STUDY OF INTRADAY AND FUTURES AND OPTIONS TRADING

A Project Submitted to
University of Mumbai for partial completion of the degree of
MASTERS OF COMMERCE
Under the Faculty of Commerce

By
NANDINI ANAND MHOLE
Roll No. 8855

Under the Guidance of

Dr. MONALI RAY

Mahatma Education Society’s

Pillai College of Arts, Commerce and Science

(Autonomous)
2022-23
STUDY OF INTRADAY AND FUTURES AND OPTIONS TRADING

A Project Submitted to
University of Mumbai for partial completion of the degree of
MASTERS OF COMMERCE
Under the Faculty of Commerce

By
NANDINI ANAND MHOLE
Roll No. 8855

Under the Guidance of

Dr. MONALI RAY

Mahatma Education Society’s

Pillai College of Arts, Commerce and Science

(Autonomous)
2022-23
 Certificate

This is to certify that MS. NANDINI ANAND MHOLE has worked and duly
completed her Project Work for the degree of MASTER OF COMMERCE under
the Faculty of Commerce in the subject of Project Work Sem III and her project
is entitled, “STUDY OF INTRADAY AND FUTURES AND OPTIONS
TRADING” under my supervision.

I further certify that the entire work has been done by the learner under my
guidance and that no part of it has been submitted previously for any Degree or
Diploma of any University.

It is her/ his own work and facts reported by her/his personal findings and
investigations.

Name and Signature of Guiding Teacher

(DR. MONALI RAY)

Signature of External Teacher

 Declaration

I the undersigned Miss. NANDINI ANAND MHOLE here by, declare that
the work embodied in this project work titled “STUDY OF INTRADAY
AND FUTURES AND OPTIONS TRADING”, forms my own contribution
to the research work carried out under the guidance of
DR. MONALI RAY is a result of my own research work and has not been
previously submitted to any other University for any other Degree/ Diploma to
this or any other University.

Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography.

I, here by further declare that all inform on of this document has been obtained
and presented in accordance with academic rules and ethical conduct.

Name and Signature of Learner

(Nandini Anand Mhole)

Certified by

DR. MONALI RAY

 Acknowledgement

To list who all have helped me is difficult because they are so numerous and the depth is so

enormous. I would like to acknowledge the following as being idealistic channels and fresh

dimensions in the completion of this project. I take this opportunity to thank the University of

Mumbai for giving me chance to do this project.

I would like to thank my Principal, Dr. Gajanan Wader for providing the necessary facilities

required for completion of this project.

I take this opportunity to thank our Coordinator Dr. Gajanan Wader, for his moral support and

guidance.

I would also like to express my sincere gratitude towards my project guide Dr. Monali Ray whose

guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and

magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the

completion of the project especially my Parents and Peers who supported me throughout my

project
 Table of Contents

Chapter No Topic Page No.

1 Introduction: 1-12

a) Overview of Equity Market

b) Recent development of Indian Stock Market
c) Importance of Equity market
d) Stock Exchange
e) Major Stock Exchange:
 NSE
 BSE

f) What is Stock Trading?

g) Types of Stock Trading
h) Key terms to know while trading
i) Data representation in stock trading
j) Growth in Indian Stock Market

2 Research Methodology: 13-19

a) Statement of the problem

b) Significance of the study
c) Objective of the study
d) Hypothesis
e) Methodology
f) Need of the study
g) Method of analysis
h) Limitation
i) Plan of work

3 Review of Literature: 20-38

1. Introduction to Intraday Trading

2. Intraday trading indicators
3. How to choose stock for intraday trading
4. Tips & Tricks for intraday trading
5. Do’s
6. Don’ts
 7. Reasons why intraday traders lose money in the stock
market.
8. Introduction to F&O Trading
9. Forward & Futures
10. Future Trading Strategies
11. Options
12. Generic terms used in options
13. Options Strategies
14. Do’s & Don’ts
15. Review of past study
16. F&O v/s intraday trading, which one seems to be
better.

4 Data Analysis, Interpretation and Presentation 39- 61

5 Conclusions and suggestions 62-63

 Findings

 Suggestions

Appendix 64-67

Bibliography 68
 CHAPTER-1

INTRODUCTION

OVERVIEW OF EQUITY MARKET:

• The market in which shares are issued and traded, either through exchanges or over-the-counter
markets.

• Also known as the stock market it is one of the most vital areas of a market economy because it gives
companies’ access to capital and investors a slice of ownership in a company with the potential to realize
gains based on its future performance.

• Mark Twain once divided the world into two kinds of people: those who have seen the famous Indian
monument, the Taj Mahal, and those who haven't.

•The same could be said about investors. There are two kinds of investors: those who know about the
investment opportunities in India and those who don't.

• India may look like a small dot to someone in the U.S., but upon closer inspection, you will find the
same things you would expect from any promising market.

• Well-developed securities markets are the backbone of any financial system. Apart from providing the
medium for channelizing funds for investment purposes, they aid in pricing of assets and serve as a
barometer of the financial health of the economy.

• The Indian securities markets have witnessed far reaching reforms in the post-liberalization era in terms
of market design, technological developments, settlement practices and introduction of new instruments.

• The markets have achieved tremendous stability and as a result, have attracted huge investments by
foreign investors. There still is tremendous scope for improvement in both the equity market and the
government securities market.

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• However, it is the corporate debt market, which needs to be given particular emphasis given its
importance for providing long-term finance for development

• Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay
Stock Exchange (BSE) and the National Stock Exchange (NSE).

• The BSE has been in existence since 1875. The NSE, on the other hand, was founded in 1992 and
started trading in 1994.

• However, both exchanges follow the same trading mechanism, trading hours, settlement process, etc.
At the last count, the BSE had about 5000 listed firms, whereas the rival NSE had about 1,600.

• Out of all the listed firms on the BSE, only about 500 firms constitute more than 90% of its market
capitalization; the rest of the crowd consists of highly illiquid shares.

• BSE’s popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock market
benchmark index. It is traded internationally on the EUREX as well as leading exchanges of the BRCS
nations (Brazil, Russia, China and South Africa)

• The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and
towns across the country. NSE was set up by leading institutions to provide a modern, fully automated
screen-based trading system with national reach.

• The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market
integrity. It has set up facilities that serve as a model for the securities industry in terms of systems,
practices and procedures. The Sector indicators of this market are Banking, Capital goods, cement, real
estate sector, infrastructure, power, telecom, automobiles, metal etc.

• The factors affecting stock market are inflation, market trends, global market, govt. policies, Financial
Statements of companies etc. also the factors affecting the stock price are financial statements of
companies, growth of companies , order book, management, policies and plans etc.

2
The Recent Developments of Indian Stock Market are:
 Insider Trading
 Depository or Paperless Trading.
 Forward Trading
 Options and Derivatives

 Surveillance on Price Manipulation

Importance of Equity Market:

• Stock Exchange (also called Stock Market or Share Market) is one important constituent of capital
market. Stock Exchange is an organized market for the purchase and sale of industrial and financial
security. It is convenient place where trading in securities is conducted in systematic manner i.e. as per
certain rules and regulations.

• It performs various functions and offers useful services to investors and borrowing companies. It is an
investment intermediary and facilitates economic and industrial development of a country.

• Stock exchange is an organized market for buying and selling corporate and other securities. Here,
securities are purchased and sold out as per certain well-defined rules and regulations. It provides a
convenient and secured mechanism or platform for transactions in different securities. Such securities
include shares and debentures issued by public companies which are duly listed at the stock exchange,
and bonds and debentures issued by government, public corporations and municipal and port trust
bodies.

• Stock exchanges are indispensable for the smooth and orderly functioning of corporate sector in a free
market economy. A stock exchange need not be treated as a place for speculation or a gambling den. It
should act as a place for safe and profitable investment, for this, effective control on the working of stock
exchange is necessary. This will avoid misuse of this platform for excessive speculation, scams and other
undesirable and anti-social activities.

3
• A stock exchange is a reliable barometer to measure the economic condition of a country. Every major
change in country and economy is reflected in the prices of shares. The rise or fall in the share prices
indicates the boom or recession cycle of the economy.

• Stock exchange is also known as a pulse of economy or economic mirror which reflects the economic
conditions of a country. The stock market helps to value the securities on the basis of demand and supply
factors. The securities of profitable and growth oriented companies are valued higher as there is more
demand for such securities. The valuation of securities is useful for investors, government and creditors.

• The investors can know the value of their investment, the creditors can value the creditworthiness and
government can impose taxes on value of securities.

• In stock market only the listed securities are traded and stock exchange authorities include the
companies names in the trade list only after verifying the soundness of company. The companies which
are listed they also have to operate within the strict rules and regulations. This ensures safety of dealing
through stock exchange.

• In stock exchange securities of various companies are bought and sold. This process of disinvestment
and reinvestment helps to invest in most productive investment proposal and this leads to capital
formation and economic growth. Stock exchange encourages people to invest in ownership securities by
regulating new issues, better trading practices and by educating public about investment. To ensure
liquidity and demand of supply of securities the stock exchange permits healthy speculation of securities.
The main function of stock market is to provide ready market for sale and purchase of securities.

•The presence of stock exchange market gives assurance to investors that their investment can be
converted into cash whenever they want. The investors can invest in long term investment projects
without any hesitation, as because of stock exchange they can convert long term investment into short
term and medium term the shares of profit making companies are quoted at higher prices and are actively
traded so such companies can easily raise fresh capital from stock market. The general public hesitates
to invest in securities of loss making companies.

4
STOCK EXCHANGE
Stock exchange gives a prepared and constant market for buy and sale of securities. It gives prepared
outlet to purchasing and offering of securities. Stock trade additionally goes about as an outlet for
the offer of recorded securities. Stock exchange is valuable for the assessment of business securities.
This empowers speculators to know the genuine worth of their possession whenever. Correlation of
organizations in a similar industry is conceivable through stock trade citations. Stock exchange
quickens the procedure of capital development. It makes the propensity for sparing, contributing
and chance taking among the putting class and changes over their reserve funds into beneficial
venture. It goes about as an instrument of capital arrangement. What is more, it additionally goes
about as a channel for right speculations.

Various stock exchanges in India There are 23 SEBI permitted stock exchanges in India. Major
stock exchanges are: ❖ Ahmadabad stock exchange

❖ Bombay stock exchange

❖ Calcutta stock exchange

❖ Bangalore stock exchange

❖ Cochin stock exchange

❖ Coimbatore stock exchange

❖ Delhi stock exchange

❖ Guwahati stock exchange

❖ Hyderabad stock exchange

❖ Jaipur stock exchange

❖ Exchange madras stock

❖ Madhya Pradesh stock exchange ltd

❖ Meerut stock exchange ltd

5
Major stock exchanges are:
National stock exchange (NSE):

The national stock exchange of India limited is the leading stock exchange within the world by equity
market volume in 2015. It was started operating in 1994 and it has ranked a biggest Stock exchange in India
by on basis of daily transaction, equity market and previous year’s annual reports depends on SEBI has
large number of clients. NSE giving a good service to all over the world and investors from crosswise
country, NSE was started as financial institutions of the India and it was working as a stock paying
company.

NSE started electronic screen-based exchanging done 1994, subscribers exchanging and web exchanging
n 2000, which were every those to begin with about its thoughtful clinched alongside India.

NSE need a fully integrated benefits of the business model including our trade listings, exchanging services,
clearing and settlement service, indices, market information feeds, innovation organization results also
fiscal training offering. NSE oversees agreeability toward exchanging; clearing parts recorded in
organization also decides the regulations of the return.

NSE’s main objective is to change the securities markets in India. Some of the objectives are:

Objectives of NSE:

 Who are using an electronic trading system for them NSE providing an effective and sensible market
to the investors
 To set up the worldwide exchanges forum for equity and debt systems.
 To develop the market standards in global level.
 To extend the market in globally.
6
Bombay stock exchange (BSE):

Bombay stock exchanges it was establish in 1875 it is the oldest stock exchanges in Asia. It is the fastest
growing stock exchange in the world it is a leading exchanging in India from past 140 years, BSE has
given the contribution for the growth of the Indian industrial sectors by raising the capital. And the native
share and stockbroker’s organization was established in 1875. BSE consist two leading worldwide
exchanges which is Singapore exchange and Deutsche bourse as international partners. BSE providing an
accurate and reliable market to the investors it is giving good market platform to the investors to gain
better returns on the investment. And also, it’s providing good market platform to investing in equity
market, Derivatives market, Mutual fund investing and Debt instrument.

BSE also giving good information about the Indian stock market through conducting webinar programmes
in this programme investors can avail lot information about stock market and if the customer has any
queries and doubt, they can clear by asking question to the webinar.

BSE concentrating on all the sectors, because the growth of the Indian market is very essential to the
market. It is giving service to risk management, education, clearing settlement, and market data services.
It is the first exchange in India and globally second. It has worldwide customers. And also, it is
maintaining customers in good manner by providing good service. Further BSE providing good facility
to the customers by educating the clients, if the client does not know the about market depository
participant appoint to the particular client after that client will do trading in all segment.

The governing board has some roles and responsibility, Board having 20 directors in the apex body which
make a decision of the plan to action and set the concern of the trade. And the governing board having 9
electoral, they from the trading area, and also have executive directors, chief executive and chief operating
officers are answerable for the daily activities. And he will get assistance from the head of the department.
7
  What is Stock Trading?

Stock trading involves buying and selling shares in companies in an effort to make money on daily changes
in price. Traders watch the short-term price fluctuations of these stocks closely and then try to buy low and
sell high. This short-term approach is what sets stock traders apart from traditional stock market investors
who tend to be in it for the long haul.
While trading individual stocks can bring quick gains for those who time the market correctly, it also carries
the danger of substantial losses. A single company's fortunes can rise more quickly than the market at large,
but they can just as easily fall.
“Trading isn’t for the faint of heart," says Nathaniel Moore, a certified financial planner and a certified
kingdom advisor at AGAPE Planning Partners in Fresno, California. "Don’t take the risk and invest money
if you need it."
If you do have the money and want to learn trading, online brokerages have made it possible to trade stocks
quickly from your computer or smartphone.

Types of Trading:

1) Intraday Trading - Intraday Trading is when an investor squares off his trade on the same day. Simply
put, intraday trading involves buying and selling the stock purchased by an investor on the same day.
The trades done by the investor are automatically squared off before the market closure, even if they are
not done by him. This type of trading is mostly done by experienced stock market traders and brokers
who are experts in this field. It requires continuous monitoring of the stocks and their movements and
one should know when to enter and when to exit. So even though it is luring, beginners shouldn’t attempt
trying their hands at intraday trading if they have no prior knowledge about stock markets and its
volatility or any other stock market technical analysis.

2) Short- term Trading- Short-Term Trading is when an investor holds his stock for a few days or
months, but less than a year. So this essentially means that your money is at risk for only a short period
of time. If you make a wrong decision, you know the results sooner than having to wait for a really long
lock-in period. This gives you an opportunity to free-up your money and use it in new trading setups.
This is the ideal strategy that a beginner in the stock market should adopt. Short-term trading uses less
capital as compared to long-term trading because the latter requires a sizable capital outlay. Another
advantage of short-term trading is that the profit targets, as well as the risk, are both in moderate
measures. A beginner can enter small with the money that he can afford to lose till he gains a better
understanding of the market.

8
 While the basic principle underlying intraday trading gives high profits on high risks, short-term trading
is a safer approach and gives returns based on the risk you are willing to take. In short-term trading, you
can easily plan your entries and exits as compared to Intraday trading which requires a specific level of
expertise.

3) Long Term Trading: Long-Term Trading is when an investor holds a stock for at least 1 year and
can go up to as many years as he wishes. Being a long-term investor does not make you a static trader
who doesn’t actively manage his portfolio. But instead, the investor spends his time doing some heavy
research on the ways to invest and the companies to invest in, etc. It entails analyzing the technical
performances of companies, in the long run, their stock prices, price performances, etc.

A long-term trader does not look to gain profits in a short span of time. The only risk in long-term trading
is if he fails to make a good investment decision in the long run or the company suffers unexpected
deterioration. So, even for long-term trading, you need to know the technical analysis and other
fundamentals surrounding stock markets.

Fundamental analysis can help you find which stock can you purchase, which are the companies you
can look at, etc. Technical analysis helps you to know the right time to purchase a stock. Thus, long-
term trading focuses on stocks which are expected to consistently perform well. Thus funds can be
invested in such stocks to create maximum capital at the end of the term.

4) F&O Trading: Futures and Options are two derivatives instruments where the traders buy or sell an
underlying asset at a pre-determined price. The trader makes profit if the price rises in case, he has a buy
position and if he has sell position, fall in price is beneficial for him. In the opposite price movement,
traders have to bear losses.
In case of futures trading, a trader has to keep a certain percentage of the future value with the broker as
margin to take the buy/sell position. To buy the Option contract, buyer has to pay a premium.

There are more types of trading like Positional trading, Swing trading, Scalping, Momentum trading etc.

9
KEY TERMS TO BE KNOW WHILE TRADING:

Interval -

Millions of trades take place every second. Hence, for analysis we need to classify these trades based
on the interval at which they took place. We can divide these trades into intra-day and long term
intervals. Intra-day can be sub-classified into 1 minute, 2, 5, 10, 15, 30 and 60 minutes. Long term
intervals can be classified into daily, weekly, monthly and so on. [4, 19]

Tick Prices-
At every interval any stock will have 4 types of prices associated with it. High price, Low price, Open
Price and Close price. High price is the highest value at which it was traded in that particular interval.
Low price is the lowest price which it reached in that interval. Open price is the first trade which took
place at that particular interval and Close price the price at which the stock was last traded at that
interval.[12]

Trend -
At any instance of time, any stock will have either higher demand than supply or lower demand than
available supply. Hence we can classify the Trend into two types namely Bearish and Bullish. A stock
is said to be in Bullish Trend if it has higher demand than its supply at that instance of time. If the stock
has higher available supply when compared with demand, it is said it be in Bearish Trend.

10
DATA REPRESENTATION IN STOCK TRADING:

Japanese Candles –

Above figure represents two different candle sticks. The green candle represents gain, and red candle
represents loss. This candle stick always contains all attributes associated with an interval (Example:
tick prices). Since it represents an interval what we are looking at, we will refer to a candle stick as an
interval in the rest of this report.

Line Graph –

Line graph is a graphical way of representing data points in stock market based only on close price or
current trading price of the stock.

11
GROWTH OF INDIAN STOCK MARKET:

India’s equity market has broken into the world’s top five club in terms of market capitalisation for the first
time. The country’s total market cap stands at $3.21 trillion, which is higher than that of the UK ($3.19
trillion), Saudi Arabia ($3.18 trillion), and Canada ($3.18 trillion).

This year, India has climbed two positions, despite a 7.4 per cent drop in its market cap. At the start of the
year, the UK and France ranked fifth and sixth with a market cap of $3.7 trillion and $3.5 trillion,
respectively.

Russia’s attack on Ukraine has upended the ranking with European nations seeing the maximum erosion in
market cap. Germany, once among the top five markets, has now slipped to tenth.

Meanwhile, Saudi Arabia has climbed three places from 10th to 7th. The country, particularly its biggest
firm Aramco, stands to gain from the surge in oil prices this year.

Shares of the state-owned oil giant are up 15 per cent year to date, valuing the company at nearly $2.4
trillion, only behind Apple the world’s most valuable firm, with a market cap of $2.6 trillion.

12
 CHAPTER-2

RESEARCH DESIGN AND METHODOLOGY

Statement of the problem:

“STUDY OF INTRADAY AND FUTURES AND OPTIONS (F&O) TRADING.”

Significance of the study:

The topic is selected to understand Stock trading and its types. This study helps give a broader knowledge
of stock trading. New concepts which are very much unknown was explored. It gave an opportunity to learn
what is intraday trading, how to proceed with stock trading, is trading in intraday or F&O is beneficial. The
term stock trading, Intraday trading, F&O Trading was known by some but the flow, the importance were
unaware by most, as to create awareness the topic was picked. Intraday and F&O are both different from
each other and requires different set of skills. The study will be useful to have a view about the trading
needs, behaviour, and the way of investing and what they actually want while they trading. The study has
been analysing some factors affecting the trading perception of trader. This study helps trader to make right
decision in stock market.

Objectives of the study:

Major objectives of the research work is to answer some basic questions that arise on the topic. Some of
the major objectives are mentioned below:

1. To Know Derivative Market in India

2. To Know traders perspective regarding investment in stock market
3. To examine the psychological factors influencing investment decisions in stock market
4. To Study the System about the intraday trading.
5. To Study the System about the F&O trading.
6. To Study different components & tricks in trading.

13
Hypothesis:

H0: Investing in stock market is an opportunity

H1: Investing in stock market is not an opportunity
H2: Trading in F&O is better than trading in intraday
H3: Trading in F&O is not better than trading in intraday

Sample selected for study:

The sample size denotes the number of elements selected for the study. For the present study,
Questionnaire distributed to 70 Stock traders out of which 60 has responded.

Sample Unit: This research is conducted for Stock traders.

Sampling technique:

Sample size is an important feature of any empirical study in which the goal is to make inferences about
a population from a sample. In practice the sample size used in the study is based on Convenience Sampling.
In Convenience sampling technique, on the basis of the Convenience, sample is selected which is
considered as representative of the population. So in this case on the basis of convenience the sample has
been selected.

14
Data Collection Technique:

Most of the questions are close ended questions in the questionnaire administered to the respondents. The
simple category scale has been used. As this type of question offer a clear direction of the trends. Close-
ended questions allow a limited number of responses and they get higher response rates when users don't
have to type so much.

Data Analysis
This involved reducing the accumulated data to manageable size, developing summaries, looking for
patterns which will help the objectives of the study and applying of statistical techniques. The various types
of tools were used for presentation and testing such as:

 Bar graphs
 Pie charts
 Column graphs

Sources of Data collection:

 Primary data: A primary data source is an original data source, that is, one in which the data are
collected first hand by the researcher for a specific research purpose or project. Primary data can be
collected in a number of ways. However, the most common techniques are self-administered
surveys, interviews, field observation, and experiments etc. Primary data collection is quite
expensive and time consuming compared to secondary data collection. Not with standing primary
data collection may be the only suitable method for some types of research. Several methods of
collecting primary data are as follows:

1) Interview Method: The method of collecting data involves presentation of oral verbal responses
it can be achieved in two ways i.e. personal interview and telephonic interview.

2) Surveys & Questionnaire: In this method a questionnaire is sent to the concerned respondents
who are expected to read and understand and reply on their own and return the questionnaire .It
consist a number of questions printed on typed in a definite order on a form on set of forms.

15
 3) Observation Method: It is commonly used in studies relating to behavioural science .Under
these method observation becomes a scientific tool and the method of data collection for the
researcher when it serves a formulated research purpose and is systematically planned and
subjected to checks and controls.

 Secondary data: When the data are collected by someone else for a purpose other than the
researcher’s current project and has already undergone the statistical analysis is called as Secondary
Data. The secondary data are readily available from the other sources and as such, there are no
specific collection methods. The researcher can obtain data from the sources both internal and
external to the organization. Secondary Data is easily available for use or for reference purpose.
Secondary data analysis can save time that would otherwise be spent collecting data and, particularly
in the case of quantitative data, can provide larger and higher-quality databases that would be
unfeasible for any individual researcher to collect on their own. In addition, analysts of social and
economic change consider secondary data essential, since it is impossible to conduct a new survey
that can adequately capture past change and/or developments. However, secondary data analysis
can be less useful in marketing research, as data may be outdated or inaccurate.

METHODOLOGY QUANTITATIVE AND EXPLANATION

QUALITATIVE RESEARCH

 Informal interview To collect personal views of the

Techniques applied respondent
 Observation

 Questionnaire in Data collected from respondent

Tools used are in digital form.
electronic form

Easy to do research as the sample

Sampling Method  Convenience sampling is readily available.

16
Questionnaire Design:

The survey questions were formulated for the population who were actively participating in any trading
and the answer can be easy to fill out within minimum amount of time and efforts, we request the customer
to answer these questions with correct information .The questionnaire consisted of close ended question.

Closed Ended Question:

It contains those questions in which the respondent is given a limited number of alternative responses
from which he or she is to select the one that most closely matched his attitude.
The fixed alternative may be taken in the form of:

 Dichotomous question:
It refers to one which offers the respondents a choice between only 2 alternatives and reduces the
issues to its simplest terms.

 Multi choice question:

Multiple-choice survey questions usually offer three or more predetermined answer options,
while they can allow for single or multiple answers

 Likert Scale Question:

It’s one of the most popular and reliable ways of measuring perceptions, attitudes, and opinions.
A Likert scale is a question which is a five or seven-point scale. The options on the scale range
from “strongly disagree” to “strongly agree” and this allows you to gain an understanding of
your respondents’ opinion.

17
Need of the Study:
This analysis on individual trader’s behaviour is an attempt to know the profile of the trader and also know
the characteristic of the trader so as to know their preference with respect to their investment in stock
trading. This study reveals the factors which affect the traders along with the tricks to follow while trading
along with its importance.

Methods of Analysis:
The information generated during data collection was both qualitative and quantitative. The qualitative
data was coded and tables were generated for analysis. The quantitative data on the other hand was
categorized after lists of individual responses were compiled.

Limitation:
This is an academic effort and it is limited to cost, time and geographical area
This study focuses on a very small subset of the traders in India with restricted jurisdiction.
As the data is collected from 60 respondents only, generalisation to other traders is inevitable
An interpretation of this study is based on the assumption that the respondents have given correct
information.
Thus, the generalization of Interpretations may require further validation.
Reluctance of the people to provide complete information about them can affect the validity of the
responses. The lack of knowledge of women about the financial instruments can be a major limitation.
The information can be biased due to use of questionnaire.

18
Research Methodology of the Study Process:

STEP 1
STEP 2
1) Primary data
Collection of
analysis
Quantitative Data
2) Secondary data
1) Questionnaire
Analysis
Design
3)Qualitative &
2) Survey
Quantitative research

STEP 3
Sampling Process
1)Targeted
Population STEP 4
2)Sample Size Data Analysis
3) Sampling
Techniques

19
 CHAPTER-3

REVIEW OF LITERATURE

Introduction to Intraday Trading:

Day Trading or the other term- intraday trading is to buy and sell a stock or security within the same day.
Statistics show that not many day traders make it and most people lose money day trading.

Hence, intraday trading can be defined as:

“It is a form of share trading in which individuals buy or sell shares over internet for a period of a
single day’s trading with the intent of profiting from small fluctuations in price.”

Day trading is often interpreted as easy path to riches, however this is not true. This trading style differs
slightly from other styles of trading in that positions are rarely (if ever) held overnight or when the market
being traded is closed. As an Intraday trader you are not concerned about whether market is going up or
down not with the market sentiments, not with the fundamental strengths of any company. All you are
concerned about is whether your stock price will rise or fall very sharply in the course of the day.

The rules for trading ‘Normally’ will no longer apply here as this is a different game with different rules.
also if we talk about the choice of the scripts and stocks, it has to work out for a particular day itself, the
day trader cannot wait until tomorrow to see how the charts works for their committing capital Intraday
trading involves a lot of high risks as buying and selling of shares need to be squared off in the same day.
Intraday trading has its own pros and cons. In Intraday trading one does not have to block the amount
invested after trading hours, profit earned per share traded is very small, effectively trading the stock's
daily volatility. If there is increased volatility in the financial markets because of some events then it could
lead to wide swings in the portfolio returns in a single day.

Intraday Trading is a demanding trading style that requires research and a well-defined strategy. Where
position traders may see a trend develop over the course of a month, intraday trading is based on trends
lasting less than an hour. A trading pattern usually lasts between 5 and 15 minutes, and traders could be

20
pulling the trigger on trades as often as every thirty seconds. All intraday trading has the same commission
structure, which is characterized by low minimum tickets and high trader pay out.
Investment decisions in equities are sometimes rational where the investors take decisions analyzing the
information in the market. Some investors take irrational decisions where they ignore certain information
that is available. Irrational decisions may also be due to the investor’s limited capacity to process the
information available. Investors also take decisions matching the risk absorption level. Stock market is
said to be peculiar though there are different methods and tools to analyze before taking decisions.
Investment decisions are still found to be complicated as there are various factors to be considered to
choose equity or a stock to invest in or trade into. These socioeconomic, demographic, and attitudinal
factors act as key drivers for investment decisions. Most of the investors feel insecure in managing their
investment on the stock market because it is difficult for an individual to identify companies which have
growth prospects for investment. The investors with higher risk appetite want to experiment and try new
and exotic products in the name of diversification. This has resulted in emergence of new options within
the same or fresh asset classes. There are more products available within each asset class be it Equity,
Mutual Fund, Gold, Real Estate. Traders‟ irrationality is an inevitable reality that has been time and again
pointed out by Researchers.

These researchers throw light on the fact that an actual Trader cannot conform to the “rational”
assumptions of the standard finance theories. They argue that investors are not the calculative utility
maximizing machines as the traditional theories believe them to be. Rather, they are led by their sentiments
and are prone to make cognitive errors. They may lack self -control, be Overconfident about their abilities,
miss calibrate information, overreact or follow the crowd without thinking. These errors can get projected
in the form of market anomalies like speculative bubbles….

TRADERS BEHAVIOUR:
 Successful Traders Learn from their mistakes.
 Love of Trading and a Competitive will to win.
 Trading style congruent to a Persons Personality and character.
 Reduction of Anxiety and stress.
 Humility and Humbleness: Success Traders curtail their EGO and PRIDE.
 Planning, Preparation, Patience and Discipline.
 Respect for Risk and Uncertainty.
 Strong Risk and Money – Management Practice.
21
Intraday Trading Indicators:

Traders often face difficulties with concurrent events occurring in intraday trading. Whether a person
is an experienced trader or a beginner, looking at the trends and indicators is always beneficial for
everyday trading. Let us look at some indicators:

1) Moving Average:

Most traders rely on the daily moving average (DMA) of the stocks. The moving average is a
line on the charts that show the behaviour of a stock over a period of time. These charts show
the opening and closing rates of the stock. The minimum average line shows the average closing
rates of that particular stock in the given interval and helps you comprehend the ups and downs
in the price and determine the flow of the stock.

2) Bollinger Bands:

These are bands that show the standard deviation of the stock. It consists of three lines - the
moving average, the upper limit and the lower limit. If you seek the trading ranger of a particular
stock, these help you locate the price variation of the stock over a period of time, hence, you can
put your money around the observations.

3) Momentum Oscillators:

The stock prices are highly volatile. Such variations largely depend on market situations. If a
trader wants to know whether a stock would rise or fall, this is where the momentum oscillator
is beneficial. It is depicted in a range of 1 to 100 and shows whether a stock would further rise
or fall, helping you in determining when to buy a particular stock. It shows the right time to
trade, not making you lose your chances.

4) Relative Strength Index (RSI):

This is the indexed form of all the trading that happens over a stock in a period of time. It ranges
from 1 to 100 and graphically shows when a stock is sold or bought highest. The RSI is
considered overbought when over 70 and oversold when below 30. It uses a formula for this
calculation, that is,

RSI = 100 – [100 / (1 + (Average of Upward Price Change / Average of Downward Price Change)
)]

22
 HOW TO CHOOSE STOCK FOR INTRADAY TRADING?

Choice of stocks is the first and the most vital step when it comes to Intraday Trading. So, it is essential
that you choose stocks that have enough liquidity for executing such trades. This is why many
recommend high liquid stocks like large-cap stocks. This can also minimize the chances of your trades
impacting the share price of the selected stock. After all, the money you put in is only worth the time
if you get a return, otherwise, it is done and dusted. So how do we choose stocks wisely? Let us take
a look.

 1) Avoid volatile stocks: It is always preferable to stay away from what clearly looks unstable. Why put
your money in something that might never let you have it back. Hence, it is advisable to track the stock
behaviour and consider trading over potentially stable stocks.

 2) Correlate stocks with geopolitical changes: It is better to invest in stocks that have a correlation with
major sectors. If the index for the sector goes up, it might also affect the price of the stock in a positive
manner. For example, strengthening of Indian Rupee against Chinese Renminbi would affect the iron
industries. Resultantly, the income from exports would increase and the stocks would go up. Picking stocks
while keeping in mind such market situation would help you a lot.

 3) Research: Looking, analyzing and comprehending are the basic steps of trading. Nothing goes right
without proper calculation unless you really have luck on your side while trading. As luck does not often
show its grace, it is always necessary to research before trading.

 4) Trends: Sometimes it's better to follow the herd rather than being a lone wolf. Look for the general flow
in the market or the stocks that have raised the most interests in traders. When the market rises, traders must
look for the stocks that rise, when it falls, looks for the stocks that show a potential decline.

23
TIPS & TRICKS FOR INTRADAY TRADING:

It is advisable to look for liquid shares for Intraday Trading. As the trader needs to square-off their
position at the end of the day, it is better to go for large cap shares. Otherwise, you might have to hold
the stocks due to lack of trading volumes. Here are some more tips and tricks for intraday traders.

 Utilising the Stop Loss

Stop Loss is a feature that enables automatic selling of a stock, if the price falls below a certain
limit. It is beneficial for traders as it minimises the potential loss that could occur.

 Set your Targets

It is as necessary to book your profit as it is to minimise your loss. Stop your greed from controlling
your decisions. At the same time, don’t let fear stop you from pulling the trigger on trades. Look
for a targeted amount to trade on any particular day. Do not put all your money in at once.

 Research

Look for all the technicalities before buying your shares, such as dividends, stock splits, bonus
dates, mergers, etc. It is advisable to add 8 to 10 shares in your wish list and research in-depth about
them.

 Learn when to Exit

Do not try to move against the flow of the market. Even the people who have been trading for over
a decade fail to explain and predict the situation of the market. If the market goes against your
expectations, you should know when to walk out.

***Note:
Large Cap Share- Large-cap companies are businesses that are well-established and have a significant
market share. Large-cap companies have market caps of Rs 20,000 crore or more. These companies
dominate the industry and are very stable. The lower volatility makes them less risky.
Stop-loss: Stop-loss can be defined as an advance order to sell an asset when it reaches a particular price
point. It is used to limit loss or gain in a trade.

24
 Portfolio: Trading is an example of planning and implementing. You have to have a clear idea
before doing anything. Build your portfolio according to your requirements and financial
strength.

 Indicators: Trading charts depict the behaviour of stocks over a period of time along with various
indicators which help predict how a particular stock could behave in the future. Include these in
the calculation before buying a stock as they could help you understand how it could behave
throughout the day.

 Control: Intraday trading can be as volatile as trading can ever get. Manage to control your greed
and fear once you get into this business. It is not always necessary that you earn a profit and it’s
same for the other way around too. This may be fast trading but still requires patience.

 Update: Daily analysis and research is necessary for Intraday Trading. The movement of the
market’s momentum must be reflected in the strategy used by a trader. It is not intelligent to use
the same strategy everywhere. So update what you are working upon with the trends in the market
and then implement.

25
 Rumors: The media can get chaotic. And so does the stock market. Do not always pay heed to the
rumors around you until and unless you are certain about it. They may deviate you from your
strategy in unexpected ways. The best way to deal with rumors is to stick to your strategy till you
are certain about news.

 Single Day Trade: “What you have is, Today”. There is no future tense in Intraday Trading. Do
not plan for the future with any stock. Whatever you buy is what you would sell today. Plan
according to the single day that you have in hand.

 Profit: Do not always expect gains in trade. Trade has never been a fair affair. If one gains, the
other has to lose.

 Over Trade: Satisfaction is the key to a healthy life. Cherish your earnings but don't go running
behind earning a lot. If you have gained a lot on a particular day and there’s still time left before the
market closes, it does not mean that it's the right day to put all your money in. The market never
works that way. Accept what you earned and learn to be satisfied.

26
Reason Why Intraday traders lose money in the stock market:

 Lack of trading discipline

This is the primary reason for intraday trading losses. Trading discipline has to focus on three things.
Firstly, there must be a trading book to guide your daily trading. Secondly, you must always trade with
a stop loss only. Thirdly, you need to keep booking profits at regular intervals. When any of these aspects
of disciplined trading are compromised with, it leads to losses in intraday trading. Trading discipline is
critical because as an intraday trader, your primary focus must be to protect your capital and limit your
losses.

 Too much panic in the market

One of the basic reasons traders lose money in intraday trading is due to panic. In the stock markets
when you panic, you actually subsidize the other trader who does not panics. Profits always flow from
the trader who panics to the trader who does not panic. When you panic in intraday trading, you tend
to cut your positions too soon. You require a basic amount of risk appetite for intraday trading, but
your risk should be properly managed. The key rule is not to panic just because the market is showing
signs of volatility.

27
 Trading against the market

For a long-term investor, taking a view against the market may be productive in the longer run. But if
you are a trader, then you must ensure that you always stay on the side of the market. As Jesse
Livermore, the legendary stock trader, rightly said, “In trading, there is no bull side and

 No capital limits in market

This is an essential part of your trading discipline, especially when you are trading intraday. You need
to put limits on your maximum loss at various levels. Each trade must be accompanied by a stop loss.
You must set limits for losses for every trading day. If the losses happen in the first hour, have the
discipline to shut your trading terminal for the rest of the day. Have an overall capital loss limit where
you will get back to the drawing board and revisit your entire trading strategy. This is your insurance
against trading losses.

 Rapid loss recovery

This is a common problem among a lot of intraday traders. When they incur a loss, they either try to
average their position or try to overtrade aggressively to recover that loss. This will only lead to more
losses. When you incur a loss, it means the trade was wrong. When you average or overtrade, you are
just being wrong twice. Losses are part of your trading process and that is why limits are set and adhered
to judiciously

 Poor feedback loop

One of the key steps in intraday trading is to ensure that the feedback loop and the learning process are
complete. Ideally, the intraday trader must maintain a trading diary that documents the trades, the
justification for the trades and the review of trades each evening. This will work as a basic manual for
the intraday trader’s continuous learning process.

28
INTRODUCTION TO F&O TRADING

FORWARDS:
Imagine you are a farmer. You grow 1,000 dozens of mangoes every year. You want to sell these mangoes
to a merchant but are not sure what the price will be when the season comes. You therefore agree with a
merchant to sell all your mangoes for a fixed price for Rs 2 lakhs. This is a forward contract wherein you
are the seller of mangoes forward and the merchant is the buyer. The price is agreed today in advance and
the delivery will take place sometime in the future.

The essential features of a forward contract are:

Contract between two parties (without any exchange between them)

Price decided today
Quantity decided today (can be based on convenience of the parties)
Quality decided today (can be based on convenience of the parties)
Settlement will take place sometime in future (can be based on convenience of the parties)
No margins are generally payable by any of the parties to the other

Forwards have been used in the commodities market since centuries. Forwards are also widely used in
the foreign exchange market.

FUTURES:
Futures are similar to forwards in the sense that the price is decided today and the delivery will take place
in future. But Futures are quoted on a stock exchange. Prices are available to all those who want to buy
or sell because the trading takes place on a transparent computer system.

The essential features of a Futures contract are:

Contract between two parties through an exchange

Exchange is the legal counterparty to both parties
Price decided today
Quantity decided today (quantities have to be in standard denominations specified by the
exchange
Quality decided today (quality should be as per the specifications decided by the exchange)
Tick size (i.e. the minimum amount by which the price quoted can change) is decided by
the exchange
29
 Delivery will take place sometime in future (expiry date is specified by the exchange)
Margins are payable by both the parties to the exchange
In some cases, the price limits (or circuit filters) can be decided by the exchange

Futures can be bought or sold in various circumstances. But the simplest of these circumstances could be:

Buy Futures when you are Bullish

Sell Futures when you are Bearish

Bullish means you expect the market to rise and Bearish means you expect the market to fall. Prices of
Futures are discovered during trading in the market. For example, who decides the price of Infosys in the
regular cash market? It is discovered based on trading between various players during market hours. The
same logic applies to Futures and Options.

FUTURES TRADING STRATEGIES:

Futures traders’ trade in two directions - long (buy futures) or short (sell futures). Here are the four most
popular futures trading strategies:

Long Trades

Long trades are a common form of trading futures. When you purchase futures, you feel confident that the
price of the underlying asset will increase before the contract expiration date. The further the price goes
above the price agreed by you and the seller (strike price), the more profits you can make.

Short Trades

Short trades refer to selling futures. When you sell a futures contract, it means you are confident that the
price of the underlying asset will decrease before the contract expiration date. Short trades are generally
considered riskier than long trades since the losses can be substantial if the price moves in the opposite
direction.

30
OPTIONS:
An Option is a contract in which the seller of the contract grants the buyer, the right to purchase from the
seller a designated instrument or an asset at a specific price which is agreed upon at the time of entering
into the contract. It is important to note that the option buyer has the right but not an obligation to buy or
sell. If the buyer decides to exercise his right the seller of the option has an obligation to deliver or take
delivery of the underlying asset at the price agreed upon. Seller of the option is also called the writer of
the option.

GENERIC TERMS USED IN OPTIONS:

1) Call Option:
An option contract is called a ‘call option’, if the writer gives the buyer of the option the right to
purchase from him the underlying asset.
2) Put Option:
An option contract is said to be a ‘put option,’ if the writer gives the buyer of the option the right
to sell the underlying asset.
3) Exercise Date:
The date at which the contract matures
4) Expiration Period:
At the time of introducing an option contract, the exchange specifies the period (not more than
nine months from the date of introduction of the contract in the exchange) during which the option
can be exercised or traded. This period is referred to as the Expiration Period. An option can be
exercised even on the last day of the Expiration Period. Beyond this date the option contract
expires
5) Strike Price:
At the time of entering into the contract, the parties agree upon a price at which the underlying
asset may be brought or sold. This price is referred to as the exercise price or the striking price.
At this price, the buyer of a call option can buy the asset from the seller and the buyer of a put
option can sell the asset to the writer of the option.
6) Option Premium or Option Price:
This is the amount which the buyer of the option (whether it be a call or put option) has to pay to
the option writer to induce him to accept the risk associated with the contract. It can also be viewed
as the price paid to buy the option.

31
OPTION STRATEGIES:

Option strategies are complex positions created including a combination of options and underlying shares
(and futures) which help the investor to benefit from his views. Some common examples are:

 Writing a Covered Call: where you hold the underlying shares and sell a Call Option with an
objective to earn Call premium

 Protective Put: where you hold the underlying shares and buy a Put Option to provide protection
against fall in the value of the underlying shares

 Bull Spread: where you buy one call option at a low strike price and sell another call option at a
higher strike price (on the same underlying) and want to benefit in a limited manner from bullish
view. You could also do this through put options.

 Bear Spread: where you buy one call option with a high strike price and sell another call option
with a lower strike price (on the same underlying) and want to benefit in a limited manner from
bearish view. You could also do this through put options

 Straddle: where you sell a call option and a put option at the same strike price (or alternatively buy
a call option and a put option at the same strike price) (these are also called Jhota / Duranga in the
Indian markets)

 Strangle: where you sell a call option and a put option at different strike prices on the same
underlying (or alternatively buy a call option and a put option at different strike prices)

 Combinations: other strategies involving a put and a call (also called fatak in Indian markets)

32
Do’s

 Always consider the possible impact of market fluctuations since they could have a high influence
on the profitability when taking your position
 Do proper research before trading in derivatives (leveraged products)
 Keep a watch on your margin requirements
 Deal only with SEBI registered brokers to avoid trading based on unsolicited tips

Don’ts

 Do not trade in options strategies without understanding the product and its risks and the strategy
which you are using
 Avoid Writing / Selling options based on unsolicited investment tips (via sources such as Whats
App, Telegram, Facebook, YouTube, Instagram, etc.) as this could lead to unlimited financial
losses
 Don’t miss out on your contract expiry date to avoid auto-settlement
 Don't blindly follow the research from any person/institute, due your due diligence before making
decisions

33
REVIEW OF PAST STUDY:

Several studies have been conducted on the various aspects of the stock markets in the past.
These studies mainly relate to various instruments of stock market, trading pattern, efficiency, risk and
return, performance. However, not much of research work has been done intraday trading and F&O
trading.

Dr.Ritu Gupta, Dr.Neelima (January-June, 2016), they find that private individuals differ in their day-
to-day financial behaviour and this has an influence on the choice of instruments used to modify
behaviour. Based on these findings, financial services can address specific segments and serve these needs
and, thereby, attract clients by offering a more professional approach. A segmented approach can increase
customer satisfaction and reduce costs by responding specifically to the different segments. Instead of
providing standard products to individual investors, investment programmers can be designed and tailored
to specific groups, e.g. “aggressive spenders”.

C.Kavitha,(2015), her findings clearly indicate that there is a significant relationship between the
investors‟ attitudes and stock market investments. The more positive attitude enhancement strategies are
introduced, the more it is easy for local investors to invest in the stock market. Further, there is a significant
relationship between the local investor’s perception of stock market regulations and their Intention to
participate at NSE. To have more local investors participating on the NSE, efforts should be directed
towards stronger Regulation and creation of more awareness

Ranjit Singh & Amit kumar (Jan – March, 2015), they have introduced an intraday stock market
strategy and each step to be followed is explained with an empirical example of TATAMOTORS. Traders
or investors can use this strategy and earn profit daily. The traders are required to pick the stock which
are volatile and have liquidity.

R.Krishna and Vinod Mishra (2012).They studied on intraday liquidity pattern in Indian Stock Market.
It is Empirical or stylized facts that emanate from such studies help us build theoretical model explaining
the intraday behaviour of the underlying market. Using once year intraday data from Indian’s National
Stock Exchange (NSE) .Using the data on 20 stocks from NSE’s NIFTY Index, they found that most f the
volume and spread related liquidity measures exhibits an intraday U-shaped pattern.

34
J. K. Nayak (2006) interpreted the preferred mode of investment is first equity, banks, mutual fund and
then any other in a descending order. It means Investor’s faith has increased and their risk taking ability
has also increased. One thing that could be drawn from this study is that problems are mostly broker
related and therefore that is one area where reforms are required. The investors feel that the amount of
knowledge available on the equity market is not satisfactory. Investors, it appears, need to be educated
more. Investors still considered the capital market as highly risky. But from the investment pattern from
the descriptive statistics it seems that the number of people willing to invest in capital market has
increased.

Swarup K. S. (2003) empirically found that equity investors first enter capital market though investment
in primary market. The main reason for slump in equity offering is lack of investor confidence in the
primary market. It appeared from the analysis that the investors give importance to own analysis as
compared to brokers‟ advice. They also consider market price as a better indicator than analyst
recommendations. Accordingly number of suggestive measures in terms of regulatory, policy level and
market oriented were suggested to improve the investor confidence in equity primary markets.

Warren Buffet (2002) argued that derivatives as time bombs, both for the parties that deal in them and
the economic system. He also argued that those who trade derivatives are usually paid, in whole or part,
on “earnings” calculated by mark-to-market accounting. But often there is no real market, and “mark-
to-model” is utilized. This substitution can bring on large scale mischief. In extreme cases, mark-to-
model degenerates into mark-to-myth. Many people argue that derivatives reduce systemic problems, in
that participant who can’t bear certain risks are able to transfer them to stronger hands. He said that the
derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in
variety and number until some event makes their toxicity clear.

Francis Breedon and Angelo Ranaldo (November, 2010) in this research paper titled “Intraday pattern
in FX return and order flow” researcher studies 10 years high-frequency foreign exchange data and
studies shows that time-of-day effects in foreign exchange returns in the course of a significance
propensity for currencies to devalue during local trading hours. Researcher confirms this pattern in series
of currencies and fined that in EUR/USD pair is easy and profitable trading strategy

35
RAVI KANT (2011), Testing of Relationship between Stock Return and Trading Volume in India,
International Journal of Multidisciplinary Research (Vol.1, Issue-06), and ISSN 2249- 2496: The paper
draws attention towards the sensitive relationship that exist between stock returns and trading volume in
India. The paper observed that, at times the volumes do not play a crucial role. In case of Futures &
Options, the volumes matters during the short term news favouring a particular company. However it is
not easy to predict the behaviour of trading volume and stock return.

E.V.P.A.S. Pallavi, Dr. K.S.S. Rama Raju and Dr. T. Kama Raju(2013), studied Operational
strategies and performance of options trading in India and found that options can be used to create
portfolio with unique features, capable of achieving investment objectives. Options are used world over
to hedge not only the portfolio risk but to also maximize the return on investment.

Ruchika GAHLOT, Saroj K. DATTA, Sheeba KAPIL (2010) The Purpose of the study is to examine
the impact of derivative trading on stock market volatility. However, results show mixed effect in case
of 10 individual stocks.

Dr. Meera Bamba, Dr.Ravi Kumar Gupta, Deepali Arya (2013) the study attempted to estimate the
volatility implications of the introduction of derivatives on the cash market.

T. Mallikarjunappa and AfsalE. M (2008) the post derivatives period shows that the sensitivity of the
index returns to market returns and any day-of the- week effects have disappeared. That is, the nature of
the volatility patterns has altered during the post-derivatives period.

Dr. Premalata Shenbagaraman The study is to assess the impact of introducing index futures and
options contracts on the volatility of the underlying stock index in India.

36
Shenbagaraman, P. (2003), “Do Futures and Options Trading increase Stock Market Volatility?”
NSE News Letter, NSE Research Initiative, Paper no. 20.

Sibani Prasad Sarangi and UmaShankar Patnaik, K. (2007), “Impact of Futures and Options on
the Underlying Market Volatility: An Empirical Study on S & P CNX Nifty Index”.

2016 ,G Yilgor et al, to investigate the effect of futures contracts on the spot market volatility. The

.
study revealed that futures and options market reduce spot market volatility

2014,Misraet al, to study the significance of Increase in Derivatives-Trading in India on the Price
mechanism Process. It was found that spot market dominance was high compared to futures and
options. Due securities transaction tax on futures and options.

37
F & O vs. Intraday Trading - Which ones seem to be better?

Looking over both the trading parameters, you realize that intraday is safer considering that you can
keep trading for days together and wait for your profits to rise before booking them. However, the capital
is extremely high, but the risk associated is lower apparently.

In F&O, there is no need to have a higher capital; instead, you need to have a correct mind set of knowing
how the stock would react and how you can make profits. It's quite risky, and losing money is extremely
higher.

Therefore, based on your preference, choosing the right one as any of these two options should help to
reap profits provided you know how to trade and read charts to know the perfect entry and exit points.

38
 CHAPTER-4

Data analysis and Interpretation

Sample size- 60

1) Age?
a) 18-25
b) 25-35
c) 35-45
d) 45 and above

Age
18-25 25-35 35-45 45 and above

12%

7%

55%
26%

Interpretation:

According to my research, 55% of the people are from the age group of 18-25 years, who has
actively respondent to the questionnaire. 26% being between the age of 25-35. 7% being between
the age of 35-45. 12% being above the age of 45.

39
2) Gender?
a) Male
b) Female

Gender
Male Female

Female 43.3

Male 56.7

0 10 20 30 40 50 60

Interpretation:

According to my research, 57% of the people are Male respondent and 43% of people are Female
respondent to the questionnaire.

40
3) What is your occupation?
a) Student
b) Full Time Employee
c) Part Time Employee
d) Others

Occupation
Part Time Employees Others Students Ful Time Employees

8%

13%

49%

30%

Interpretation:

According to my research, the stock traders are mostly those who are full time employees. The
research says that 49% are Full Time Employees they tends to investment in stock trading with
an intention of earning returns. 30% are Students, 8% are Part time employees and 13% have
other occupation.

41
4) What is your current income status?
a) Stable
b) Unstable
c) No Income

Income Status
No Income Unstable Stable

25%

12%
63%

Interpretation:

According to my research, 63% of the respondent has stable income, so the person with stable
income tends to actively participate in stock trading as compared to 12% respondent with
unstable income or 25% of respondent with no income.

42
5) Are you aware of Stock Market?
a) Aware
b) Neutral
c) Not Aware

Awareness of Stock Market

Aware Neutral Not Aware

5%

33%

62%

Interpretation:

According to my research, 62% respondent are aware of stock market and are participating in
trading. 33% respondent are not fully aware about stock market or its pros and cons. 5% of
respondent are unaware of stock market.

43
6) When Thinking of the stock market and investing, what is your perception?
a) Very Positive
b) Positive
c) Neutral
d) Negative
e) Very Negative

Perception on investing
Very Positive Positive Neutral Negative Very Negative

Very Negative 0

Negative 1.7

Neutral 35

Positive 40

Very Positive 23.3

0 5 10 15 20 25 30 35 40 45

Interpretation:

According to my research, 23% are very positive regarding their perception on investing in stock
market because of their constant study and bird’s eye view on stock market. 40% are positive
regarding investing in stock market due to the increasing knowledge and better judgement in
stock market. 35% of the respondent are of neutral view as they are the beginners in stock
market. 2% are of negative perception regarding investing in stock market due to its high risk
and no returns.

44
7) Do you participate in trading?
a) Yes
b) No

Participation in Trading
Yes No

40%

60%

Interpretation:

According to my research, 60% of respondent actively participate in stock trading as they are
aware of stock market whereas 40% of respondent do not participate in stock trading as they
have no knowledge of stock trading even if they have will to participate.

45
8) Do you keep budgets for trading?
a) Yes
b) No
c) Maybe

Budgeting for Trading

Yes No Maybe

10%

40%

50%

Interpretation:

According to my research, 40% of respondent tend to keep budgets for trading as per their
previous experience in stock trading. 50% of respondent don’t keep any budgets for trading as
their stock trading depends upon their cash inflow. 10% of the respondent don’t keep any
budgets as they are not regular stock traders.

46
9) How do you keep track of Trading?
a) Online Systems
b) Chartered Accountant
c) Certified Market Professionals
d) Others

Tracking Trade
Online Systems Chartered Accountant
Certified Market Professionals Others

80 71.7
70
60
50
40
30
20
6.7 18.3
10
3.3
0

Online Systems
Chartered
Accountant Certified Market
Professionals Others

Interpretation:

According to my research, 71.7% of respondent keep track of stock trading through online
systems, it may be based on online apps or daily news or on their judgements. 6.7% of the
respondent get professional services from Chartered Accountants to keep track on their stock
trading. 3.3% of the respondents invest lum sum money to certified market professionals who
on their behalf buy and sell stock and in return they earn commission. 18.3% of respondent
depends on others or their own judgement.

47
10) Are you aware of the term Intraday Trading?
a) Fully Aware
b) Neutral
c) Unaware

Awareness of Intraday Trading

Fully Aware Neutral Unaware

26.7

30

43.3

Interpretation:

According to my research, 30% of respondent are fully aware of the term intraday trading,
even some are intraday traders. 43.3% of respondent are of neutral view as they are not fully
aware of the term intraday trading, its pros and cons then the strategy to be used etc. 26.7% of
the respondent have no knowledge of the term intraday trading.

48
11) Are you aware of the term F&O Trading?
a) Fully Aware
b) Neutral
c) Unaware

Awareness of F&O Trading

Fully Aware Neutral Unaware

40 23.3

36.7

Interpretation:

According to my research, 23.3% of respondent are fully aware of the term F&O (Futures and
Options) Trading. 36.7% of respondent are of neutral view as they are not fully aware of the
term F&O trading. 40% of the respondent have no knowledge of the term F&O trading as this
type of trading is very risky if entered without prior knowledge and experience.

49
12) What is the time period you prefer to Invest?
a) Long Term
b) Short Term
c) Intraday
d) Combination of the above

Long Term Short Term Intraday Combination of the above

28.3

43.3
3.3

25.1

Interpretation:

According to my research, 43.3% of the respondent prefer to invest in Long term trading as
the risk is low as a lot of study has been done behind the stock. 25.1% of the respondent prefer
to invest in Short term trading with an intention of earning returns.3.3% of the respondent
prefer intraday trading .28.3% of the respondent tend to invest in combination of the above,
they play in short term long term along with other type of investment in a given financial year.

50
13) What percent of your income would you invest?
a) 0-15%
b) 15%-30%
c) More than 30%

0-15% 15%-30% More than 30%

6.6

21.7

71.7

Interpretation:

According to my research, 71.7% of the respondent invest 0-15% of their income in stock
trading. 21.7% of the respondent invest 15% -30% of their income in stock trading. 6.6% of the
respondent invest more than 30% of their income in stock trading. Larger potion only invest 0-
15% of their income in stock trading.

51
14) Thinking again of the stock market and investing, do you feel that investing is mostly an
opportunity or mostly a risk?
a) Mostly an Opportunity
b) Mostly a risk

Mostly an opportunity Mostly a risk

70

60

50 63.3

40

30 36.7

20

10

Mostly an opportunity
Mostly a risk

Interpretation:

According to my research, 63.3% of the respondent think that investing in stock market is
mostly an opportunity. 36.7% of the respondent think that investing in stock market is mostly
a risk, due to their lack of knowledge and will to participate. Mostly negative thoughts come
in front of their mind when it comes to stock trading.

52
15) What is the purpose behind investment?
a) Earn Returns
b) Future Plans
c) Wealth Creation

Wealt Creation,
33.3
Earn Return, 41.7

Future Plans, 25

Interpretation:

According to my research, 41.7% of the respondent’s purpose behind investment is to earn

return, 33.3% of the respondent’s purpose behind investment is to create wealth, 25% of the
respondent’s purpose behind investment is for future plans.

53
16) Which factor do you consider first before investing in stock market?
a) High Returns
b) Risk & Rewards
c) Time Horizon

High Returns Risk & Rewards Time Horizon

15

35

50

Interpretation:

According to my research, 35% of the respondent consider high return to be the first factor to
invest in stock market, 50% of the respondent consider risk & rewards to be their first factor to
invest in stock market, 15% of the respondent consider time horizon to be their first factor to
invest in stock market.

54
17) At what rate do you want your investment to grow?
a) Slowest rate
b) Average
c) Fastest Rate

Slowest Rate Average Fastest Rate

31.7

63.3

Interpretation:

According to my research, 5% of the respondent wants their investment to grow at slower rate,

63.3% of the respondent wants their investment to grow at average rate, 31.7% of the
respondent wants their investment to grow at faster rate.

55
18) I would go for the best possible return even if there were risks involved.
a) Strongly Disagree
b) Neutral
c) Strongly Agree

Strongly Disagree Neutral Strongly Agree

50

45 48.3
40
36.7
35
30
25
20
15
10 15
5
0

Strongly Disagree
Neutral
Strongly Agree

Interpretation:

According to my research, 15% of the respondent would strongly disagree even if the best
possible returns involve high risk, 48.3%% of the respondent have neutral view even if the best
possible returns involve high risk, 36.7% % of the respondent would strongly agree even if the
best possible returns involve high risk

56
19) Do you have a saving and investment target amount you aim for each year?
a) Yes
b) No
c) Maybe

Yes No Maybe

28.3

43.3

28.4

Interpretation:

According to my research, 43.3% of the respondent have savings and investment target
amount for each year, 28.4% of the respondent have no savings and investment target amount
for each year, 28.3% of the respondent may have savings and investment target amount for
each year.

57
20) How do you time your investment in stock trading?
a) Monthly
b) Quarterly
c) Half Yearly
d) Yearly

Monthly Quarterly Half Yearly Yearly

15

41.7
16.7

26.6

Interpretation:

According to my research, 41.7% of the respondent invest monthly in stock trading, 26.6% of
the respondent invest quarterly in stock trading, 16.7% of the respondent invest half yearly in
stock trading, 15% of the respondent invest yearly in stock trading.

58
21) When the market goes down I tend to sell some of my riskier investment and put the money
in safer investment.
a) Strongly Agree
b) Agree
c) Neutral
d) Disagree
e) Strongly Disagree

Strongly Agree Agree Neutral Disagree Strongly Disagree

45 43.3

40

35

30

25 21.7
20
18.3
15 10
10

5 6.7
0
Strongly
Agree
Agree Neutral
Disagree
Strongly
Disagree

Interpretation:

According to my research, when market goes down I sell tend to sell my investment & put the
money in safer investment. 10% of the respondent strongly agree, 21.7% of the respondent
Agree, 43.3% of the respondent are of neutral view, 18.3% of the respondent Disagree, 6.7%
of the respondent strongly disagree.

59
22) Is trading in stock market necessary to you?
a) Yes
b) No
c) Maybe

Maybe, 35
Yes, 40

No, 25

Interpretation:

According to my research, 40% of the respondent think that stock market is necessary to them,
25% of the respondent think that stock market is not necessary to them, 35% of the respondent
is neutral to the view as to stock market is necessary to them or not.

60
23) Is trading in F&O better than trading in Intraday?
a) Yes
b) No
c) Maybe

Yes, 16.7

No, 18.3

Maybe, 65

Interpretation:

According to my research, 16.7% of the respondent think that trading in F&O better than
trading in Intraday, 18.3% trading in F&O better is not than trading in Intraday, 65% of the
respondent are not able to decide if trading in F&O better than trading in Intraday.

61
 CHAPTER-5

CONCLUSIONS AND RECOMMENDATIONS

FINDINGS:

There is no correlation between Futures & Options and Intraday trading, both are two different
topics.

The people with high income or stable income tend to trade in stock trading and are ready to bear
risk for returns.

There were 60 respondent to this study. But out of which 36 respondent do not participate in
stock trading and 24 respondent participate in stock trading.

Out of 60, 35 are male, 25 are female .That’s mean the gender does not play any role in participating
in stock trading.

Out of 60, 18 respondent are aware of the term intraday trading, 17 respondent are unaware of the
term intraday trading and 25 respondent are in neutral view of the term intraday trading. This explains
that larger portion are not fully aware of intraday trading.

Out of 60, 14 respondent are aware of the term F&O trading, 24 respondent are unaware of the term
F&O trading and 22 respondent are in neutral view of the term F&O trading. This explains that larger
portion are not at all aware of the term F&O trading.

62
HYPOTHESIS TESTING

H0: Investing in stock market is an opportunity - Proved

H1: Investing in stock market is not an opportunity – Disproved

H2: Trading in F&O is better than trading in intraday- Disproved

H3: Trading in F&O is not better than trading in intraday- Proved

63
CONCLUSION:

Equity market is still oldest and continues to be the unique financial tool in the country. One has to
appreciate the fact that every aspect of life as its periods of high and lows. This has been the case with
the stock markets. Equity market is worldwide now a day’s majority of populations of the country are
investing in equity market and youth of the country is much attracted to the equity market and their
future is bright. The poor performance of many stocks may be mostly attributed to the quality of personal
involved and their matter of fund management.
The research study “INTRADAY AND F&O TRADING” is found that the investors have a positive
behaviour towards Equity stocks. Majority of the investors prefer equity stocks for the returns and feel
that it is a safe measure of investment. As far as the socio economic variables and demographic variables
are concerned age, qualification, Income and occupation have been encouraging the perception of
investors towards equity market. It was also found that there is majority investors prefer online to invest
their money in equity stocks. The study will also help the Many companies gain real time knowledge
and will help users to analyze the perceptions of the investors.
It is a challenge for the stock brokers to create the awareness and benefits of equity stock market in the
society and explain them that how best their returns are bit still many people of the country are investing
and getting a good return
A stock can be traded in multiple ways namely, options, futures, equities and commodities.
It is very important to note the co-relation between various intervals at any single type of trading alone.
For example: If daily interval indicates a fall, intra-day will indicate a bullish trend for a short period of
time. However, the converse is not true.

We can also co-relate between stock markets of different countries. As an example, we can co-relate
between IT stocks of India with currency exchange rates. Whenever Rupee price falls with respect to
Dollar price, IT stocks of India are more likely to show a Bearish trend. The reason being, whenever an
IT company makes a deal with a US company, they would have discussed the cost in Dollars. Now since
Rupee price fell, they would get paid much lesser than what they were actually expecting.

The stock market not only deals with long term or short term trading but there are various concepts
which are not very much know by the population, some of the concepts are intraday trading, Futures and
Options,

Crypto currency etc. These concepts need a lot more knowledge then just the basics. These are the trading
type which require strong technical knowledge as well.

64
The main reason for the traders to not explore stock market is due to its heavy risk. Traders tend to forget
about the profit component due to risk factor. Even money become a big factor for investing. So time
traders have a lot of knowledge about stock market, where they can earn profit with their investment but
the lack of money becomes barrier for their growth.

Traders tend to think with their hearts while making important decisions in stock market instead of being
practical which leads to their downfall. In order to achieve the objective of maximizing the return, the
traders need to consider both risk factor and return potential of various companies under consideration.
That will be differing from companies to companies. Equity analysis is one of the most important
techniques used to measure the risk and return factor of equities of different companies.

The main reason for this study was to know new concepts apart from just stock market. There are too
many concepts to learn and many ways to make money, if taken into consideration. The will to trade is
the most important weapon in stock market which will lead to our ultimate success.

65
SUGGESTIONS:

Intraday and F&O trading is for those how are ready to invest their time, as the trader has to keep
an eye on their stock. If not the trader may face losses or they may lose an opportunity to gain.

Keep yourself updated with market trends, technologies, etc. Develop a habit to read a lot on
trading. Constant reading and being updated is necessary to become a smart and successful trader.

If you are either too afraid of losing money or too greedy of making money, you will be a loser.
Focus on the right strategies which will help you get profits by mitigating risk.

Your decisions should be backed by proper research and facts. Acting on the basis of rumours
will make you lose money.

Develop the habit of reading more about trading strategies, free intraday tips, etc. to become an
expert trader.

You should always hold and preserve your emergency funds, keeping them safe. Don’t risk your
emergency capital and assets in the share market. As if you mislay your hard-earned emergency
funds in the stock market, your life with your family can be challenging.

Success and Losing in the stock market are an integral part of trading. One can’t always make
profits in trading. If you make a loss in share trading, better accept it and learn from the monetary
losses. You have to stop overthinking about the failures

66
 APPENDIX

1) Age?
a) 18-25
b) 25-35
c) 35-45
d) 45 and above

2) Gender?
a) Male
b) Female

3) What is your occupation?

a) Student
b) Full Time Employee
c) Part Time Employee
d) Others

4) What is your current income status?

a) Stable
b) Unstable
c) No Income

5) Are you aware of Stock Market?

a) Aware
b) Neutral
c) Not Aware

6) When Thinking of the stock market and investing, what is your perception?
a) Very Positive
b) Positive
c) Neutral
d) Negative
e) Very Negative

67
7) Do you participate in trading?
a) Yes
b) No

8) Do you keep budgets for trading?

a) Yes
b) No
c) Maybe

9) How do you keep track of Trading?

a) Online Systems
b) Chartered Accountant
c) Certified Market Professionals
d) Others

10) Are you aware of the term Intraday Trading?

a) Fully Aware
b) Neutral
c) Unaware

11) Are you aware of the term F&O Trading?

a) Fully Aware
b) Neutral
c) Unaware

12) What is the time period you prefer to Invest?

a) Long Term
b) Short Term
c) Intraday
d) Combination of the above

68
13) What percent of your income would you invest?
a) 0-15%
b) 15%-30%
c) More than 30%

14) Thinking again of the stock market and investing, do you feel that investing is mostly an
opportunity or mostly a risk?
a) Mostly an Opportunity
b) Mostly a risk

15) What is the purpose behind investment?

a) Earn Returns
b) Future Plans
c) Wealth Creation

16) Which factor do you consider first before investing in stock market?
a) High Returns
b) Risk & Rewards
c) Time Horizon

17) At what rate do you want your investment to grow?

a) Slowest rate
b) Average
c) Fastest Rate

18) I would go for the best possible return even if there were risks involved.
a) Strongly Disagree
b) Neutral
c) Strongly Agree

69
19) Do you have a saving and investment target amount you aim for each year?
a) Yes
b) No
c) Maybe

20) How do you time your investment in stock trading?

a) Monthly
b) Quarterly
c) Half Yearly
d) Yearly

21) When the market goes down I tend to sell some of my riskier investment and put the money in
safer investment.
a) Strongly Agree
b) Agree
c) Neutral
d) Disagree
e) Strongly Disagree

22) Is trading in stock market necessary to you?

a) Yes
b) No
c) Maybe

23) Is trading in F&O better than trading in Intraday?

a) Yes
b) No
c) Maybe

70
 BIBLIOGRAPHY

Web reference:

https://www.motilaloswal.com/blog-details/A-Beginners-Guide-to-Futures-and-Options-
Trading/1662

https://www.bajajfinserv.in/insights/futures-and-
options#:~:text=What%20is%20F%26O%20Trading%3F,price%20is%20beneficial%20for%
20him.

https://upstox.com/learning-center/intraday-trading/how-to-do-intraday-trading/

https://upstox.com/learning-center/futures-and-options/

https://www.kotaksecurities.com/ksweb/intraday-trading/intraday-trading-guide-for-
beginners#:~:text=Intraday%20trading%2C%20also%20called%20day,a%20result%20of%20
the%20trades.

http://www.nseindia.com/products/content/equities/indices/historical_index_data.htm
https://www.bajajfinserv.in/insights/futures-and-options

71