to expiration

Futures price is not necessarily the same as the spot price. There may be differences
between the two prices due to market factors such supply and demand imbalances,
geopolitical developments, economic data, and market sentiment. Traders often use
arbitrage strategies to take advantage of price discrepancies between the futures
price and the spot price. These tactics entail buying and selling related assets at the
same time in order to profit from the price difference. Futures markets are effective,
and a wide range of factors affect pricing. Pricing models are used by traders and
investors as recommendations, but the actions and expectations of all market players
ultimately decide actual market prices.

1.5. OPTIONS CONTRACT:

➢ INTRODUCTION TO OPTIONS CONTACT:

An option is a contract that gives the right, but not the obligation, to purchase or sell
the underlying asset at the stated price on or before the specified date or day. Those
who take long positions, i.e., buy options, are referred to as buyers or option holders,
while those who take short positions, i.e., sell options, are referred to as sellers or
option writers.

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When it comes to purchasing or selling the underlying asset, the option buyer has
the right but not the obligation, whereas the option writer is bound by the contract.
As a result, the option buyer will only exercise his option when the circumstances
are in his favour; nonetheless, if he does so, the option writer is then obligated to
uphold the terms of the contract.

➢ BASIC FEATURES OF OPTIONS CONTRACT:

1. Lot Size:
In the equities market, we can only purchase bundles of shares of a specific script;
for example, if we want to buy options of reliance, the lot size is 250 shares,
therefore you cannot buy a single share. Have to purchase whole lot. For example:
- in NIFTY lot size is 50 shares.

2. Settlement:
In options contracts, settlement describes the process of meeting the contractual
obligations, either by delivering the underlying asset or by paying in cash.

3. Premium:
The premium is the price paid by the option buyer to the option seller for the rights
provided by the contract. The current value of the asset, the strike price, the
remaining time before expiration, volatility, and interest rates all have an impact on
the premium.

4. Expiry:
Every options contract has a delivery date, also known as an expiration date, that
indicates when the contract will mature. The contract holder must decide on or
before this date whether to settle the contract by making the underlying asset
available for delivery (for sellers) or taking delivery (for buyers), or by closing out
the position with an offsetting trade. For many equity index and options contracts,
this happens on the Last Thursday of certain trading month or week.

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➢ TYPES OF OPTIONS:
The Options are divided into different categories based on a number of different
characteristics. The several categories of options are as follows.

1. On the basis of the underlying asset:

• Index Options: These options use an index as their underlying. Some options
are European while others are American. Index options contracts are cash
settled, just like index futures contracts. Generally index options are European
Style. European Style options are those option contracts that can be exercised
only on the expiration date.
• Stock Options: Options on Individual Stocks are options contracts using
individual stocks as the underlying. Stocks on which options are introduced are
chosen based on eligibility requirements and subject to regulator clearance.
These contracts are written in American form and are cash settled. Option
contracts that can be exercised on or before the expiration date are known as
"American Style Options."

2. On the basis of the market movements:

• Call Options (bullish):
Call options are used by traders who expect the price of the underlying asset to rise.
They are bullish on the future performance of the asset. The holder of a call option
may purchase the asset at the predetermined strike price. The call option is profitable
if the market price of the asset increases above the strike price.

• Put Options (Bearish):

Put options are used by traders who anticipate a fall in the price of the underlying
asset. They are pessimistic about the future performance of the asset. A put option
gives the holder the right to sell the asset at a predetermined strike price. The put
option is profitable if the market price of the asset decreases below the strike price.

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3. On the basis of the exercise of option:

• American Options:
American options can be exercised by the option holder at any time before or on the
expiration date. Most equity options traded on exchanges are American-style
options.

• European Options:
European options can only be exercised by the option holder on the expiration date
itself. European options are often used for index options and options on other
financial instruments.

➢ PARTIES IN THE OPTIONS CONTRACT:

In a call options contract, there are four main parties involved:

1. Call Option Buyer (Holder)
2. Call Option Seller (Writer)
3. Put Option Buyer (Holder)
4. Put option Seller (Writer)

1. Call Option Buyer (Holder):

The individual or entity that buys a call option, which provides them the right but
not the obligation to buy the underlying asset at a given strike price, is known as the
call option buyer.

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Pay-off for Buyer of a Call Options:

S – Strike price
E1 – Spot price 1
E2 – Spot Price 2
ITM – In the Money
ATM – At the Money
OTM – Out of the Money
SP – Premium / Loss
SR – Profit at spot price E1

• Case 1: (Spot Price > Strike Price)

The spot price (E1) is greater than strike price(S) then the buyer gets the profit. If
the spot price goes to (E1), then the buyer gets the profit of (SR); If the spot price
more than (E1) then profit also increases more than (SR).
• Case 2: (Spot Price < Strike Price)
The spot price(E2) is less than strike price(S) then the buyer gets the loss. If the spot
price goes to (E2), then the buyer gets the loss of (SP); if price goes down less than
(E2) then also his loss is limited to his premium (SP).

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2. Call Option Seller (Writer):

The call option seller is the individual or entity who sells a call option to the buyer,
granting them the right to buy the underlying asset at a specified strike price.

Pay-off for Seller of a Call Options:

S – Strike price
E1 – Spot price 1
E2 – Spot Price 2
ITM – In the Money
ATM – At the Money
OTM – Out of the Money
SP – Premium / Profit
SR – Loss at spot price E2

• Case 1: (Spot Price < Strike Price)

As the spot price(E1) of the underlying asset is less than strike price(S) then the
seller gets the profit of (SP); if price goes down less than (E1) then also his profit is
does not exceed (SP).
• Case 2: (Spot Price > Strike Price)
As the spot price(E2) of the underlying asset is more than strike price(S) then the
seller gets the loss of (SR); if price goes more than (E2) then the loss of the seller
also increases more than (SR).

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3. Put Option Buyer (Holder):

The individual or entity that buys a put option, which provides them the right but
not the obligation to sell the underlying asset at a particular strike price, is known
as the put option buyer.

Pay-off for Buyer of a Put Options:

S – Strike price
E1 – Spot price 1
E2 – Spot Price 2
ITM – In the Money
ATM – At the Money
OTM – Out of the Money
SP – Premium / Loss
SR – Profit at spot price E1

• Case 1: (Spot Price < Strike Price)

As the spot price(E1) of the underlying asset is less than strike price(S), then the
buyer gets the profit of (SR); if price goes down less than (E1) then also his profit
increases more than (SR).
• Case 2: (Spot Price > Strike Price)
As the spot price(E2) of the underlying asset is more than strike price(S) then the
buyer gets the loss of (SP); if price goes more than (E2) then the loss of the buyer
is limited to his premium (SP).

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4. Put option Seller (Writer):

The individual or entity that sells a put option to a buyer, entitling them to sell the
underlying asset at a predetermined strike price, is known as the put option seller.

Pay-off for Seller of a Put Options:

S – Strike price
E1 – Spot price 1
E2 – Spot Price 2
ITM – In the Money
ATM – At the Money
OTM – Out of the Money
SP – Premium / Profit
SR – Loss at spot price E1

• Case 1: (Spot Price < Strike Price)

As the spot price(E1) of the underlying asset is less than strike price(S), then the
seller gets the loss of (SR); if price goes less than (E1) then the loss of the seller is
also increase more than (SR).
• Case 2: (Spot Price > Strike Price)
As the spot price(E2) of the underlying asset is more than strike price(S), then the
seller gets the profit of (SP); if price goes more than (E2) then the profit of seller is
limited to his premium (SP).

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➢ FACTORS AFFECTING THE OPTION PRICING:

Different factors that affect the value of options have an impact on option pricing,
which is a crucial aspect of financial markets. Although there are alternative models
that consider more complex considerations, the Black-Scholes-Merton model is
used to calculate the theoretical fair value of European-style options (options that
can only be exercised at expiration). The model provides formulas for pricing both
call and put options.

For Call Options:

C = S * N(d1) - X * e^(-rt) * N(d2)

For Put Options:

P= X * e^(-rt) * N(-d2) - S * N(-d1)

Where:

C is the price of the call option.

P is the price of the put option.
S is the current price of the underlying asset.
X is the strike price of the option.
r is the risk-free interest rate.
t is the time to expiration (in years).
N() represents the cumulative standard normal distribution function.
d1 = (ln(S / X) + (r + (σ^2) / 2) * t) / (σ * √t)
d2 = d1 - σ * √t

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The following are the primary variables influencing option pricing:

• Underlying Asset Price (S): An important factor in determining the value of an
option is the current price of the underlying asset, such as a stock, index, or
commodity. Put options become more valuable as the price of the underlying
asset declines, and call options become more lucrative as the price of the
underlying asset rises.

• Strike Price (K): The option holder can purchase or sell the underlying asset at
the strike price, commonly referred to as the exercise price. In general, the value
of a call option grows when the strike price is lower than the current asset price,
and the value of a put option increases when the strike price is higher than the
current asset price.

• Time Until Expiration (T): The option's value increases with the amount of
time left before it expires. This is due to the fact that there is more time for the
price of the underlying asset to move in a positive manner. The time value of the
option reduces as the expiration date draws near.

• Volatility (σ): Volatility gauges how much the underlying asset's price will
fluctuate. The possibility for the price of the underlying asset to fluctuate
dramatically is increased with higher volatility, which is advantageous for both
call and put options. Option prices rise as volatility rises because there is a
greater chance that the option will be profitable.

• Interest Rates (r): The price of options is influenced by interest rates. Higher
interest rates raise the cost of holding the underlying asset, which can lower call
option value and raise put option value.

• Dividends (if any): Dividends for equities might influence option price. Higher
dividends typically result in lower call option values and higher put option
values. This is due to the fact that bigger dividends diminish the likelihood of
the underlying stock's price appreciating.

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• Market mood and Supply-Demand Dynamics: Inconsistent supply and

demand dynamics and market mood can have an impact on option pricing. Call
option prices might rise as a result of increased demand in response to
favourable news or sentiment regarding the underlying asset. On the other hand,
bad news or public opinion may increase interest in put options.

• Implied Volatility (IV): Implied volatility, which is determined from option

prices, is the market's anticipation of future price volatility. It's a factor in option
pricing models and is subject to adjustments in response to events and market
mood. Option prices rise in correlation with implied volatility, and vice versa.

➢ ELIGIBILITY CRITERIA FOR SECURITIES/INDICES

TRADED IN FUTURE AND OPTIONS:

The following are some typical requirements for securities or indexes to be eligible
for trading in the F&O segment:

• Market Capitalization: A specified minimum market capitalization

requirement must be met by the securities or index. This criterion is typically
set to make sure that the underlying asset has an adequate amount of liquidity
and market activity.

• Trading Volume: The asset or index must have a certain minimum volume of
trades over a given time frame. By doing this, traders can enter and exit positions
with a sufficient amount of liquidity without materially changing the market
price.

• Price Range: Trading in derivatives may not be appropriate for securities or

indexes with high price volatility. As a result, minimum and maximum price
thresholds for inclusion in the F&O segment are frequently set by exchanges.

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• Listing History: Before a securities or index is taken into consideration for the
F&O segment, there may be a requirement that it have a specific amount of
trading history on the exchange. This enhances its market presence and
trustworthiness.

• Delivery Method: Individual securities ought to be subject to mandatory

delivery in the cash section. This indicates that you should be able to receive the
actual shares if you purchase the security in the derivatives market and hold it
until it expires.

• Regulatory Approval: Securities or indices must get regulatory approval from

the relevant securities market regulator (such as the Securities and Exchange
Board of India - SEBI) in order to be included in the F&O segment.

• Corporate Governance and Financials: To guarantee the stability and

dependability of the security, one may also take into account the corporate
governance procedures and financials of the underlying companies.

• Market Representation: To provide a varied perspective of the market, the

index used to calculate index-based derivatives should include a specific number
of stocks and sectors.

• Liquidity: This requirement is very important. The underlying asset should be

sufficiently liquid to support derivative trading without leading to unwarranted
price changes.

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1.6. INTERNAL AND EXTERNAL FACTORS MAJORLY INFLUENCING

THE FUTURES AND OPTIONS GROWTH:

Both internal and external factors play significant roles in influencing the growth
of the industry. Here are the major factors within each category:

➢ Internal Factors:
• Market Participants and Behaviour: The behaviour and strategies of various
market participants, including retail investors, institutional investors, and
market makers, can significantly impact the growth and stability of the Futures
and Options industry.

• Product Innovation: The development and introduction of new derivative

products, strategies, and trading tools within the industry can stimulate growth
and attract more participants.

• Market Liquidity: The internal liquidity of the Futures and Options market is
essential. A deep and liquid market is more attractive to traders and investors,
fostering growth.

• Risk Management Practices: Effective risk management strategies and

practices employed by market participants can enhance the industry's credibility
and attractiveness to investors.

• Regulatory Framework: The effectiveness and adaptability of internal

regulations within the industry, including rules governing margin requirements,
position limits, and clearing and settlement procedures, can influence industry
growth and stability.

• Market Infrastructure: The efficiency and reliability of trading platforms,

clearinghouses, and other infrastructure components within the industry play a
vital role in its growth.

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➢ External Factors:
• Global Economic Conditions: The overall economic environment, including
factors like interest rates, inflation, and economic stability, can significantly
influence trading volumes and investment decisions in the Futures and Options
market.

• Geopolitical Events: Political instability, trade disputes, and other geopolitical

events can create market volatility and influence the demand for hedging and
risk management tools.

• Market Liquidity: External factors affecting market liquidity, such as capital

flows, investor sentiment, and overall market conditions, impact trading and the
growth of the industry.

• Technological Advancements: Rapid advancements in technology can affect

the industry by enabling more efficient trading and risk management strategies.

• Competition from Other Asset Classes: The attractiveness of other investment

options, such as equities, bonds, or alternative investments, can divert funds
away from the Futures and Options market.

• Regulatory Changes: Changes in regulatory policies and international

agreements can have a profound impact on the industry's growth by affecting
the ease of cross-border trading and market access.

• Commodity Prices: For commodity derivatives, fluctuations in underlying

commodity prices can greatly influence the demand for futures and options
contracts.

• Investors Sentiment: External factors like news and market sentiment can drive
speculative trading and impact the industry's growth.

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CHAPTER – 2
COMPANY PROFILE

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2.1. COMPANY HISTORY

Shalmala Securities Private ltd is a non- Government Company, incorporated on 08
May, 2000. It’s a private unlisted company and is classified as company limited by
shares. Company’s authorized capital stands at Rs l5.0 lakhs and has 35.0% paid up
capital which is Rs 5.25 lakhs. This is majorly in finance business from last l8 years
and currently, company operation is active. Current board members and director are
SUBRAY.A. HEGDE and GEETA.S. HEGDE.

RELIGARE Securities is one of the leading collectively structured monetary

establishments of India. The institution afford a large and various bunch of offering
ranging from broker of inventories and commodities, depository services, coverage
broking, advisory carrier of investment of mutual price range. RELIGARE
Securities is established and is operated via one of kind subsidiaries.

RELIGARE Securities is established by way of a vision of providing included

financial care operated with the aid of dating of agree with. It is a found inside the
idea of partnership to be able to reach every clients. The priority of the group is to
offer provider in capital marketplace functions. The institution is a affiliate of NSE
and OTCEI.

Brand Identity of Religare

Name: Religare is pushed from Latin word that’s stated to be “bind together”. The
call represents the nature of monetary carrier that the organization gives.

Symbol: The Religare person's name is joined with the image of a four piece of
paper clover. It defines the first-class of fortune that is objectives of every monetary
plans.
• Hope so as to constitutes the first piece of paper of the clover,

• Trust amount to the moment of piece of paper of the clover,

• Care amount to the third piece of paper, and,

• Good Fortune amount to the fourth piece of paper of the clover

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Religare presently dealing the with it’s handling operations in 3 foremost

regions lending:
SME Finance:
• SME Finance is small and average corporation financing targeted NBFC.
• It gives balance capital to the increase of SME’s.
• Presently activated in 32 sub division across the cities.
• Offers SME Working resources loan, secured loan to growth of commercial
enterprises, brief term change finance and other loans like industrial asset
mortgage, capital market mortgage, and private loan and so on.
Affordable Housing finance:
• Religare housing improvement finance agency ltd (RHDFC) is registered
underneath national housing institution. (NHI)
• Provides insurance for buy of residence, production of house, improvement
loans to low income groups.
Health insurance:
• Provides health insurance to corporate personnel, individual customers and
economic offering which comes beneath low income category.
• Religare health insurance(RHI) is initiated inside the 12 months July 2012, that
is currently working in 6l offices.
• Philosophy of RHI being “Customer Centricity”, which means greater weight is
given to its customers and their pride.
• The essential shareholders of RHI are Union Bank of India and Corporation
Bank.
• RHI gives insurance like vital infection, personal twist of fate, coverage to top-
up, worldwide journey profits and maternity insurance and additionally offers
organization coverage for health and injuries for corporate employees.
Retail Broking:
• Retail Broking ltd is a give somebody the loan of securities in marketplace firms
in India which presently presenting its offering to more than l0 lakh plus client
each online and offline.
• Presently operating in 400 plus cities offering its services in Equity, legal tender
and property.

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2.2. Vision, Mission and Service Profile:

VISION
To “be a worldwide issuer of great in elegance funding products and services”.

MISSION
To “create a patron-centric scale enterprises across geographies, asset classes and
investor segments”.

PROMOTERS OF RELIGARE
• Malvinder Mohan Singh, RHC Finance Private ltd
• Abhishek Singh
• RHC Holding Private ltd
• Shivinder Singh
• Aditi Shivinder Singh
• Japna Malvinder Singh

2.3. PRODUCT / SERVICE PROFILE:

Religare result or examinations are well known for the trading online and offline,
portfolio management, advisory services for savings in mutual funds, inventory and
commodity trading etc.
Main products are:
• Equity Broking – BSE and NSE
• Derivatives – Futures and options
• Commodities Trading – NCDEX and MCX
• Currency
• Mutual Funds Investment
• Initial Public offerings (international equity)
• Fixed Deposits
• NRI
• National Pension Scheme
• Depository Services – NSDL and CDSL

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Area of Operation:
Religare Enterprises Ltd is the holding company for one of the main providers of
various financial services in India (REL). REL offers a wide variety of financial
services through its underlying subsidiaries and operating firms, including loans to
SMEs, affordable housing finance, health insurance, and capital markets. REL is
traded on the Bombay Stock Exchange and the Indian National Stock Exchange
(NSE) (BSE). Religare as a whole provides services to almost all market categories,
including significant enterprises, institutions, HNIs, mid-sized businesses, SMEs,
and mass retail. The company, which has over 7000 employees, operates in more
than 1450 locations across India.
Religare Broking Limited (RBL), one of the industry's top securities firms in India,
offers physical and online services to over 10 lakh clients. Totally owned by
Religare Enterprises Limited, RBL is a subsidiary (REL). Through its extensive
network of over 400 cities, the corporation offers depository participation services,
equities, currency, and commodity brokerage services (through its subsidiary
Religare Commodities Limited

2.4. COMPETITOR’S PROFILE:

• HDFC Mutual Funds

• DSP Black Rock

• UTI Mutual Funds

• ICICI Mutual Funds

• Share Khan

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2.5. Organisational Structure:

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2.6. SWOT ANALYSIS:

SWOT analysis is a strategic planning tool used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats of a business or organization. It involves
assessing the internal and external factors that affect the organization's performance
and competitiveness.

Strength:
• It is encouraged by RANBAXY organization of corporation.
• They are having individual of the quality devoted equity studies team which way
of the conduct of the market and provide funding advice often.
• It has the well-built association which gets admission to multiple clients of its
unusual branches in exceptional cities.
• And additionally own a dial and exchange facility that is as similar as a name
center carrier.

Weakness:
• Unsatisfactory investments for spreading out itself country wide which is as it’s
nevertheless localized.
• lack of focus about the cooperation among the client.
• Avoiding and much less significance is given on the maintenance of the clients.

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Opportunity:
• Have a more possibility in article of trade marketplace because of non-stop
boom in quantity of buyers.
• As the use of internet is growing every day it is able to boost a new bunch of
traders in buying and selling of securities.
• Can have surplus of retail traders with small financial via promotional behaviour
by channels like print and digital media.

Threats:

• Aggressive promotional actions via the competitions may additionally become

mystery to have increasingly new investors.
• Due to less wide variety of branch offices there could be a destroyed for quick
delivery of offerings.
• It’s not so trouble-free to convince the investors to spend money on commodity
marketplace because of terrible market circumstance of commodities at present.

2.7. COMPANY ACHIEVEMENTS / AWARDS:

Religare Enterprises Limited's subsidiary, Religare brokerage Limited, a well-

known provider of brokerage and financial services in India as of September 2021.
Here are some of Religare Broking's greatest successes and accomplishments:

Wide Range of Financial Services: Religare Broking provided a full range of

financial services, such as trading in equity and derivatives, commodities,
currencies, mutual funds, initial public offerings (IPOs), and wealth management.
Clients had access to a variety of investment possibilities because to this extensive
range of services.

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Pan-India Presence: With a network of branches and franchises spread out

throughout several cities and towns, the corporation had a considerable presence all
over India. It was reachable to a big customer base thanks to its ubiquitous presence.

Online trading platforms: Religare offered mobile applications and online trading
platforms, allowing customers to trade and manage their investments easily. The
platforms provided trading tools, research reports, and real-time market data.

Research and Analysis: The research and analysis division of Religare Broking
was renowned for producing research papers, market insights, and investment
advice. Customers seeking to make well-informed financial decisions found this
research to be helpful.

Compliance and Regulatory Adherence: The business stressed adherence to legal

requirements. Customers could feel secure in the honesty and reliability of their
investments.

Investment Advisory Services: Religare offers individualised investment advisory

services, where qualified experts created custom investment plans based on the
objectives and risk tolerances of its clients.

Strong Customer Base: Retail investors, high-net-worth individuals (HNIs), and

institutional clients were all part of Religare Broking's sizable and varied customer
base. This diversity demonstrated its capacity to meet different investment
requirements.

Investments in technology: Religare Broking made investments in infrastructure

and cutting-edge trading technology to offer efficient and dependable trading
services. This featured effective risk management mechanisms and quick order
execution.

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Awards:
➢ 2016
Religare Securities Ltd., "NSDL Star Performer Awards - 2016," Best Performer in
New Accounts Opened and Best Performer in Account Growth Rate (Non-Bank
Category) Religare Health Insurance Co. won the "Overall" category at the 2016
India Insurance Awards. Ltd. "Religare Finvest Ltd.'s "ERM Leadership Awards
2016" in the category "The Most Innovative Risk Management Strategy."For
outstanding data quality score improvement in 2015, Religare Finvest Ltd. was
given the "CIBIL Data Quality Award 2016" in the "Fast and Upcoming" category.

➢ 2017
Religare Securities Ltd. is announcing the 2017 NSDL Star Performer Awards. Most
Successful User of New Account (Non- Bank Category).The 2017 Krishi Pragati
Award for "Outstanding Contribution" in NCDEX Agri was given to Religare
Commodities Ltd. by NCDEX., Religare Securities Ltd., received the "Top Equity
Personality of the Year Award" at the 2017 BSE Commodity Equity Outlook (CEO)
Weekend Awards. Religare Commodities Ltd. received the 2017 Skoch BSE Award
- Order of Merit in the category of "Training and Innovation."The Great Place to
Work® Institute has designated Religare Finvest Ltd. as a "Great Place to
Work."The 2017 CIBIL Commercial Bureau Data Quality Award for NBFCs went
to Religare Finvest Ltd."Times Ascent World HRD Congress 2017" Times Ascent
World HRD Congress 2017, 2017One of the "Top 50 Dream Companies to Work
For" in the "Overall" category is Religare Finvest Ltd. Times Ascent World HRD
Congress 2017.

➢ 2018
Religare Broking Ltd. was recognised at the 2018 NSE Market Achievers Awards
as the "Regional Retail Member of the Year - North." According to The Insurance
India Summit & Awards 2018, Religare Health Insurance Co. Ltd. was named
"Bancassurance Leader of the Year." According to The Insurance India Summit &
Awards 2018, Religare Health Insurance Co. Ltd. was named "Best Claims Service
Provider of the Year."

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"Grameen Swaasthya Suraksha" received the "Bronze Skoch Award" from Religare
Health Insurance Co. Ltd. in the micro insurance category. In recognition of
exceeding goals set forth in the National Pension System (NPS) campaign (Non-
Bank Category), As the recipient of the "Pension Champion Trophy," Religare
Broking Ltd.

➢ 2019
Religare Commodities Ltd. won the 2019 MCX Awards for "Best Broking House -
Bullion."

➢ 2020
IAMAI's 11th Digital Summit and Awards gave Care Health Insurance Limited a
silver award for best search marketing campaign. 2020 Afaqs DIGIES Digital
Award' best SEO/SEM campaigns. The 2021 Krishi Pragati Awards are presented
to Religare Commodities Limited.

➢ 2021
Awards received by Care Health Insurance include the Insurance Alertss Awards
2021 for Best Health Insurance Product in India. The Insurance Alertss Awards will
honour India's Top Health Insurance Agents in 2021. Religare Commodities Limited
has won the following honours: 2022 Krishi Pragati Awards.2020

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2.8. FUTURE GROWTH AND PROSPECTS:

Nowadays are not only wealthy people able to purchase stocks. Anyone who owns
a smartphone and has access to the internet can buy and sell stocks remotely while
relaxing in their own homes. Since stock investing has become more democratic as
a result, the economy has expanded.

The introduction of electronic trading in the middle of the 1990s and SEBI's
decision to legalise Direct Market Access (DMA) in 2009 were two of the most
significant turning events in the history of the Indian stock markets. This made it
possible for more technology developments, enabling brokers and clients to use
computerised and automated trading while reducing manual errors. By leveraging
cutting-edge technology, modern stockbrokers offer a variety of services that can
help investors save time and money. For example, they can provide real-time quotes,
research and analytical tools, and online trading capabilities without requiring your
brokers to physically lock in your orders. Process automation, improved market
knowledge, improved customer communication, and improved security to protect
client data have all helped stockbrokers address the challenges of today's businesses.
Adhaar-based e-KYC has made quick, paperless account opening possible, while
UPI has substantially sped up fund transfers to brokerage accounts.

RBL deliberately integrates its own branches with a vast network of sub-brokers
and franchisees as part of its distribution plan to broaden its reach and market the
Religare brand across India. To make it simpler and more comfortable for
customers, RBL offers a number of trading platforms, including Branch, Web,
mobile App, and Call & Trade. Through Bank invest, the Retail Broking company
also has ties with a number of banks, which is advantageous to customers and
improves their contact with the company.

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PROFILE OF SELECTED BANKS:

➢ STATE BANK OF INDIA:

The State Bank of India (SBI), established on July 1, 1955, is the largest public
sector bank in India. Headquartered in Mumbai, Maharashtra, and led by Chairman
Dinesh Khara, SBI boasts a widespread network serving diverse banking needs.
Offering a comprehensive range of financial services, including retail and corporate
banking, international operations, and treasury services, SBI plays a pivotal role in
the nation's economic landscape. With a significant global presence, the bank
extends its services internationally, facilitating foreign exchange, investment
banking, and international trade. Renowned for technological innovation, SBI
provides online and mobile banking solutions, enhancing accessibility. As a
financially robust institution, SBI consistently ranks among India's top banks,
contributing not only to the nation's economic growth but also engaging in impactful
social initiatives.

➢ ICICI BANK:
ICICI Bank, headquartered in Mumbai, India, is a leading private sector bank with
a prominent presence in the financial landscape. Established in 1994, it has rapidly
grown to become one of the largest and most influential banks in the country. Under
the leadership of its CEO Sandeep Bakhshi. ICICI Bank offers a wide array of
financial products and services, including retail and corporate banking, insurance,
asset management, and investment banking. Known for its customer-centric
approach and technological innovation, ICICI Bank has been at the forefront of
digital banking in India. Its commitment to excellence and a robust financial
performance solidity its position as a key player in the Indian banking sector.

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➢ AXIS BANK:
Axis Bank, headquartered in Mumbai, India, stands as a prominent private sector
bank with a robust presence in the financial sector. Established in 1993, Axis Bank
has evolved into one of the leading banks in India, offering a comprehensive range
of financial services. Under the leadership of its CEO and Managing Director,
Amitabh Chaudhry. The bank is known for its commitment to innovation and
technology-driven solutions.

Axis Bank provides a wide array of services, including retail and corporate banking,
treasury, and investment banking. The bank has been at the forefront of digital
transformation in the banking industry, introducing cutting-edge technologies to
enhance customer experiences. With a vast network of branches and ATMs, Axis
Bank serves a diverse customer base, contributing significantly to the growth and
development of the Indian banking sector. Its strategic focus on customer
satisfaction, coupled with a strong financial performance, reinforces Axis Bank's
position as a key player in India's dynamic banking landscape.

➢ KOTAK MAHINDRA BANK:

Kotak Mahindra Bank, headquartered in Mumbai, India, is a prominent private
sector bank known for its customer-centric approach and financial services.
Established in 2003, the bank has rapidly grown under the leadership of its CEO
and Managing Director, Dipak Gupta. Kotak Mahindra Bank offers a
comprehensive suite of banking products and services, including retail and
corporate banking, wealth management, and investment banking.

Renowned for its commitment to innovation, Kotak Mahindra Bank has been a
pioneer in adopting technological advancements to provide seamless digital banking
experiences. The bank's strategic focus on customer satisfaction, coupled with its
strong financial performance, has solidified its position in the Indian banking sector.
With an extensive branch and ATM network, Kotak Mahindra Bank caters to the
diverse financial needs of individuals and businesses, contributing significantly to
the growth and development of the banking industry in India.

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CHAPTER - 3
RESEARCH DESIGN AND METHODOLOGY

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3.1. LITERATURE REVIEW:

1. Umamaheswari (2022): An Empirical study on influential factor of investors
investment towards futures and options trading in India.
In the past few decades, the investor's concept of their investment towards numerous
routes has altered. When mutual funds were first introduced, many investors
recommended them because their returns were comparably higher than those of
fixed deposits and recurring deposits. Later, when investors were looking for higher
returns than mutual funds, they began investing in the stock market. Many investors
were willing to take on risk in exchange for a greater return. Despite the fact that
there are noticeable differences in risk-taking behaviour among the various age
groups. The investors began investing in options and futures for a variety of reasons,
including risk management, high returns, arbitrage, etc. Despite their lack of
experience in derivatives, the investors often consult friends or brokers when
making decisions. However, different age groups of people are affected in different
ways by important stock market investments. In order to comprehend the
influencing aspects of investors' investment, awareness, and risk towards options
and futures trading in India, this study is necessary. According to the study's
findings, there is a correlation between the respondents' demographic characteristics
and risk, awareness, and important investing criteria for futures and options trading
on the Indian stock market.

2. Dr. S. Durga (2022): A Paper on a review on stock futures and stock options
with reference to NSE and BSE.
Derivatives, which are thought of as Risk Management Tools, assist investors in
reducing a variety of risks. The volume of derivatives trading is growing daily,
demonstrating the significance of derivatives. Derivative goods of all kinds are
developing to satisfy the requirements of various investors. Major Indian
exchanges trade a wide variety of equity derivatives and other financial instruments.
The current article examines equity derivatives trading on the NSE and BSE.

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3. Mr. Venkatesha (2022): Derivatives Market in India - Futures and Options.

International Journal of Creative Research Thoughts.
Risk management tools called derivatives get their value from an underlying asset.
The underlying asset may be an index, shares, bond, money, interest, or any type of
asset. Banks, securities companies, businesses, and investors use derivatives to
manage risks, get access to cheaper credit, and turn a profit. Future growth of
derivatives is projected to be considerably faster. Financial derivatives allow parties
to exchange particular financial risks (like interest rate, currency, equity, and
commodity price, as well as credit risk) with other organisations that are more
willing or better suited to take or manage these risks. Typically, but not always, this
can be done without exchanging a primary asset or commodity. A derivatives
contract's inherent risk can be exchanged either by trading the contract itself, like
with options, or by generating a new contract with risk characteristics that
counterbalance those of the original contract that is already owned. This essay
attempts to inform readers about the numerous derivatives market contracts and
tools available for purchase by investors.

4. Dr. Mubarak (2021): Trends and development of futures and options-a case
study of BSE India.
In terms of a vibrant market for traded derivatives, India is one of the best-creating
countries. Since 2000, the Indian market for traded derivatives has shown
tremendous growth in terms of trading volume and trading contracts. In 2000, the
BSE launched financial derivatives on the Indian market, including Index Futures,
Index Options, Stock Futures, and Stock Options. As a result, this research sheds
light on the trends and growth of futures and options traded on the BSE during a 17-
year period. Mean, standard deviation, trend analysis, CAGR, and relative
percentage analysis are statistical techniques utilised in this type of data analysis.
India has had "Explosive Growth" in the stock derivatives market, and further
expansion is anticipated as well. Since 2000, India has seen a tremendous increase
in the number of contracts and trading turnover volume in the financial derivatives
market. According to the study, BSE's standing and development in the derivative
F&O market were highly commendable for a decade before declining in terms of
the number of contracts and trading volume.

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5. Carlier (2021): A Simple Options Trading Strategy based on Technical

Indicators,. International Journal of Economics and Financial Issues.
The purpose of this paper is to investigate the reliability of options strategies, with
a focus on weekly options. The author demonstrates that, when correctly traded,
options may be a superior alternative to buying or selling the underlying, and that
options with a solid given volatility approach and with well-capitalized underlying
stocks may produce excellent outcomes. Using the bollinger bands and the simple
moving average on the US market, the author examined a straightforward trading
method. The goal of the following explanation of a new capital allocation strategy
is to maximise the outcomes. The options strategy is compared with the same
approach used when selling or purchasing the underlying in order to make further
comparisons.

6. Dr. N Selvaraj (2020): Traders Perception and Awareness on Financial

Derivatives in India. Sumerianz Journal of Economics and Finance.
Derivatives, which attempt to boost profits and lower risk, are among the most
cutting-edge financial industry developments. A financial product that has been
generated from another financial product or commodity is known as a derivative.
Derivatives cannot exist on their own without a market and an underlying product.
Contracts for easily marketable assets are written between two parties as derivatives.
Due to the rising volatility in the stock and foreign exchange markets, derivatives
are becoming more and more important. Although the RBI works to promote the
use of derivative instruments and seeks measures to encourage a healthy market,
there is still a lack of widespread knowledge regarding these products and their
applications. In order to stimulate the use of derivative products as hedge
instruments, it is required to ascertain the level of awareness among the investing
public and, if low, to devise sufficient awareness-raising strategies. The regulatory
agencies and brokerage firms can use this study to raise traders' awareness of
derivatives. Instead of making high-risk, highly rewarding investments, one should
make solid, risk-free investments. Better returns would come from keeping better
track of the market environment and having thorough knowledge of a certain stock.

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7. Toopalli Sirisha and Dr. NallaBala Kalyan (2019): The Valuation of Options
on Futures Contracts. The Jornal of the American Finance Association.
This paper objective is to investigate the impact on the underlying market volatility
of financial derivatives with respect to futures and options. It advises investors on
how to invest in futures, options, and swaps and teaches them about risk
management in derivatives. It also assists investors in building diversified
portfolios. According to the report, derivatives will reduce the risk that occurs in the
stock market. Using a call or put option, an investor in options makes money. The
analysis reveals that options offer greater profits and lower risk compared to futures.
This paper presents simple closed-form expressions for volatility futures and
option prices and examines their implications for the characteristics of these
securities. We show that the properties of these volatility derivatives are
fundamentally different from those of conventional option and futures contracts.
This analysis also provides insights into the role that volatility derivatives may play
in managing and hedging volatility risk in financial markets.

8. Rastogi, (2019): Volatility Integration in Spot, Futures and Options

Markets.
This paper's goal is to examine how volatility is integrated throughout the spot,
futures, and options markets in order to give information for hedging and the
creation of derivatives rules. The simultaneous equation modelling of volatility in
the three markets is modelled using the generalised method of moments (GMM).
Additionally, the integration of volatility across the three markets is examined for
structural flaws. The paper's key conclusion is that market volatility in the spot and
futures markets is not correlated with market volatility in the options market.
However, there is a correlation between the volatility of the spot and futures
markets. Because of this, investors can utilise options for hedging, and policymakers
do not need to worry about the impending influence of options markets on spot
markets. To the best of the authors' knowledge, no prior study has examined how
volatility is integrated throughout the three markets. Furthermore, this study's
observation that the options market performs differently from the futures market
hasn't been covered in past research.

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9. Silva (2018): Fundamentals of Futures and Options.

Since 1970, the global market for derivative securities has grown significantly. They
are not often fully understood, even so. The authors address this issue by describing
how options and futures are related to the underlying securities or index from which
they ultimately receive their value. Futures contract pricing and hedging
relationships, option strategies and features, and option pricing and hedging
interactions are also covered.

10. M. V. Sai Priya (2018):

This Paper attempts to study futures and options by taking into account a
company derivative from the Indian stock market and outlining the best strategies
for investors to increase their earnings in derivative markets. The study revealed
that derivatives will reduce the risk that emerges in a stock market. The loss in the
near-month contract was covered by the futures investor utilising the mid-month
contract. Options will give more growth to the investors over the future and investor
can use margin of safety and know where to buy and sell the stocks.

11. Vashishtha (2018): Development of Financial Derivatives Market in India-

A Case. International Research Journal of Finance and Economics.
This paper has focused on capital markets and commodities markets. Demand-
supply dynamics cause changes in the prices of both agricultural and non-
agricultural commodities throughout time. Due to the globalisation and
liberalisation wave that has been sweeping the globe for the past two decades, the
volume of international trade and business has multiplied. This has caused abrupt
and unforeseen changes in the value of financial assets as well as interest and
currency rates, putting the business world at unmanageable financial danger. Risk
management is more crucial than ever in the current, extremely uncertain corporate
environment. The development of the derivatives market is a brilliant financial
engineering achievement that offers a practical and affordable solution to the issue
of risk that is embodied in the price unpredictability of the underlying asset.

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12. Mohammed Rubani (2017): Derivative Trading in Indian Capital Market.

This paper has focused on the evolution of the Indian capital market and
assessment of the Indian derivative market's performance, and factors influencing
the development of the derivative market. The market-determined interest rates and
exchange rates also caused portfolio volatility and instability. Hedging actions using
various derivatives exposed values, security prices, and prices to various risks.

13. Aggarwal (2017): Futures and options expiration-day effects: The Indian
evidence. Review of Futures Markets.
In this study, the price, volatility, and volume of the underlying shares are examined
in relation to the impact of options and futures expiration. The Wilcoxon matched-
pairs signed-ranks test is used to compare the values of these variables one day
before expiration, on the day of expiration, and one day following expiration with
those one and two weeks before and after the corresponding day. The prices of the
underlying shares often weaken slightly the day before expiration and dramatically
the day after. The rate of return growth on the day following expiration is unusually
high. For shares with reasonably significant derivative volumes, an abnormally high
volume is also seen on the expiration day; it begins to build up a day before
expiration and continues into the next day. These effects can be largely attributed to
arbitrage activity and the Indian cash market's ban on short sells.

14. Sinha & Rani (2017): Impact of equity derivatives on stock market
indicies. NICE Journal of Business.
The study aims to analyse the trends and patterns of such derivatives as well as the
effects of equity derivatives on stock market indices.
Design/methodology/approach: The study is exploratory-descriptive in character. It
is based on secondary data collected over a ten-year period. Equity derivatives, the
Karl Pearson's Coefficient of Correlation, multiple regression, and the Ordinary
Least Square (OLS) model were used to examine it. Findings: Based on data
collected over a ten-year period, it was discovered that the flow of equity derivatives
moved in tandem with the Sensex and the Nifty. The Sensex and the Nifty have a
high positive correlation with equity derivatives.

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15. Saha (2016): A Study on the Volatility Effects of Listing of Equity Options
and Equity Futures in National Stock Exchange of India. Indian journal
of finance.

Financial derivatives have been a fascinating topic of study ever since they were
first introduced in various stock exchanges throughout the world, with their impact
on the volatility of the underlying assets being a prominent worry. An extensive
analysis of the Indian market was deemed required in light of the extraordinary
expansion of the derivatives market there and the lack of global agreement among
research on the effect of futures and options on market volatility. Whether the
introduction of options and futures contracts affected the volatility of the underlying
shares was the main goal of this study. The results of the ARMA-GARCH models
used in the study demonstrated that the listing of equity options and futures lessened
the volatility of the majority of the underlying equities.

3.1.1. LIST OF FINDINGS FROM LITERATURE REVIEW:

Based on the information provided from the literature review of various academic
papers on derivatives, futures, and options trading in India, several findings and key
points can be summarized:
• Diversification and Portfolio Management: Derivatives can assist investors in
building diversified portfolios and managing risk, thereby reducing exposure to
market volatility.

• Integration Across Markets: The relationship between spot, futures, and options
markets is an essential consideration for risk management and the creation of
derivative rules. Market volatility in the spot and futures markets may not
necessarily be correlated with the options market, providing potential
opportunities for hedging.

• Impact of Expiration Days: Options and futures expiration days can have
significant effects on underlying shares, including price, volatility, and volume.
These effects are often attributed to arbitrage activity and market dynamics.

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• Correlation with Stock Market Indices: Equity derivatives, such as futures and
options, have a high positive correlation with stock market indices like Sensex
and Nifty. The flow of equity derivatives is influenced by the movements of
these indices.

• Volatility Effects: The listing of equity options and equity futures on the
National Stock Exchange of India has been found to reduce the volatility of the
majority of underlying equities, as demonstrated by ARMA-GARCH models.

• Lack of Derivative Experience: Despite the appeal of derivatives, many

investors lack experience in trading them. They often seek advice from friends
or brokers when making decisions related to options and futures trading
derivatives, such as options, offer investors the opportunity to manage specific
financial risks, including interest rate, currency, equity, and commodity price
risks. These instruments can help in managing and hedging volatility risk in
financial markets.

• Evolution of Investment Choices: Over the years, Indian investors have shifted
from traditional investment options like fixed deposits and mutual funds to more
dynamic options such as stock market investments, futures, and options. They
seek higher returns and are willing to take on increased risk for potential gains.

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3.2. Statement of the Problem

The problem addressed in this project report is to evaluate and compare the
performance of futures and options contracts as derivatives in financial markets.
The study aims to assess their profitability, risk management capabilities, market
efficiency, and the impact of market liquidity, providing valuable insights for
investors and traders in utilizing these derivatives effectively.

3.3. Need of the Study

The study on the performance of derivatives, specifically futures and options
contract, fulfils the need for informed decision-making, effective risk management,
assessment of market efficiency, evaluation of regulatory frameworks, and
optimization of investment portfolios. By addressing these needs, the study provides
valuable insights and guidance to investors, traders, policymakers, regulators, and
market participants, enabling them to navigate the derivatives market effectively
and achieve their financial objectives.

3.4. Scope of the Study

The study is conducted over a eight-week period with the main objective of
understanding the derivatives with special reference to futures and options in the
Indian context. For the study, Indian Stock Exchange has been used as a
representative sample. The report has only made a humble attempt to evaluate the
derivatives market in the context of India. The study does not take into account the
global viewpoint of derivatives markets.

3.5. Research Questions:

1. How do the profit/loss positions differ between futures buyers, futures sellers,
option writers, and option holders in the derivatives market?
2. What are the different factors that affect the profit/loss position of futures buyers
and sellers?
3. What are the factors that affect the pricing of futures and options contracts?

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3.6. Objectives of the study:

• To understand the theoretical knowledge of futures and options.
• To find the profit/loss position of futures buyer and seller and also the option
writer and option holder.
• To analyse the practices followed by investors with respect to futures and
options trading.
• To provide suitable suggestions to the investors who are trading in derivatives.

3.7. Operational Definitions of the Study:

Hedging: Hedging is a risk management strategy involving the use of selective
futures and options contracts to protect against adverse price movements in the
underlying assets

Return: The total return on investment, including both capital appreciation and
income, expressed as a percentage of the initial investment.

Volatility: The standard deviation of the daily returns of a future or option over a
specified period of time.

Risk management: It is the process of identifying, assessing, prioritizing, and

mitigating potential risks or uncertainties that could affect an organization, project,
investment, or any other endeavour. It involves a systematic approach to
understanding and minimizing the negative impact of events or situations that may
result in financial losses, operational disruptions, or other adverse consequences

Order execution: The process of placing and filling orders for futures and options
contracts.

Liquidity: The average daily trading volume of a futures or options over a specified
period of time.

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Portfolio management: The construction and management of a portfolio of futures

and options contracts, including the selection of contracts, the allocation of assets,
and the monitoring and rebalancing of the portfolio.

Expiration Date: The expiration date is the specific date on which a futures or
options contract ceases to be valid. It is the last day on which the contract can be
exercised or traded.

Return on Investment (ROI): The ratio of the net profit or loss from the selective
futures and options trading strategy to the initial investment, expressed as a
percentage.

Annualized Return: The annualized percentage return achieved through the

selective futures and options strategy, accounting for compounding.

3.8. Research Methodology:

• Primary Data: Primary data collected through google form survey,
questionnaire and personal interaction.
• Secondary Data: Secondary data collected from various sources like Websites,
Records and Magazines

3.9. Data Collection:

Data is collected from both primary and secondary sources. Such as website and
questionnaire.

3.10. Sampling Design:

3.10.1. Sampling Plan:
The target sampling plan of the research is 50
3.10.2. Sampling Method:
Sampling technique adopted for the study is Judgemental Sampling under Non
Probability Sampling Technique

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3.10.3. Sampling Frame:

The sample is drawn from the investors.

3.10.4. Sampling Unit:

Sampling unit is 50

3.10.5. Sampling Size:

Sampling size is 80

3.10.6. Plan of Analysis:

The data will be collected from the primary and secondary sources. The collected
data will be tabulated and analysed using relevant statistical tools and graphical
representation is made wherever necessary. Finally findings are drawn from the
analysis and suitable suggestions will be made.

3.11. Limitations of the Study:

The following are the limitations of the study:
• The stocks chosen for the analysis is SBI, ICICI Bank, Axis Bank, and Kotak
Mahindra Bank and contract taken is August 2023 ending one month contract.
• The secondary data collected is completely restricted to SBI, ICICI Bank, Axis
Bank, and Kotak Mahindra Bank of 2023; hence this analysis cannot be taken
universal.

3.12. The Chapter Scheme:

Chapter 1 – Introduction
Chapter 2 – Profile of Industry /company
Chapter 3 – Research Design
Chapter 4 – Analysis of Data
Chapter 5 – Findings, Suggestions and Conclusions

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CHAPTER – 4
DATA ANALYSIS AND INTERPRETATIONS

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DATA ANALYSIS AND INTERPRETATIONS

Here I have done Data Analysis and Interpretation is with help of 50 respondents
who respondent to my questionnaire which the process of assigning meaning to the
collected information and determining the conclusions, significance, and
implications of the findings. All these data are collected through questionnaire
through the sample data collection.

4.1. HAVE YOU EVER INVESTED IN DERIVATIVES?

YES 50 62.5

NO 30 37.5

Analysis:
We can see that from above table 62.5% are interested and they are investing. And
37.5% are not investing in the derivatives.

The graph depicts respondent to derivative investments.

According to the above data 62.5% of the peoples says that they invest in
derivatives, while the majority of the remaining peoples is either not interested in
investing or not investing. It also appears that the remaining peoples is largely
unaware about derivatives.

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4.2. Age group you belongs to?

Age Group Number of Percentage
Respondents
21 - 30 20 40%
31 - 40 17 34%
41 - 50 9 18%
51 and above 4 8%
Total 50 100%
Analysis:
According to the above data, 40% of those who trade futures and options are 21-
30 years old, and the next majority will be 31- 40 years old.

PERCENTAGE
45%
40%
40%
34%
35%

30%

25%

20% 18%

15%

10% 8%

5%

0%
21 - 30 31 - 40 41 - 50 51 and above

This Graph shows the age group of the people.

Looking at the graph above, we can see that the majority of investors are between
the ages of 21-30, and the lowest number of investors being beyond the age of 51.
As most investors are salaried peoples, we may conclude that they are make
significant investments.

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4.3. Your occupation?

Occupation Number of Percentage
Respondents
Student 8 16%
Salaried 30 60%
Self-Employed 10 20%
Retired 2 4%
Total 50 100%
Analysis:
In the above data set 60% of respondents are salaried, 20% are self -employed, 16%
are students and 4% respondents are retired.

This graph depicts the occupation of the respondents.

We can assume that the majority of the investors in the preceding table are salaried.
They contribute 60%, the self-employed and the students also trading options and
futures.

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4.4. What is your annual income?

Annual Income Number of Percentage
Respondents
Below 100000 8 16%
100000 - 300000 2 4%
300000 - 500000 3 6%
Above 500000 37 74%
Total 50 100%
Analysis:
According to the above table, 74% of peoples have an income more than 5 lakh,
16% have an income of below 1 lakh, 6% have an income of 3-5 lakh, and 4%
have an income of 1-3 lakh.

Percentage

Above 500000 74%

300000 - 500000 6%

100000 - 300000 4%

Below 100000 16%

0% 10% 20% 30% 40% 50% 60% 70% 80%

This graph indicates the investors income level.

In the bar chart, you can see the distribution of respondents based on their annual
income categories. In the graph, you can see that "Above 500,000" has the tallest
bar, representing the highest percentage (74%) of respondents. "Below 100,000" has
the shortest bar, indicating the lowest percentage. The two middle-income
categories, "100,000-300,000" and "300,000-500,000," have bars in between,
reflecting their respective percentages.

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4.5. How would you rate the risks associated with Options and
Futures?
Risk level Number of Percentage
Respondents
High 42 74%
Medium 7 14%
Low 1 2%
Total 50 100%
Analysis:
According to the above table 74% respondents they are assume that derivatives are
high risky investment options. 14% respondents says that derivatives are medium
risk and 2% respondents says that the derivatives are less risky.

Percentage

2%
14%

74%

High Medium Low

The graph shows the risk level which is assumed by investors.

As we can see above 74% of investors believe derivatives are high risky so they
are invested less capital. And also 14% investors are believe that medium risk is
associated with the derivatives, while less number of investors(2%) believe the
derivatives is low risk.

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4.6. How familiar are you with the concepts of futures and
options trading?
Familiarity of the Number of Percentage

concept Respondents

Very familiar 21 42%

Somewhat familiar 26 52%
Not very familiar 2 4%
Not at all familiar 1 2%
Total 50 100%
Analysis:
According to the above data a majority of the respondents (94% in total, including
the "Very Familiar" and "Somewhat Familiar" categories) have some level of
familiarity with futures and options trading. The combined percentage of
respondents with limited or no familiarity (i.e., "Not very familiar" and "Not at all
familiar") is only 6%.

4% 2%

42%

52%

Very familiar Somewhat familiar Not very familiar Not at all familiar

The graph shows the familiarity of the concept of futures and options which is
assumed by investors.
From the graph, it's clear that the largest group of respondents falls into the
"Somewhat Familiar" category, followed by "Very Familiar." Only a small
percentage of respondents are in the "Not Very Familiar" and "Not At All Familiar"
categories. The data suggests that a significant portion of the respondents have at
least some knowledge of futures and options trading.

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4.7. Have you actively traded futures and options in the past 2
year?

Yes 46 92%
No 4 8%

Analysis:

Respondents who have actively traded futures and options (Yes), There are 46
respondents, which accounts for 92% of the total respondents. This suggests that the
majority of respondents have actively traded futures and options in the past two
years. And There are 4 respondents, which account for 8% of the total respondents.
This group represents a minority of respondents who have not actively traded
futures and options in the past two years.

8%

Yes
No
92%

The graph shows the data who are actively traded futures and options in the past 2
year.

In the pie chart, you can see that the "Yes" category (actively trading futures and
options) occupies the majority of the chart, representing 92% of the total, while the
"No" category (not actively trading) is a much smaller segment at 8%. This pie chart
provides a clear visual representation of the distribution of respondents who have
actively traded futures and options versus those who have not.

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4.8. What factors influenced your decision to trade futures and

options?
Factors Number of Percentage
Respondents
Potential for high returns 9 18%
Risk management 19 38%
Portfolio diversification 5 10%
Hedging against market 17 34%
volatility
Total 50 100%
Analysis:
According to the above data investors and traders trade futures and options for a
variety of reasons, including risk management, hedging against market volatility,
potential for high returns, and portfolio diversification. The majority of investors
decision is influenced by risk management(38%), and followed by hedging(34%).

40%

35% 38%
30% 34%

25%

20%

15% 18%
10%
10%
5%

0%
Potential for high Risk management Portfolio Hedging against
returns diversification market volatility

The graph shows the factors that influenced respondent`s decisions to trade futures
and options.
The two most significant factors are risk management and hedging against market
volatility, accounting for the majority of responses. The potential for high returns is
also a notable factor, while portfolio diversification plays a smaller role in
influencing trading decisions.

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4.9. How often do you engage in trading futures and options?

Particulars Number of Percentage
Respondents
Daily 6 12%
Weekly 26 52%
Monthly 4 8%
Occasionally 7 14%
Rarely 7 14%
Total 50 100%
Analysis:
According to the above data majority of respondents have taken a trade weekly
basis(52%), and minority of respondents says they have taken a trade monthly and
daily basis. Some respondents also says that they have taken a trade occasionally
and very rarely.

14%

14%

8%

52%

12%

The graph provides data on how often respondents engage in trading futures and
options, with the number of respondents and the corresponding percentage for each
frequency category.
The bar chart will have five sections, with the "Weekly Trading" section being the
largest, representing 52% of the total. This indicates that weekly trading is the most
common frequency among the respondents. The other sections represent the
respective percentages for daily, monthly, occasional, and rare trading.

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4.10. How would you rate the overall performance of the futures
and options you've traded?
Performance Number of Percentage
Respondents
Excellent 0 0%
Good 16 32%
Average 30 60%
Poor 3 6%
Very poor 1 2%
Total 50 100%
Analysis:
According to the above data none of the respondents rated their futures and options
trading performance as excellent, and the majority (60%) considered it average.
However, a significant portion (32%) regarded their performance as good, while
only a small number (6%) found it poor, and a very small fraction (2%) rated it as
very poor.

6% 2%
32%

60%

Excellent Good Average Poor Very poor

The graph shows the overall performance of the futures and options.
In the pie chart, the average category, representing 60% of the total responses, would
be the largest section. The good category, representing 32%, would be the second-
largest section. The poor and very poor categories, representing 6% and 2%
respectively, would be much smaller slices of the pie chart, indicating that only a
small percentage of respondents rated their performance as unsatisfactory.

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4.11. What metrics do you use to assess the performance of your

trades?

Performance Matrix Number of Percentage

Respondents
Return on investment 7 14%
(ROI)
Winning percentage 1 2%
Risk-to-reward ratio 24 48%
Annualized returns 8 16%
Volatility measures 10 20%
Total 50 100%

Analysis:

The analysis of the performance metrics feedback indicates that the risk-to-reward
ratio is the most crucial measure, with 48% of respondents emphasizing its
significance, demonstrating a strong emphasis on risk management. Volatility
measures and annualized returns are moderately important, with 20% and 16% of
respondents, respectively, highlighting their relevance. Return on investment is
considered important by 14% of respondents, signifying its significance to a smaller
but still notable portion. In contrast, winning percentage is the least relevant metric,
with only 2% of respondents finding it worthy of consideration in the context of the
study.

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48%

20%
16%
14%

2%

Interpretation:
The column chart with the performance metrics on the x-axis and the percentage of
respondents on the y-axis. The chart will highlight the distribution of respondent
preferences for these performance metrics.

In the column chart, the risk-to-reward ratio will have the tallest column, indicating
it was the most significant concern for nearly half of the respondents. volatility
measures and annualized returns will have columns of moderate height, followed
by return on investment, which will have a shorter column. winning percentage will
have the shortest column, highlighting its low importance, with just 2% of
respondents considering it.

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4.12. Do you track and analyse your trading data to improve your
performance?

Yes 50 100%
No 0 0%

Analysis:

According to the data provided indicates that trading data is being tracked and
analysed to improve performance in 100% of the cases (50 out of 50 responses).
This means that all respondents are actively engaged in tracking and analysing their
trading data for performance improvement

100%

Yes No

Interpretation:

In the pie chart, you will see a single 100% filled segment labelled "Yes”, indicating
that all respondents track and analyse their trading data for performance
improvement. There is no segment for "No" because there were no respondents who
reported not tracking and analysing their trading data. This chart visually illustrates
that the practice of tracking and analysing trading data is universally adopted among
the surveyed individuals.

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4.13. How important is back testing in your trading strategy

development?

Importance of back Number of Percentage

testing Respondents
Very important 42 84%
Somewhat important 7 14%
Neutral 1 2%
Not very important 0 0%
Not at all important 0 0%
Total 50 100%

Analysis:

According to the above data, it is evident that back testing is considered highly
important in trading strategy development, with a significant majority of
respondents (84%) stating that it is “very important”. A smaller proportion of
respondents (14%) find back testing to be “somewhat important”, while only a
negligible percentage (2%) remained “neutral” on the matter. None of the
respondents considered back testing to be "not very important" or "not at all
important”.

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2%

14%
Very important
Somewhat important
Neutral
Not very important
Not at all important
84%

Interpretation:

The overwhelming consensus among the respondents is that back testing is a critical
aspect of trading strategy development. The majority of traders understand the value
of historical data analysis to assess the performance of their strategies and make
informed decisions. “Very important" would be the largest slice of the pie, taking
up 84% of the chart. "Somewhat important" would be a smaller slice, occupying
14% of the chart. "Neutral" would be an even smaller slice, making up 2% of the
chart. "Not very important" and "Not at all important" would not be present in the
chart, as there were no respondents who chose these options.

This pie chart would visually illustrate the strong consensus on the high importance
of back testing in trading strategy development.

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4.14. What factor do you consider for trading in Options and

Futures?

Factors Number of Percentage

Respondents
Entry and exit load 3 6%
Initial Deposits 3 6%
Knowledge about Future 27 54%
and Options
Risk management 17 34%
Total 50 100%

Analysis:

The survey data reveals that the most critical factor for traders when considering
Options and Futures trading is having a strong knowledge about these financial
instruments, as 54% of respondents prioritize this aspect. Additionally, risk
management is the second most significant concern, with 34% of traders
emphasizing the importance of managing and mitigating risks. On the other hand,
factors such as entry and exit load, as well as initial deposits, hold considerably less
importance, with only 6% of respondents considering each of them in their decision-
making process.

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6% 6%
34%

54%

Entry and exit load Initial Deposits

Knowledge about Future and Options Risk management

Interpretation:

The pie chart visually represents the factors considered by respondents when trading
in Options and Futures. Knowledge about Futures and Options dominates the chart
with the largest slice at 54%, signifying its primary importance. Risk management
is the second most significant factor at 34%, indicating a substantial concern for
mitigating risks. Entry and exit load, as well as initial deposits, each have equal,
relatively small portions at 6%, highlighting their relatively lower priority in traders
decision-making processes.

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4.15. What types of futures and options do you typically trade?

Types of trade Number of Percentage
Respondents
Indices 42 84%
Stocks 4 8%
Commodities 1 2%
Currencies 3 6%
Total 50 100%
Analysis:
The survey data reveals that the majority of respondents, 84%, primarily trade in
indices. This indicates that a significant portion of traders prefer to deal with index
futures and options. Stocks are the second most popular choice, with 8% of
respondents trading them. Currencies and commodities are less commonly traded,
with 6% and 2% of respondents, respectively, engaging in these markets.

84%

8% 6%
2%

The above chart represents the types of futures and options typically traded by a
group of respondents, categorizing their preferences. The majority of respondents,
constituting 84%, primarily trade in indices. Stocks are the second most popular
choice, with 8% of respondents indicating they trade in this category. Only a small
percentage of respondents, 2%, trade in commodities, and 6% of them engage in
trading currencies. This information can be valuable for understanding the trading
preferences within this particular group.

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4.16. What trading strategies do you commonly employ?

Investors Strategies Number of Percentage
Respondents
Day trading 21 42%
Swing trading 19 38%
Long-term investing 10 20%
Total 50 100%
Analysis:
According to the above data, it is evident that day trading is the most favoured
trading strategy among the surveyed investors, with 42% of respondents choosing
it, followed closely by swing trading, which is the second most common strategy at
38%. In contrast, long-term investing is the least preferred strategy, selected by 20%
of the investors, indicating a lower level of popularity among the respondents.

20%

42%
Day trading
Swing trading
38% Long-term investing

The pie chart illustrates the distribution of trading strategies employed by a group
of investors. Day trading is the most popular strategy, with 42% of respondents
favouring it, closely followed by swing trading at 38%. Long-term investing is the
choice of 20% of the surveyed investors. This data highlights that day trading and
swing trading are the dominant strategies among the respondents, while long-term
investing is less common among this group.

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Hypothesis Testing
Chi-Square Tests:

1) Analysis of age group and conceptual knowledge of people

invested in futures and options:

Null Hypothesis (H0) : There is no significant relationship between age and

conceptual knowledge of people invested in futures and options.
Alternative Hypothesis (H1) : There is a significant relationship between age and
conceptual knowledge of people invested in futures and options.
Chi-Square Test
Actual:
Row Labels 21 - 30 31 - 40 41 - 50 51 and above Grand Total
Not at all familiar 1 0 0 0 1
Not very familiar 0 1 1 0 2
Somewhat familiar 10 7 6 3 26
Very familiar 9 9 2 1 21
Grand Total 20 17 9 4 50

Expected:
Row Labels 21 - 30 31 - 40 41 - 50 51 and above Grand Total
Not at all familiar 0.4 0.34 0.18 0.08 1
Not very familiar 0.8 0.68 0.36 0.16 2
Somewhat familiar 10.4 8.84 4.68 2.08 26
Very familiar 8.4 7.14 3.78 1.68 21
Grand Total 20 17 9 4 50

Alpha = 0.05
Calculated P value = 0.6821
Calculated P value > Alpha : Accept the null hypothesis

Conclusion: There is no significant relationship between the age and knowledge of

people invested in futures and options. The p-value is greater than the typical
significance level of 0.05, suggesting that age group and understanding the
conceptual knowledge of people invested in futures and options are not significantly
related

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2) Analysis of occupation and conceptual knowledge of people

invested in futures and options:

Null Hypothesis (H0) : There is no significant relationship between occupation and

conceptual knowledge of people invested in futures and options.
Alternative Hypothesis (H1) : There is a significant relationship between occupation
and conceptual knowledge of people invested in futures and options.

Chi-Square Test
Actual:
Row Labels Not at all familiar Not very familiar Somewhat familiar Very familiar Grand Total
Retired 0 0 1 1 2
Salaried 0 2 16 12 30
Self-employed 0 0 6 4 10
Student 1 0 3 4 8
Grand Total 1 2 26 21 50

Expected:
Row Labels Not at all familiar Not very familiar Somewhat familiar Very familiar Grand Total
Retired 0.04 0.08 1.04 0.84 2
Salaried 0.6 1.2 15.6 12.6 30
Self-employed 0.2 0.4 5.2 4.2 10
Student 0.16 0.32 4.16 3.36 8
Grand Total 1 2 26 21 50

Alpha = 0.05
Calculated P value = 0.6129
Calculated P value > Alpha : Accept the null hypothesis

Conclusion: There is no significant relationship between occupation and investors

understanding about the concept of people invested in futures and options. The p-
value is greater than the typical significance level of 0.05, suggesting that
Occupation and these factors are not significantly related.

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3) Analysis of the performance of futures and options based on

different trading strategies:

Null Hypothesis (H0) : There is no significant relationship between the overall

performance of the futures and options and trading strategies do they commonly
employ.
Alternative Hypothesis (H1) : There is a significant relationship between the overall
performance of the futures and options and trading strategies do they commonly
employ.

Chi-Square Test
Actual:
Row Labels Average Good Poor Very poor Grand Total
Day trading 10 11 0 0 21
Long-term investing 5 3 2 0 10
Swing trading 15 2 1 1 19
Grand Total 30 16 3 1 50

Expected:
Row Labels Average Good Poor Very poor Grand Total
Day trading 12.6 6.72 1.26 0.42 21
Long-term investing 6 3.2 0.6 0.2 10
Swing trading 11.4 6.08 1.14 0.38 19
Grand Total 30 16 3 1 50

Alpha = 0.05
Calculated P value = 0.0358
Calculated P value < Alpha : Reject the null hypothesis

Conclusion: There is a significant relationship between the different trading

strategies and performance of futures and options. The p-value is lesser than the
typical significance level of 0.05, suggesting that different trading strategies and
performance of futures and options are significantly related.

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4) Analysis of the performance of futures and options based on

engage in trading derivatives:

Null Hypothesis (H0) : There is no significant relationship between the overall

performance of the futures and options and engage in trading derivatives.
Alternative Hypothesis (H1) : There is a significant relationship between the overall
performance of the futures and options and engage in trading derivatives.

Chi-Square Test

Actual:
Row Labels Average Good Poor Very poor Grand Total
Daily 3 3 0 0 6
Monthly 1 2 1 0 4
Occasionally 6 1 0 0 7
Rarely 4 1 1 1 7
Weekly 16 9 1 0 26
Grand Total 30 16 3 1 50

Expected:
Row Labels Average Good Poor Very poor Grand Total
Daily 3.6 1.92 0.36 0.12 6
Monthly 2.4 1.28 0.24 0.08 4
Occasionally 4.2 2.24 0.42 0.14 7
Rarely 4.2 2.24 0.42 0.14 7
Weekly 15.6 8.32 1.56 0.52 26
Grand Total 30 16 3 1 50

Alpha = 0.05
Calculated P value = 0.2710
Calculated P value > Alpha : Accept the null hypothesis

Conclusion: There is no significant relationship between the performance of futures

and options and engage in trading derivatives. The p-value is greater than the typical
significance level of 0.05, suggesting that engage in trading derivatives and
performance of futures and options are not significantly related.

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5) Analysis of the performance of futures and options based on back

testing in trading derivatives:

Null Hypothesis (H0) : There is no significant relationship between the overall

performance of the futures and options and back testing in trading derivatives.
Alternative Hypothesis (H1) : There is a significant relationship between the overall
performance of the futures and options and back testing in trading derivatives.

Chi-Square Test
Actual:
Row Labels Average Good Poor Very poor Grand Total
Neutral 1 0 0 0 1
Somewhat important 2 4 0 1 7
Very important 27 12 3 0 42
Grand Total 30 16 3 1 50

Expected:
Row Labels Average Good Poor Very poor Grand Total
Neutral 0.6 0.32 0.06 0.02 1
Somewhat important 4.2 2.24 0.42 0.14 7
Very important 25.2 13.4 2.52 0.84 42
Grand Total 30 16 3 1 50

Alpha = 0.05
Calculated P value = 0.1197
Calculated P value > Alpha : Accept the null hypothesis

Conclusion: There is no significant relationship between the performance of futures

and options and back testing in trading derivatives. The p-value is greater than the
typical significance level of 0.05, suggesting that back testing in trading derivatives
and performance of futures and options are not significantly related.

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4.17. STATE BANK OF INDIA:

Date Market Price Futures Price

31-Aug-23 564.73 561.35

30-Aug-23 571.71 567.45

29-Aug-23 574.04 574.80

28-Aug-23 572.19 572.55

25-Aug-23 571.35 570.05

24-Aug-23 578.08 576.70

23-Aug-23 573.28 576.95

22-Aug-23 571.19 569.40

21-Aug-23 573.68 573.20

18-Aug-23 571.96 573.40

17-Aug-23 569.51 573.00

16-Aug-23 562.18 566.10

14-Aug-23 567.98 563.20

11-Aug-23 577.35 576.75

10-Aug-23 575.85 576.20

09-Aug-23 575.84 576.95

08-Aug-23 575.04 576.10

07-Aug-23 575.85 572.35

04-Aug-23 587.61 577.50

03-Aug-23 597.13 595.10

02-Aug-23 606.94 602.25

01-Aug-23 619.54 615.75

Table 1: Table showing the market and futures prices of State Bank of India

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Market price for the State bank stocks are taken as the average of Open, High, Low,
and Close price.
The objective of this analysis is to evaluate the profit/loss position of futures
contract. This analysis considered the August 2023 contract of State Bank. The lot
size of State Bank is 1500, the time period in which this analysis done is from
01/08/2023 to 31/08/2023.

Graph showing the price movement of State Bank Futures

620
610
600
Futures Price

590
580
570
560
550
540
530

Date Futures Price

(Source: Plotted using the data from NSE website using excel)

Observation and Findings:

If a person buys 1 lot i.e. 1500 futures of State Bank on 14 Aug, 2023 and sells on
23 Aug, 2023 then he will get a profit of (576.95 - 563.2) = 13.75 per share. So he
will get a profit of Rs.20625 i.e. 13.75 * 1500
If he sells on 31 Aug, 2023, then he will get a loss of (563.2 – 561.35) = -1.85 i.e. a
loss of 1.85 per share. So his total loss is Rs.2775 i.e. 1.85 * 1500
The closing price of State Bank at the end of the contract period is 561.35 and this
is considered as settlement price.

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Call Options:

Call Options
Date Market Price 560 580 600 620 640 660
31-Aug-23 564.725 2.6 0.05 0.05 0.05 0.05 0.05
30-Aug-23 571.7125 8 0.2 0.1 0.05 0.05 0.05
29-Aug-23 574.0375 15.35 1.65 0.3 0.15 0.05 0.05
28-Aug-23 572.1875 13.7 2 0.45 0.2 0.05 0.05
25-Aug-23 571.35 11.9 2.05 0.65 0.3 0.15 0.1
24-Aug-23 578.075 18 4.6 1.2 0.45 0.15 0.15
23-Aug-23 573.275 18.7 5.35 1.4 0.5 0.2 0.15
22-Aug-23 571.1875 12.9 3.2 0.9 0.4 0.2 0.15
21-Aug-23 573.675 16.25 5.1 1.7 0.65 0.3 0.2
18-Aug-23 571.9625 17.05 6.05 2.3 0.95 0.4 0.3
17-Aug-23 569.5125 17.2 6.55 2.8 1.3 0.65 0.4
16-Aug-23 562.175 13.25 4.95 2.35 1.25 0.7 0.4
14-Aug-23 567.975 12.65 5.15 2.6 1.45 0.85 0.55
11-Aug-23 577.35 22.2 10.55 4.9 2.45 1.3 0.8
10-Aug-23 575.85 22.15 10.75 5 2.55 1.25 0.75
09-Aug-23 575.8375 23.1 11.45 5.45 2.8 1.4 0.85
08-Aug-23 575.0375 22.6 11.35 5.35 2.7 1.4 0.85
07-Aug-23 575.85 20.75 10.55 5.15 2.6 1.4 0.85
04-Aug-23 587.6125 26.45 14.95 7.75 4 2.2 1.35
03-Aug-23 597.125 41.25 26.75 16.3 9.15 4.7 2.55
02-Aug-23 606.9375 46.5 31.25 19.5 11.05 5.6 3.1
01-Aug-23 619.5375 61.8 41.1 26.7 16 8.55 4.5
Table 2: Table showing the call prices of State Bank of India

The following table explains the market price and premiums of calls.
• The first column explains trading date
• Second column explains the SPOT market price in cash segment on that date.
• The third column explains call premiums amounting at these strike prices; 560,
580, 600, 620, 640, 660.

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Observations and Findings:

Buyers Pay-off :
• Those who have purchase call option at a strike price of 600, the premium
payable is 26.7
• On the expiry date spot market price closed at 564.72 as it is out of the money
for the buyer and the in the money for the seller, hence the buyer is in loss.
• So the buyer will lose only premium of 26.7 per share.
• Loss for the buyer is, i.e. 26.7*1500 = 40050.
(Pay off = Max (Spot price – Strike price, 0) - Premium Value
= Max (564.725 – 600,0) – 26.7 = -26.7)

Sellers Pay-off :
• Only the premium amount will be the profit for the seller.
• So his profit is 26.7*1500 = 40050

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Put Options :
Put Options
Date Market Price 520 540 560 580 600 620
31-Aug-23 564.725 0.05 0.05 0.35 18.05 38 58.1
30-Aug-23 571.7125 0.1 0.15 0.85 12.45 32.5 53.2
29-Aug-23 574.0375 0.1 0.2 0.75 6.85 25.4 45.4
28-Aug-23 572.1875 0.15 0.3 1.2 9.45 27.85 48
25-Aug-23 571.35 0.15 0.45 1.7 11.8 30.1 50.05
24-Aug-23 578.075 0.2 0.45 1.25 7.7 24.2 43.4
23-Aug-23 573.275 0.25 0.5 1.55 8.15 24.1 43.4
22-Aug-23 571.1875 0.4 0.85 3.2 13.45 31.1 50.85
21-Aug-23 573.675 0.4 0.8 2.7 11.45 28.2 47.15
18-Aug-23 571.9625 0.5 1.05 3.4 12.3 28.2 46.8
17-Aug-23 569.5125 0.7 1.35 4.05 13.2 29.3 47.8
16-Aug-23 562.175 1.15 2.4 6.85 18.35 35.6 54.65
14-Aug-23 567.975 1.85 3.55 8.9 15.62 38.9 57.7
11-Aug-23 577.35 1.05 2.15 5.1 13.3 27.6 45.25
10-Aug-23 575.85 1.2 2.4 5.6 14.15 28.2 45.4
09-Aug-23 575.8375 1.15 2.45 5.75 14.15 27.9 45.05
08-Aug-23 575.0375 1.35 2.7 6.3 14.85 28.85 46.1
07-Aug-23 575.85 1.85 3.7 8.1 17.8 32.2 49.7
04-Aug-23 587.6125 2.35 4.35 8.35 16.8 29.5 45.3
03-Aug-23 597.125 1.35 2.7 5.55 11.35 20.85 33.45
02-Aug-23 606.9375 0.85 1.85 4 8.55 17.05 28.5
01-Aug-23 619.5375 0.5 0.95 2.15 5.05 10.7 19.95
Table 3: Table showing the put prices of State Bank of India

Observations and Findings:

Buyers Pay-off :
• As buyer bought 1 lot of State Bank that is 1500, at a strike price of 580 paid a
premium of 5.05 per share.
• Settlement price is 564.725
Pay off = Max (Strike price - spot price, 0) - Premium Value
Pay off = Max (580 – 564.725,0) – 5.05 = 10.225
Buyers Profit =10.225*1500 = 15337.5

Because it is positive it is in the money contract hence buyer will get more profit,
incase spot price decreases, buyer`s profit will increase.

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Sellers Pay-off :
• It is in the money for the buyer so it is out of the money for the seller, hence he
is in loss.
• The loss is equal to the profit of the buyer i.e. Rs.15337.5

Graph showing the price movement of Spot and Futures

630
620
610
600
590
580
570
560
550
540
530

Market Price Futures Price

(Source: Plotted using the data from NSE website using excel)

Observations and Findings:

• There appears to be a general correlation between Market Price and Futures
Price, with both moving in the same direction. However, Futures Price often
lags behind Market Price.
• The buyer of a futures make money, if the buy price is lower than the settlement
price.
• If the future's selling price is less than the settlement price, the seller incur losses.

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4.18. ICICI BANK :

Date Market Price Futures Price

31-Aug-23 959.73 958.75

30-Aug-23 964.80 959.15

29-Aug-23 971.54 968.45

28-Aug-23 969.44 970.55

25-Aug-23 966.43 969.05

24-Aug-23 973.41 970.55

23-Aug-23 959.75 966.35

22-Aug-23 955.49 953.00

21-Aug-23 954.46 956.80

18-Aug-23 952.16 953.05

17-Aug-23 954.73 953.80

16-Aug-23 955.71 957.80

14-Aug-23 957.43 961.20

11-Aug-23 961.63 958.00

10-Aug-23 971.50 968.80

09-Aug-23 975.10 976.50

08-Aug-23 976.29 976.85

07-Aug-23 971.13 972.20

04-Aug-23 966.69 969.70

03-Aug-23 971.29 965.10

02-Aug-23 985.89 985.60

01-Aug-23 997.18 993.70

Table 4: Table showing the market and futures prices of ICICI Bank

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Market price for the ICICI Bank stocks are taken as the average of Open, High,
Low, and Close price.
The objective of this analysis is to evaluate the profit/loss position of futures
contract. This analysis considered the August 2023 contract of ICICI Bank. The lot
size of ICICI Bank is 700, the time period in which this analysis done is from
01/08/2023 to 31/08/2023.

Futures Price
1000.00
990.00
980.00
Futures Price

970.00
960.00
950.00
940.00
930.00

Date Futures Price

(Source: Plotted using the data from NSE website using excel)

Observation and Findings:

If a person buys 1 lot i.e. 700 futures of ICICI Bank on 1 Aug, 2023 and sells on 8
Aug, 2023 then he will get a profit of (993.70 – 976.85) = 16.85 per share. So he
will get a loss of Rs.11795 i.e. 16.85 * 700
If he sells on 31 Aug, 2023, then he will get a loss of (993.70 – 958.75) = 34.95 i.e.
a loss of 34.95 per share. So his total loss is Rs.24465 i.e. 34.95 * 700
The closing price of ICICI Bank at the end of the contract period is 958.75 and this
is considered as settlement price.

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Call Options:
Call options
Date Market Price 940 960 980 1000 1020 1040
31-Aug-23 959.73 20.1 0.2 0.05 0.05 0.05 0.05
30-Aug-23 964.80 19.4 2.95 0.2 0.1 0.1 0.05
29-Aug-23 971.54 28.05 9.4 1.05 0.3 0.2 0.1
28-Aug-23 969.44 31.25 11.9 2 0.65 0.25 0.15
25-Aug-23 966.43 29.55 11.9 2.95 1.1 0.45 0.2
24-Aug-23 973.41 31.25 13.85 4.1 1.55 0.55 0.25
23-Aug-23 959.75 27.75 11.95 3.9 1.7 0.75 0.35
22-Aug-23 955.49 17.6 5.85 1.7 0.85 0.45 0.2
21-Aug-23 954.46 20.6 7.7 2.45 1.2 0.55 0.35
18-Aug-23 952.16 19.25 7.75 3.15 1.7 0.9 0.5
17-Aug-23 954.73 20.95 9.4 4.1 2.3 1.3 0.8
16-Aug-23 955.71 23.65 11.15 4.75 2.5 1.4 0.95
14-Aug-23 957.43 27.9 14.85 7.1 3.75 2.1 1.35
11-Aug-23 961.63 26.2 14.6 7.55 4.1 2.35 1.55
10-Aug-23 971.50 34.35 20.85 11.25 5.8 3.05 1.95
09-Aug-23 975.10 40.9 25.8 14.55 7.7 4 2.35
08-Aug-23 976.29 41.5 26.55 15.5 8.4 4.5 2.7
07-Aug-23 971.13 38.6 24.55 14.35 7.9 4.25 2.6
04-Aug-23 966.69 37.05 24 14.35 8.3 4.75 2.95
03-Aug-23 971.29 35.35 22.85 13.75 8 4.65 2.95
02-Aug-23 985.89 51.35 35 23 13.85 7.9 4.6
01-Aug-23 997.18 57.35 41.35 27.85 17.6 10.35 6.1
Table 5: Table showing the call prices of ICICI Bank

The following table explains the market price and premiums of calls.
• The first column explains trading date
• Second column explains the SPOT market price in cash segment on that date.
• The third column explains call premiums amounting at these strike prices; 940,
960, 980, 1000, 1020, 1040.

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Observations and Findings:

Buyers Pay-off :
• Those who have purchase call option at a strike price of 940, the premium
payable is 57.35
• On the expiry date spot market price closed at 959.73 as it is in the money for
the buyer and the out of the money for the seller, hence the buyer is in profit.
• So the buyer will get profit of (959.73 – 940) 19.73 per share
• After deducting the premium buyer is at loss of 26334 i.e. 37.62*700
(Pay off = Max (Spot price – Strike price, 0) - Premium Value
= Max (959.73 – 940,0) – 57.35= -37.62)

Sellers Pay-off :
• Loss for the buyer will be the profit for the seller.
• So seller gain is 26334 i.e. (37.62*700)

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Put Options:
Put Options
Date Market Price 900 920 940 960 980 1000
31-Aug-23 959.73 0.05 0.05 0.1 0.45 21.2 41.4
30-Aug-23 964.80 0.1 0.15 0.65 4 20.65 41.55
29-Aug-23 971.54 0.1 0.15 0.35 1.3 12.9 32.25
28-Aug-23 969.44 0.2 0.3 0.55 1.7 11.95 30.45
25-Aug-23 966.43 0.3 0.4 1 3.45 14.1 32.15
24-Aug-23 973.41 0.25 0.5 1.25 3.65 13.8 31.45
23-Aug-23 959.75 0.35 0.65 1.8 5.9 17.7 35.05
22-Aug-23 955.49 0.6 1.25 4.2 12.4 28.15 47.45
21-Aug-23 954.46 0.65 1.2 3.5 10.5 25.45 44.65
18-Aug-23 952.16 0.9 2 5.7 14.25 29.7 47.4
17-Aug-23 954.73 1.05 2.35 6.4 14.95 29.35 47.45
16-Aug-23 955.71 1.05 2.25 5.65 13 26.6 44.25
14-Aug-23 957.43 1.3 2.62 6.15 12.32 25.1 43.05
11-Aug-23 961.63 1.75 3.7 8 16.15 29.3 45.9
10-Aug-23 971.50 1.4 2.65 5.7 11.7 21.85 36.6
09-Aug-23 975.10 1.05 1.95 4.2 9.1 17.7 30.6
08-Aug-23 976.29 1.1 2.2 4.75 9.65 18.45 31.35
07-Aug-23 971.13 1.65 3.05 6.15 12 21.75 35.3
04-Aug-23 966.69 2.1 3.85 7.45 13.9 24.1 37.5
03-Aug-23 971.29 3.15 5.8 10.45 17.7 28.2 42.15
02-Aug-23 985.89 1.7 3.05 5.4 9.95 17.55 28.2
01-Aug-23 997.18 1.3 2.25 4.15 7.7 14.05 23.7
Table 6: Table showing the put prices of ICICI Bank

Observations and Findings:

Buyers Pay-off :
• As buyer bought 1 lot of ICICI Bank shares that is 700, at a strike price of 980
paid a premium of 14.05 per share.
• Settlement price is 959.73
Pay off = Max (Strike price - spot price, 0) - Premium Value
Pay off = Max (980 – 959.73,0) – 14.05 = 6.22
Buyers Profit =6.22*700 = 4354
Because it is positive it is in the money contract hence buyer will get more profit,
incase spot price goes higher than the strike price then the buyer incur losses.

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Sellers Pay-off :
• It is in the money for the buyer so it is out of the money for the seller, hence he
is in loss.
• The loss is equal to the profit of the buyer i.e. Rs. 4354

Graph showing the price movement of spot and futures

1010.00
1000.00
990.00
980.00
970.00
960.00
950.00
940.00
930.00
920.00

Market Price Futures Price

(Source: Plotted using the data from NSE website using excel)

Observations and Findings:

• The Futures Price shows less fluctuation during the same period, generally
decreasing but at a slower rate.
• The buyer of a futures make money, if the buy price is lower than the settlement
price.
• If the future's selling price is less than the settlement price, the seller incur losses.

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4.19. AXIS BANK:

Date Market Price Futures Price

31-Aug-23 978.79 973.50

30-Aug-23 985.90 983.10

29-Aug-23 984.54 981.55

28-Aug-23 982.83 988.40

25-Aug-23 979.18 982.05

24-Aug-23 985.03 983.50

23-Aug-23 969.31 978.90

22-Aug-23 954.36 957.35

21-Aug-23 949.29 952.85

18-Aug-23 941.51 945.25

17-Aug-23 939.04 939.35

16-Aug-23 938.71 936.55

14-Aug-23 940.45 943.25

11-Aug-23 942.51 942.25

10-Aug-23 952.49 944.95

09-Aug-23 955.18 956.20

08-Aug-23 957.44 958.00

07-Aug-23 956.35 954.55

04-Aug-23 952.63 958.75

03-Aug-23 944.73 941.50

02-Aug-23 955.29 951.35

01-Aug-23 963.20 966.20

Table 7: Table showing the market and futures prices of Axis Bank

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Market price for the Axis Bank stocks are taken as the average of Open, High, Low,
and Close price.
The objective of this analysis is to evaluate the profit/loss position of futures
contract. This analysis considered the August 2023 contract of Axis Bank. The lot
size of Axis Bank is 625, the time period in which this analysis done is from
01/08/2023 to 31/08/2023.

Price movement of Axis Bank futures

1000.00
990.00
980.00
Futures Price

970.00
960.00
950.00
940.00
930.00
920.00
910.00

Date Futures Price

(Source: Plotted using the data from NSE website using excel)

Observation and Findings:

If a person buys 1 lot i.e. 625 futures of Axis Bank on 1 Aug, 2023 and sells on 14
Aug, 2023 then he will get a loss of (966.20 – 943.25) = 22.95 per share. So he will
get a loss of Rs.14343.75 i.e. 22.95 * 625
If he sells on 31 Aug, 2023, then he will get a profit of (966.20 – 973.50) = 7.3 i.e.
a profit of 7.3 per share. So his total profit is Rs.4562.5 i.e. 7.3 * 625
The closing price of Axis Bank at the end of the contract period is 973.50 and this
is considered as settlement price.

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Call Options:
Call Options
Date Market Price 930 950 970 980 990 1010
31-Aug-23 978.79 45.25 24.35 6.65 0.2 0.1 0.05
30-Aug-23 985.90 53.3 33.5 12.55 4.7 1.85 0.3
29-Aug-23 984.54 50.1 31.5 12.25 5.1 2.25 0.65
28-Aug-23 982.83 58.95 38.6 19.15 11.2 6.05 1.55
25-Aug-23 979.18 52.25 32.3 14.9 8.7 5 1.5
24-Aug-23 985.03 53.7 34.55 16.85 10.55 6.2 1.95
23-Aug-23 969.31 49.35 30.25 14.45 9.45 6 2.35
22-Aug-23 954.36 29.25 13.5 4.65 3.05 2 0.95
21-Aug-23 949.29 26.35 12.25 4.95 3.45 2.4 1.25
18-Aug-23 941.51 21.5 10.05 4.6 3.45 2.55 1.5
17-Aug-23 939.04 19.4 9.6 4.7 3.65 2.8 1.7
16-Aug-23 938.71 17.55 8.15 4.1 3.25 2.5 1.55
14-Aug-23 940.45 19.35 11.3 5.75 4.5 3.21 2.2
11-Aug-23 942.51 23.1 12.65 6.9 5.25 4.05 2.6
10-Aug-23 952.49 26.45 15.4 8.65 6.55 5.05 3.15
09-Aug-23 955.18 33.65 20.3 11.4 8.6 6.5 3.95
08-Aug-23 957.44 34.65 21.35 12.3 9.35 7.05 4.2
07-Aug-23 956.35 33.25 20.2 11.75 8.95 6.85 4.2
04-Aug-23 952.63 36.2 22.75 13.6 10.45 8.05 4.95
03-Aug-23 944.73 26.3 16.2 9.65 7.5 5.9 3.8
02-Aug-23 955.29 33.2 21.15 12.95 10.1 7.9 4.9
01-Aug-23 963.20 43.25 29.4 18.8 14.85 11.55 7.05
Table 8: Table showing the call prices of Axis Bank

The following table explains the market price and premiums of calls.
• The first column explains trading date
• Second column explains the SPOT market price in cash segment on that date.
• The third column explains call premiums amounting at these strike prices; 930,
950, 970, 980, 990, 1010.

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Observations and Findings:

Buyers Pay-off :
• Those who have purchase call option at a strike price of 990, the premium
payable is 11.55
• On the expiry date spot market price closed at 978.79 as it is out of the money
for the buyer and the in the money for the seller, hence the buyer is in loss.
• So the buyer will lose only premium of 11.55 per share.
• Loss for the buyer is, i.e. 11.55*625 = Rs.7218.75
(Pay off = Max (Spot price – Strike price, 0) - Premium Value
= Max (978.79 – 990,0) – 11.55 = -11.55)

Sellers Pay-off :
• Only the premium amount will be the profit for the seller.
• So his profit is 11.55*625 = Rs.7218.75

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Put Options:
Put Options
Date Market Price 900 920 940 960 980 1000
31-Aug-23 978.79 0.05 0.1 0.05 0.05 5.7 28.1
30-Aug-23 985.90 0.05 0.15 0.1 0.2 2.4 17.7
29-Aug-23 984.54 0.05 0.1 0.15 0.4 4.1 20.7
28-Aug-23 982.83 0.15 0.25 0.4 0.9 3.35 14.75
25-Aug-23 979.18 0.3 0.45 0.9 1.85 7.2 21.3
24-Aug-23 985.03 0.4 0.7 1.35 2.4 7.55 20.35
23-Aug-23 969.31 0.3 0.65 1.3 3.2 11.05 25.25
22-Aug-23 954.36 0.55 1.4 3.7 10.95 25.55 43.3
21-Aug-23 949.29 1.05 2.25 5.6 14.7 30.2 48.85
18-Aug-23 941.51 1.95 4.05 9.55 20.95 37.7 55.95
17-Aug-23 939.04 3.55 6.6 13.75 26.6 43.6 61.1
16-Aug-23 938.71 3.3 6.85 14.8 28.35 45.95 64.6
14-Aug-23 940.45 3.05 6 12.35 24.15 40.1 59.35
11-Aug-23 942.51 4 7.45 14.4 26.3 42.45 59.85
10-Aug-23 952.49 4.5 8.15 14.95 26 40.8 58.2
09-Aug-23 955.18 2.6 5.1 9.9 18.6 31.8 48.45
08-Aug-23 957.44 2.6 5.25 9.95 18.5 31.4 46.45
07-Aug-23 956.35 3.05 5.9 11.4 20.6 34.15 50.05
04-Aug-23 952.63 2.8 5.45 10.3 18.65 31.45 46.8
03-Aug-23 944.73 6.55 11.25 19 30.55 45.75 62.5
02-Aug-23 955.29 5 8.6 14.9 24.65 37.95 54.8
01-Aug-23 963.20 3.2 5.6 10.1 17.65 28.2 42.75
Table 9: Table showing the put prices of Axis Bank

Observations and Findings:

Buyers Pay-off :
• As buyer bought 1 lot of Axis Bank shares that is 625, at a strike price of 940
paid a premium of 10.1 per share.
• Settlement price is 978.79
Pay off = Max (Strike price - spot price, 0) - Premium Value
Pay off = Max (940 – 978.79,0) – 10.1 = -10.1
Buyer Loss =10.1*625 = 6312.5
It is negative because it is out of the money contract hence buyer will get loss,
incase spot price is less than the strike price then buyer get a profit.

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Sellers Pay-off :
• It is out of the money for the buyer so it is in the money for the seller, hence he
is in profit.
• The profit is equal to the loss of the buyer i.e. Rs. 6312.5

Graph showing the price movement of spot and futures

1000.00
990.00
980.00
970.00
960.00
950.00
940.00
930.00
920.00
910.00

Market Price Futures Price

(Source: Plotted using the data from NSE website using excel)

Observations and Findings:

• The Market Prices display higher daily volatility compared to Futures Prices,
with larger price swings.
• The Futures Price follows a similar trend to the Market Price, indicating that
both are influenced by similar factors.
• The buyer of a futures make money, if the buy price is lower than the settlement
price.
• If the future's selling price is less than the settlement price, the seller incur losses.

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4.20. KOTAK MAHINDRA BANK

Date Market price Futures price

31-Aug-23 1765.66 1,758.75

30-Aug-23 1777.67 1,772.75

29-Aug-23 1784.92 1,780.55

28-Aug-23 1780.52 1,787.35

25-Aug-23 1774.32 1,777.05

24-Aug-23 1784.56 1,780.15

23-Aug-23 1769.65 1,779.25

22-Aug-23 1767.15 1,764.45

21-Aug-23 1762.5 1,765.40

18-Aug-23 1762.16 1,755.80

17-Aug-23 1780.91 1,770.55

16-Aug-23 1791.46 1,792.25

14-Aug-23 1800.76 1,800.95

11-Aug-23 1803.58 1,801.20

10-Aug-23 1823.58 1,810.95

09-Aug-23 1837.17 1,837.60

08-Aug-23 1840.96 1,836.25

07-Aug-23 1846.66 1,842.85

04-Aug-23 1840.45 1,846.95

03-Aug-23 1833.01 1,835.55

02-Aug-23 1845.36 1,835.80

01-Aug-23 1866.97 1,864.25

Table 13: Table showing the market and futures prices of Kotak Bank

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Market price for the Kotak Bank stocks are taken as the average of Open, High,
Low, and Close price.
The objective of this analysis is to evaluate the profit/loss position of futures
contract. This analysis considered the August 2023 contract of Kotak Bank. The lot
size of Kotak Bank is 400, the time period in which this analysis done is from
01/08/2023 to 31/08/2023.

Graph showing the price movement of Kotak Bank futures

1,880.00
1,860.00
1,840.00
Futures Price

1,820.00
1,800.00
1,780.00
1,760.00
1,740.00
1,720.00
1,700.00

Date Futures price

(Source: Plotted using the data from NSE website using excel)

Observation and Findings:

If a person buys 1 lot i.e. 400 futures of Kotak Bank on 1 Aug, 2023 and sells on 14
Aug, 2023 then he will get a loss of (1864.25 - 1800.95) = 63.3 per share. So he will
get a profit of Rs.25320 i.e. 63.3 * 400
If he sells on 31 Aug, 2023, then he will get a loss of (1864.25 – 1758.75) = 105.5
i.e. a loss of 105.5 per share. So his total loss is Rs.42200 i.e. 105.5*400
The closing price of Kotak Bank at the end of the contract period is 1758.75 and
this is considered as settlement price.

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Call Options:

CALL OPTIONS
Date Market price 1760 1800 1820 1840 1880 1920
31-Aug-23 1,765.66 2.4 0.15 0.1 0.05 0.1 0.1
30-Aug-23 1,777.67 14.2 0.85 0.3 0.15 0.15 0.1
29-Aug-23 1,784.92 22.55 3.15 1.45 0.7 0.2 0.1
28-Aug-23 1,780.52 30.25 6.5 2.8 1.35 0.45 0.2
25-Aug-23 1,774.32 24.3 6.25 3.35 2.15 0.85 0.35
24-Aug-23 1,784.56 28.15 9.05 5.05 3.1 1.35 0.7
23-Aug-23 1,769.65 29.65 10.2 5.6 3.35 1.4 0.75
22-Aug-23 1,767.15 21.3 6.55 3.45 2.2 1.05 0.8
21-Aug-23 1,762.50 22.95 7.55 4.25 2.95 1.55 1
18-Aug-23 1,762.16 21.95 8.85 5.65 4 2.4 1.5
17-Aug-23 1,780.91 31.8 14.1 9.25 6.5 3.55 2.4
16-Aug-23 1,791.46 45.2 21.65 14.7 10 5.05 3
14-Aug-23 1,800.76 54.6 29.55 21.3 15.2 7.75 4.45
11-Aug-23 1,803.58 57.95 32.75 24.1 17.5 9.35 5.25
10-Aug-23 1,823.58 65.7 40.65 31.05 23.45 13 7.35
09-Aug-23 1,837.17 87.45 55.2 43.2 32.8 18.3 9.95
08-Aug-23 1,840.96 87.45 56.55 44.3 34.2 19.65 11.15
07-Aug-23 1,846.66 94.15 61.2 48.4 37.65 22.25 13.1
04-Aug-23 1,840.45 96.3 65.35 51.85 40.75 24.65 14.75
03-Aug-23 1,833.01 88.45 59.4 47.5 37.45 23.05 14.3
02-Aug-23 1,845.36 87.9 58.75 47.15 37.15 23.35 14.55
01-Aug-23 1,866.97 236.05 80.25 66.2 54.1 35.15 21.75
Table 14: Table showing the call prices of Kotak Bank

The following table explains the market price and premiums of calls.
• The first column explains trading date
• Second column explains the SPOT market price in cash segment on that date.
• The third column explains call premiums amounting at these strike prices; 1760,
1800, 1820, 1840, 1880, 1920.

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Observations and Findings:

Buyers Pay-off :
• Those who have purchase call option at a strike price of 1840, the premium
payable is 54.1
• On the expiry date spot market price closed at 1765.66 as it is out of the money
for the buyer and the in the money for the seller, hence the buyer is in loss.
• So the buyer will lose only premium of 54.1 per share.
• Loss for the buyer is, i.e. 54.1*400 = Rs.21640
(Pay off = Max (Spot price – Strike price, 0) - Premium Value
= Max (1765.66 – 1840,0) – 54.1 = -54.1)

Sellers Pay-off :
• Only the premium amount will be the profit for the seller.
• So his profit is 54.1*400 = Rs.21640

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Put Options:
PUT OPTIONS
Date Market price 1740 1760 1800 1820 1840 1880
31-Aug-23 1,765.66 0.05 1.45 44.45 64.3 83.25 121.35
30-Aug-23 1,777.67 0.8 2.7 28.7 49 67.7 102.6
29-Aug-23 1,784.92 0.95 2.2 22.35 41.1 60 96
28-Aug-23 1,780.52 1.45 2.95 19.1 34.9 53.8 93.65
25-Aug-23 1,774.32 3.2 7 28.35 45.1 66.9 101.5
24-Aug-23 1,784.56 4.05 7.85 28.15 44.2 63 102.9
23-Aug-23 1,769.65 5.55 9.95 30.15 45.9 63 101
22-Aug-23 1,767.15 9.3 15.9 40.85 57.65 75.95 112
21-Aug-23 1,762.50 9.9 16.55 40.65 56.8 76.8 115.5
18-Aug-23 1,762.16 15.85 24.55 51.25 68.5 86.8 128.9
17-Aug-23 1,780.91 12.85 19.7 41.85 57.2 74.65 110.75
16-Aug-23 1,791.46 7.4 11.85 28.15 41.3 56.05 91.65
14-Aug-23 1,800.76 8.6 12.7 27.8 38.5 52.65 84.55
11-Aug-23 1,803.58 10.15 14.7 29.8 41.4 55.25 87.55
10-Aug-23 1,823.58 10.35 14.45 29 39.35 52.9 81.15
09-Aug-23 1,837.17 5.65 8.1 17.1 24.6 34.4 59.35
08-Aug-23 1,840.96 6.7 9.45 19.2 27.05 36.75 62.9
07-Aug-23 1,846.66 5.75 8.4 17.55 24.75 33.9 57.6
04-Aug-23 1,840.45 6.3 8.75 17.2 24.1 33.15 55.85
03-Aug-23 1,833.01 8.7 12.05 22.75 30.75 40.7 66.45
02-Aug-23 1,845.36 8.55 11.55 22.2 30.35 40.3 65.95
01-Aug-23 1,866.97 5.4 7.55 15.2 21.3 28.9 49.6

Table 15: Table showing the put prices of Kotak Bank

Observations and Findings:

Buyers Pay-off :
• As buyer bought 1 lot of Canara Bank shares that is 400, at a strike price of 1800
paid a premium of 15.2 per share.
• Settlement price is 1765.66
Pay off = Max (Strike price - spot price, 0) - Premium Value
Pay off = Max (1800 – 1765.66,0) – 15.2 = 19.14
Buyer profit =19.14*400 = 7656
It is positive because it is in the money contract hence buyer will get profit, incase
spot price is more than the strike price then buyer get a loss.

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Sellers Pay-off :
• It is in the money for the buyer so it is out of the money for the seller, hence he
is in loss.
• The loss is equal to the profit of the buyer i.e. Rs. 7656

Graph showing the price movement of spot and futures

1880
1860
1840
1820
1800
1780
1760
1740
1720
1700

Market price Futures price

(Source: Plotted using the data from NSE website using excel)

Observations and Findings:

• The market price and futures price both exhibit some fluctuations throughout
the month of August 2023.
• Both market and futures prices started the month relatively high and prices
continued to decline throughout the period. It touched a low of 1762.16 on 18th
August 2023.
• The buyer of a futures make money, if the buy price is lower than the settlement
price.
• If the future's selling price is less than the settlement price, the seller incur losses.

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CHAPTER 5
SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS

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5.1. FINDINGS:
• According to the study, 50 peoples are responded and majority of them claimed
they invest in Futures and Options. A salaried peoples make significant
investments.
• According to the study 74% respondents they are assume that derivatives are
high risky investment options.
• According to survey 38% investors they assume that risk management is
important in futures and options and also majority of investors says futures and
options gives a average return.
• 48% investors claimed they are use the matrics of risk-to reward ratio to assess
the performance of trades.
• According to survey majority of the investors says back testing is very important
in trading strategy development and all investors track their trade performances
every time.
• According to survey 54% assumes that knowledge of futures and options is very
important and most of the investors are invest in index options and futures.
• The analysis shows that there is a general trend of movement in the same
direction between the State Bank of India futures price and market price.
Nonetheless, it has been noted that futures prices frequently lag behind market
prices, which may have an effect on trading techniques and decisions.
• Analysis of call options shows that buyers can profit when the spot market price
exceeds the strike price and the premium paid.
• Investor /trader buy a call option when market is in uptrend. And buy a put
option when market is in down trend.
• Call writer sells a call option when market is in downtrend. And put writer sells
put option when market is in up trend.
• Sellers of put options may incur losses when the option buyer is in profit. In
cases where the option is in the money for the buyer, the seller's loss is equal to
the buyer's profit.
• Futures and options contracts are traded on exchanges, and the prices of these
contracts are determined by supply and demand.

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5.2. CONCLUSIONS:

The Indian derivatives market is still relatively young and underdeveloped

compared to more mature markets such as the US and Europe. However, it has
grown rapidly in recent years and is expected to continue to grow in the future. The
Indian derivatives market is dominated by equity derivatives, with futures and
options contracts on stock indices and individual stocks accounting for the majority
of trading volume. However, other derivatives products, such as commodity
derivatives and currency derivatives, are also gaining popularity. The Indian
derivatives market is regulated by the Securities and Exchange Board of India
(SEBI). SEBI has implemented a number of measures to protect investors, such as
margin requirements and position limits. The Indian derivatives market has played
a significant role in the development of the Indian capital market. It has provided
investors with a way to hedge risk and speculate on asset prices. It has also helped
to attract foreign investment into the Indian market.

Here are some of the key conclusions from study on derivatives with respect to
futures and options:
❖ Futures and Options contracts are difficult financial instruments, they can be
useful instruments for managing risk and speculating on the future direction of
asset prices.
❖ Due to the high liquidity of futures and options markets, positions can be entered
and exited easily.
❖ Options and futures Contracts can also be used for making money, but doing so
carries a large risk.
❖ In terms of returns, option writers beat option buyers, but they also had more
volatility.

Overall, futures and options contracts are versatile and powerful financial
instruments that can be used by a variety of market participants to achieve their
investment goals. However, it is important to understand the risks involved before
trading futures and options contracts.

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5.3. RECOMMENDATION:

The project report of “Evaluation study on the performance and practices of

selective futures and options” presents findings and analyses. It offers investors,
traders, and market participants the following recommendations for well-informed
decision making.

➢ Define the Scope: Start by explicitly outlining the scope of your evaluation.
Specify the sorts of futures and options you want to examine, such as
commodities, stock indices, interest rates, or currency futures. Additionally,
determine whether you want to focus on specific methods, timeframes, or
markets.

➢ Data Collection: Compile trade history for the chosen futures and options. Data
on prices, trade volumes, and open interest will be required. Additionally, you
might wish to gather data on entry/exit regulations, position sizing, and
particular trading methods.

➢ Performance Metrics: Determine the performance metrics you will use to

evaluate the strategies. Common metrics include, annualized return, risk-
adjusted return (e.g., Sharpe ratio), maximum drawdown, winning percentage,
average holding period, risk metrics (e.g., standard deviation), transaction costs,
etc.

➢ Backtesting: Conduct backtesting to examine the historical performance of the

selective futures and options strategies. This involves applying the techniques
to previous data and computing the performance indicators.

➢ Risk Assessment: Analyze the risk involved with each strategy, including the
possibility for substantial drawdowns and the impact of black swan events.
Consider how the strategies handle risk, such as stop-loss orders or position
sizing restrictions.

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➢ Market Conditions: Examine the market conditions during the evaluation

period. Consider elements like volatility, interest rates, geopolitical events, and
economic conditions, as these can considerably affect the performance of futures
and options strategies.

➢ Trading Practices: Evaluate the trading practices implemented within the

strategies. This includes assessing the following:
Position sizing methods
Entry and exit rules
Risk management techniques
Portfolio diversification
Handling of news and events

➢ Comparative Analysis: Examine how various strategies performed in the chosen

futures and options markets. Determine which tactics worked best and under
what circumstances.
➢ Adjusting trading rules or parameters to enhance performance.
➢ Diversifying strategies to reduce risk.
➢ Suggesting specific market conditions or timeframes where the strategies excel.
➢ Emphasizing the importance of risk management practices.

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5.4. Management Lessons learned:

• Derivatives can be a powerful tool for hedging risk and managing price
volatility. Derivatives can be used to protect against adverse price movements
in underlying assets, such as commodities, stocks, and currencies. This can be
especially beneficial for businesses that rely on these assets for their operations.

• Derivatives can also be used to generate income. By buying and selling

derivatives contracts, businesses can profit from price movements in underlying
assets, even if they do not own those assets directly. However, it is important to
note that derivatives trading is a complex and risky activity, and it is important
to have a thorough understanding of the risks involved before engaging in it.

• It is important to have a clear understanding of the different types of derivatives

contracts available and how they work. There are many different types of
derivatives contracts, each with its own unique features and risks. Businesses
should carefully select the types of derivatives contracts that are most
appropriate for their needs and risk tolerance.

• It is important to develop a sound risk management framework for derivatives

trading. This framework should include clear policies and procedures for
managing risk exposure, as well as limits on the amount of money that can be
lost on derivatives trades.

• It is important to have a qualified team in place to manage derivatives trading

activities. This team should have a deep understanding of the derivatives market
and the risks involved in trading derivatives.

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Bibliography:

1. Aggarwal, R. (2017). Futures and options expiration-day effects: The Indian

evidence. Review of Futures Markets, 290–299.
2. Carlier, F. (2021). A Simple Options Trading Strategy based on Technical
Indicators,. International Journal of Economics and Financial Issues,
Econjournals, 88-91.
3. Chiang, R. (2019). Relative informational efficiency of cash, futures, and
options markets: The case of an emerging market. Journal of Banking &
Finance, 16-21.
4. Durga, D. S. (2022). A PAPER ON A REVIEW ON STOCK FUTURES AND
STOCK OPTIONS WITH REFERENCE TO NSE AND BSE. European
Journal of Molecular & Clinical Medicine, 28-34.
5. E, K. (2019). Index-Based Futures and Options Markets in Real Estate. Cowles
Foundation Discussion Papers, 1249.
6. KRISHNA RAMASWAMY, S. M. (2022). The Valuation of Options on Futures
Contracts. The Jornal of the American Finance Association, 42-48.

7. Lien, D. (2020). Hedging downside risk: futures vs. options. International

Review of Economics & Finance, 15-25.

8. Mubarak, D. (2021). TRENDS AND DEVELOPMENTS OF FUTURES AND

OPTIONS- A CASE STUDY OF BSE OF INDIA. UGC Care Journal, 26-35.

9. Padhi, M. P. (2016). Derivative Trading in Indian Capital Market: An Empirical

Study of NSE. Pacific Business Review, 21-28.

10. Pandey, D. N. (2017). The Relationship between Spot and Future Markets in
India: Evidence from. Pacific Business Review International, 62-71.

11. Philip Garcia, R. M. (2004). A selected review of agricultural commodity futures

and options markets. European Review of Agricultural Economics, 235–272,.

12. Rastogi, S. (2019). Volatility Integration in Spot, Futures and Options Markets:
A Regulatory Perspective. J. Risk Financial Manag. 2019, 23-32.

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13. Saha, A. (2016). A Study on the Volatility Effects of Listing of Equity Options
and Equity Futures in National Stock Exchange of India. Indian journal of
finance, 26-34.

14. Sarkar, A. (2017). INDIAN DERIVATIVES MARKETS. The Oxford

Companion to Economics in India, 221.

15. Selvaraj, D. N. (2020). Traders Perception and Awareness on Financial

Derivatives in Indian. Sumerianz Journal of Economics and Finance, 160-170.

16. Silva, H. d. (2018). Fundamentals of Futures and Options. CFA Institute

Research Foundation , 2020

17. Sinha, S. K., & Rani. (2017). IMPACT OF EQUITY DERIVATIVES ON

STOCK MARKET INDICES. NICE Journal of Business , 77-88.

18. Umamaheswari, S. (2022). An empirical study on influential factor of investors’

investment towards futures and options trading in India . AIP Conf. Proc, 128.

19. Vashishtha, A. (2018). Development of Financial Derivatives Market in India-

A Case. International Research Journal of Finance and Economics - Issue 37
(2010), 198-212.

20. Venkatesha, M. (2022). Derivatives Market in India - Futures and Options.

International Journal of Creative Research Thoughts (IJCRT), 12-15.

Websites:

https://www.nseindia.com/

https://www.bseindia.com/market_data.html

www.moneycontrol.com

https://www.investopedia.com/

https://scholar.google.com/

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ANNEXURES
QUESTIONNAIRE

1. Name

2. Have you ever invested in derivatives?

o Yes
o No

3. Age group you belongs to?

o 21 – 30
o 31 – 40
o 41 – 50
o 51 and above

4. Your occupation?
o Salaried
o Student
o Self-employed
o Retired

5. What is your annual income?

o Below Rs 100000
o 100000 to 300000
o 300000 to 500000
o Above 500000

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6. How would you rate the risks associated with Option and Futures?
o High
o Medium
o Low

7. How familiar are you with the concepts of futures and options
trading?
o Very familiar
o Somewhat familiar
o Not very familiar
o Not at all familiar

8. Have you actively traded futures and options in the past 2 year?
o Yes
o No

9. What factors influenced your decision to trade futures and options?

o Potential for high returns
o Risk management
o Portfolio diversification
o Hedging against market volatility

10.How often do you engage in trading futures and options?

o Daily
o Weekly
o Monthly
o Occasionally
o Rarely

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11. How would you rate the overall performance of the futures and
options you've traded?
o Excellent
o Good
o Average
o Poor
o Very poor

12. What metrics do you use to assess the performance of your trades?
o Return on investment (ROI)
o Winning percentage
o Risk-to-reward ratio
o Annualized returns
o Volatility measures

13. Do you track and analyse your trading data to improve your
performance?
o Yes
o No

14. How important is back testing in your trading strategy

development?
o Very important
o Somewhat important
o Neutral
o Not very important
o Not at all important

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15. What factor do you consider for trading in Option and Futures?
o Entry and exit load
o Initial Deposits
o Knowledge about Future and Options
o Risk management

16. What types of futures and options do you typically trade?

o Indices
o Stocks
o Commodities
o Currencies

17. What trading strategies do you commonly employ?

o Day trading
o Swing trading
o Long-term investing

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Plagiarism Report

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