Share Market Updates

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What are the different types of bonds available in India?

There has been a profound change in the processes and functions of investment and banking after digitisation. There are several options available for individuals to choose and secure their income. They get the opportunity to earn interest on their returns which is beneficial at the time of emergency. People can also invest in bonds which is a debt instrument where the issuer company borrows money from the bondholder and pays them interest on the principal amount. The interest is called the Coupon.

The holder and the issuer sign an agreement where the issuer decides to repay the borrowed money with interest at fixed intervals such as semi-annual, annual, or monthly periods. Bonds and stocks are capital market securities where stockholders have a share in the company, and bondholders are creditors in it. Many businesses issue tax-saving bonds along with the Government to raise funds for financing long-term investments or current expenditures. Bonds are safe and have a low-risk involvement. They also offer steady income and are classified into different types.

Capital Gains Bonds are instruments that allow investors to transfer their gains from long-term assets such as land and property into specific bonds. They also offer tax exemption from Capital Gains Tax under Section 54 EC of the Income Tax Act, 1961 for up to six months from the date of selling the asset. The NHAI and Rural Electrification Corporation Ltd. (RECL) issue these bonds.

Government Securities are bonds issued by the Central and State Governments that carry no credit risk. They are one of the safest options for investment in India to earn periodic interests and principal upon maturity. These bonds pay interest on a semi-annual basis.

Various corporates issue Corporate Bonds for financing their needs and carry credit risk. The bondholder earns income from regular interest and principal amount upon their maturity. They pay higher interest to their owners compared to bank FDs and government bonds.

In Inflation-Linked Bonds, both the principal amounts and interest payments have an index to inflation. Inflation-indexed bonds are an efficient method for countering inflation risks.

Convertible Bonds allow their holders to convert them into equity based on some pre-specified terms and conditions.

A Sovereign Gold Bond issued by the Indian Government is in the form of security and stock. It carries an interest rate which requires regular payment and has zero risks of handling compared to physical gold.

RBI Bonds are a form of savings bonds issued by the Government of India in 2018 with a tax of 7.75 per cent. They enable resident citizens and Hindu Undivided Families (HUF) to invest in taxable bonds without any monetary limits.

If individuals hold these bonds until maturity, they get a fixed return on their investment. But if they sell the bond prematurely, its price will depend on market conditions prevailing at that time. If the selling price is higher than the purchase price, the return will also be higher, and vice versa.

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Options strategies for options traders

Investors that are keen to make the best returns in today's market they must understand how to trade in futures and options

The most common option strategies are below, including how to trade options and trading strategies.

Long Call Option Strategy

Long call options offer an investor the ability to bet on whether the underlying stock will increase in value or remain above the strike price. This is one of two types of bull option contracts, the other being selling contracts of put options. The strategy of the long call option enables traders to profit without all the risk associated with owning the stock outright. Since calls are less costly than the stock itself, more shares can be leveraged by a trader than they could with only the stock.

Long Put Option Strategy

The option trading strategy of long-put options gives a person the right to sell an underlying stock at the specified price. He or she is expecting that the stock will drop below the strike price before the expiration date when the investor buys a put option. Using a put eliminates the risk to the investor instead of shorting the stock since they can only lose the price of the put, verses infinite risk associated with shorting the stock.

Short Call Option Strategy

The strategy for the short call option, also known as an exposed or naked call, is to sell a call without taking a position in the underlying stock. They should avoid the short call option for those who are new to options, as it is a high-risk strategy with minimal income. A brief call is used by more advanced traders to benefit from unusual circumstances where they earn a risk-taking premium.

Short Put Option Strategy

The investor bets on the fact that the stock will rise or remain flat before the option expires, with the short put option strategy. If the put option expires worthlessly, out of the money (above the strike price), then the investor retains the entire premium, reflecting the trade's maximum benefit. Trading a put option is one of two bull market tactics when it comes to single option trades, the other being the long call option.

Covered Call Option Strategy

The covered call strategy includes writing a call option for the trader against the stock they are buying or already holding. In addition to collecting a premium for sale, the holder also gets access to the advantages of owning the underlying asset up to the strike price, where the stock will be called out, with protected calls.

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How to do online stock trading?

The stock market is the best places to invest your money. Some people stay away from online stock trading thinking the effects of a volatile market and risky stocks, but if you spend some time and efforts to learn the basics of the market and how to invest in the stock market, you can make huge gains. You can learn how to do online stock trading by reading the article.

But before we move on to stock trading, let us first understand two important things related to trading.

What are Sensex and Nifty

If you are thinking, what is Sensex, then be informed that Sensex is the benchmark index of BSE or Bombay Stock Exchange. The oldest stock index in India, Sensex consists of 30 largest and the most active stocks on the BSE.

Nifty or Nifty 50 is National Stock Exchange Fifty and is the benchmark index of NSE or National Stock Exchange. Nifty consists of the stocks of the top 50 companies that are actively traded.

How to do online stock trading?

Before you start investing, how to go about online stock trading must be understood.

Choosing a Broker

Look for an online stockbroker and open a brokerage account. You can start with a low-cost stockbroker. The beginner traders must find a broker who can provide customer support, proper education to the investor, open account, help answer questions, and trade minimums. Many online brokers also have a stock trading software, so you can get a streamlined, smooth, and user-friendly way to trade. Even if you have a personal account, you can have a separate professional trading account.

Understand different types of Trades

There are different options of the trades available, as you begin online stock trading such as limit trade, stop loss, good-till-cancelled trades, bracket trades, etc. You can learn more about them to understand each of these terms well.

Avoid paying high commission and fee. Certain expenses must be avoided so that you do not end up wasting your stock trading profits.

Read a lot

To understand stock market trading, the best thing to do is to read financial articles and stock market books. You can also read online tutorials, to get a sea of knowledge and information about almost everything related to the stock market. Create a detailed market background before starting.

Follow market in leisure time.

In your everyday spare time, the market must be followed. You can begin by reading how the market behaved yesterday. Also, know about overnight price action in the markets. There are many finance news sites which can enhance the knowledge of many new investors. Gradually, you will observe that you have started understanding the market well.

Virtual trading

Many stockbrokers offer a virtual trading platform to beginner investors. So, pull up your socks and start your trading journey. Follow real-time market actions and make buying and selling decisions. Try different holding periods and strategies while you do trading and take some time out to analyse the results.

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How to trade in futures and options

Derivatives trading such as futures and options was launched in the year 2000 in Indian stock exchanges. The only futures and options were initially for indices. Futures and options in individual stocks came in a couple of years later. Futures and options have since become very common and account for much of the stock exchange trading.

Such tools are useful for investors and traders, so it is essential to know how to trade in stock futures and options if you want to make the most of the stock market ups and downs. It's a reasonably good idea to invest in the stock market because equity returns have outperformed most other investments in recent years. Investing in equity and its derivatives bear market risk, and it is often best to proceed with a degree of caution.

It is essential to get your basics before knowing how to invest in F&O. Following are some aspects –

Futures and options are derivatives that derive value from the underlying asset. There are different types of assets available on derivatives. Those include stocks, share index futures, and commodities, such as wheat, coal, gold, silver, cotton, and more. We should concentrate on how to trade in stock market futures and options.

For two primary purposes, these futures and options are used. One is hedging against price risks; another is taking advantage of price changes or speculation.

What are the futures?

Future contracts allow a buyer or seller to buy or sell stock in the future at a specific predetermined price on a given date. For instance, there will be an expected increase in the share price of company XY, which is currently at INR 60. You then buy 1,000 XY futures at INR 60. So if the share price of XY goes up to INR 80, you will make 80-60×1000, or INR 20,000. If the prices fall INR 40, you make a loss of INR 20,000.

What are the options?

Options grant a buyer or seller the options in the future to buy or sell stock at a specified price on a set date. The difference between a prospect and an options is you have the choice not to exercise the contract at a later time.

There are two types of options – call and put option. A call option lets you buy a specific stock, while a put option allows you to sell the stock. Put options are a better when the stock prices might fall.

What is the margin?

It is crucial to understand how to trade in futures and the principle of margin. Margin is what the broker has to pay for a futures trade.

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Some advice on how to start investing in the share market

There are many professions and occupations which offer attractive salaries and benefits. Many people pursue their ambitions based on them and try to earn as much required to make a living. Sometimes, they have hefty expenses which they are unable to meet, given the amount of money they receive monthly. It is challenging to tackle such situations without economic support.

Hence, they look for alternatives to earn income besides their occupations. Many people make a profit from stock market investments which is an addition to their regular income. It helps them meet all the needs of their families without compromising much on expenses. They have shared their experiences with colleagues, friends, relatives, and other people known to them. Many people gain inspiration from them and try to learn how to start investing in share market.

When investors are new to the stock market, they have lots of dreams and expectations to fulfil. They expect high returns on every investment and assume every step to turn out successful. Although there are hundreds of examples of successful journeys, it would be wrong to neglect thousands who failed at it.

Following are some points to consider –

Pay off all high-interest debts: Any debts with high interest such as personal loans, credit card dues, etc., should be paid off first. Do not waste time in giving all the returns of the market as an interest to the debt.

Invest only the surplus funds: When beginners learn how to make money in the stock market, they should consider investing only that portion of income that is surplus and will not affect their daily lives. They must not invest when they must meet priorities such as education, housing, marriage, etc.

Keep some cash in hand: When investing in the share market, it is wise for investors to save some money as emergency funds. It serves the purpose to meet essential requirements such as house renovations, migration to a different city, or even switching jobs. They must learn to maintain a border between personal and financial freedom.

Investors can also consider some other points while learning how to make money in stocks, which include small investments, portfolio diversification, investments in blue-chip stocks, etc. Always research before investing in any stock or commodity. Do not blindly follow people who give tips on trade. Every investor follows a different strategy. Also, the situation of the stock market might have changed while that individual was trading.

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Understand the features of Capital gain bonds and Government saving bonds

It is essential to invest in tax-saving options. But not only should your attention be on saving taxes, but your investments should also expand to a significant amount. Since there are growing investment choices on offer today, choosing the right strategy may seem a little confusing.

Capital Gain Bonds

Any income you receive from the selling the asset is a long-term capital gain. This could be land, real estate or even investment. You are responsible, under the Income Tax Act, to pay tax on these gains. You will reduce the responsibility of such taxes, however.

To make use of tax deductions in the future, invest in section 54EC shares, also widely known as capital gain bonds. The bonds get issued in compliance with the rules of the IT Act section 54EC.

Features of Capital gain bonds

Bonds with capital gains are healthy, stable, and give a reasonable interest rate. Below are some of the significant features of 54EC bonds.

Interest: The section 54ec bonds pay a 5.75 per cent interest rate. The interest is received every year. The benefit gained is taxable on the bonds.

Safe: The bonds to the capital gain are rated AAA and are stable. Undertakings in the public sector back these, and therefore the default rate is low.

Tenure: For five years, you will invest in those bonds, which is also the lock-in period.

Transferability: The 54EC bonds are not transferable at any time from one person to another.

Tax saving bonds

Government of India Savings Bonds may be the solution to your needs. Also recognized as 7.75 per cent Savings (Taxable) Bonds, 2018, the Reserve Bank of India (RBI) released these bonds. They have a fixed seven-year term. The initial scheme introduced in 2003 promised an 8 per cent return, but in 2018 India's Government reduced it to 7.75 per cent.

Features of Government savings bonds

Here is why you should consider GoI bonds for your short-term investment:

Interest rate: The central Government sets the interest rate for GoI bonds at 7.75 per cent. The Government may adjust the price at any time, and any such adjustment gets notified to the investor.

Eligibility: Only Indian nationals can invest in tax-savings bonds. You can buy yourself a GoI bond or keep a bond jointly with a member of your family. You may also buy a bond in your child's name or ward. In case of death, you can appoint an individual to receive the funds. Such bonds are non-transferable though.

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Getting started with futures trading

Many people are involved in trading of commodities and services nowadays. Trading has become a trend since it enables people to earn profit by investing some capital in a product only to find that the prices have gone higher. The moment there is an increase in the price, the trader earns a profit. By investing in trade, many people have gained lots of monetary benefits, although there are fluctuations.

The definition A futures contract is an agreement which states an asset’s purchase or sale at a future date based on a specified price. They are standardised agreements that typically trade on an exchange. One party agrees to buy a given number of securities that can be delivered later. The seller agrees to this and makes a bond.

Investors, speculators, and other financial players, including companies, can use the futures market for supply and delivery of commodities.

How does it work? These contracts allow buyers and sellers to secure a specific price and protect the commodity from the fluctuations in price in the future. Companies buy the agreement to prevent an unexpected rise in the cost of the commodity. They will also have to finalise the date of delivery in the future at a mentioned price.

Sellers of the commodity sell the contract to ensure a steady market and protect the commodity’s prices from declining unexpectedly. Based on the business, both the parties manage their exposures to risks of price changes. Sometimes, there are cases where the contract increases its value when the product’s price has risen. Such traders can buy and sell the deal without taking responsibility for the commodity’s delivery. They just monitor and act upon price movements.

What does the contract consist?

After understanding what is a futures contract, it becomes easier for people to trade with futures over exchanges. These standardised contracts consist of parameters such as:

• The unit of measurement • The settlement of trade – cash or physical delivery • The number of goods to be delivered as per the contract • The currency unit denominated under the contract • The currency unit under which the contract quotes • Grade or quality considerations, if appropriate like gasoline and metals

Futures traders should be careful not to be obliged to take the delivery of physical goods. Avoid signing a receipt for heaps of products when the contract expires.

The procedure for trading

Futures trading is relatively easy. Open an account virtually or with a broker that supports their market. Provide details of investment experience, income, and net worth. Some companies offer a good deal of advice and research, whereas others simply provide a quote and a chart. Decide wisely before trading.

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The process of dematerialisation

Many people invest in shares and other securities through online processes. They have many confidential items, including share certificates that are important for their trade and commercial activities. These documents should be stored as there is a lengthy procedure for applying for duplicate ones. The world has advanced in technology. Everything is going digital.

The dematerialisation process consists of the conversion of physical shares and securities to digital or electronic formats to smoothen the process of buying, selling, transferring, and holding stocks. It is cost-effective and safe. Two depositories are registered with the Securities and Exchange Board Of India (SEBI), namely Central Depository Services India Limited (CDSL), and National Securities Depository Limited (NSDL), to take control of these accounts and processes.

Why is it essential?

Keeping track of paper-based documents can be tedious and annoying. There are possibilities of them getting lost or destroyed. Any misplaced material may lead to the breakdown of the Indian Share Market and the businesses associated with it. Duplicate certificates are not easy to obtain since the process is lengthy and involves lots of time.

Shares that get dematerialised will receive their credits in the Demat account without causing the fear of loss in transit and other interest charges for loans associated with that account.

The process

The dematerialisation of securities includes many processes, most importantly, the availability of a Demat account. Without this account, trading is not possible. It has become mandatory for every trader and shareholder to have this account in India.

The steps to apply for a Demat account are as follows:

1. Select a depository participant (DP): Most of the brokerage and financial firms get referred to as depository participants.

2. Fill the account opening form: The applicant should fill the form for opening the account which includes necessary contact details.

3. Submit the documents: Documents such as address proof, bank account details, income proof, identity proof, and one passport-sized photograph must be submitted for verification. All the copies should get duly attested.

4. Sign the agreement: A standardised agreement containing all the rules and regulations, charges get paid, and the terms and conditions between the applicant and the depository participant should be signed.

5. Document verification: A staff member from the DP will verify all the documents submitted by the applicant.

6. Generation of login details: Once all the documents are verified, the Demat account number and ID gets generated. With the help of these details, applicants can access their Demat account online.

These accounts are easy to access and operate. Track all transactions from the current location without visiting the broker’s office.

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The procedure to invest in online IPO

Many people invest their shares in private and public firms to earn some profit when the market values rise. Companies have a certain amount of stock that is either bought or sold by buyers and sellers alike depending upon the market value. When they present those shares, it contributes to their growth as a firm and attracts new shareholders. The number of people dealing in shares has risen in recent years with people ready to invest capital for higher returns.

An Initial Public Offering (IPO) is a method of buying the shares of a company that is ready to go public. It is a popular investment method as the value increases in a short time.

Following are the steps on how to invest in IPO online:

1. Decide the IPO: The first step of investment is to choose the IPO. Refer to the prospectus of the company before finalising on the decision. It can be found on the website of the Securities and Exchange Board of India (SEBI). The prospectus gives an idea of the company’s business plan and its purpose.  Once the company for investment is decided, the arrangements for funding starts.

2. Funding: Savings can be used to invest in IPOs. Many banks and non-finance companies lend money to people who have insufficient funds in their accounts. They have different interest rates on every kind of loan.

3. Demat and trading account: Having a Demat account is a compulsion for IPO investments. It is for storing all the stocks and financial securities in electronic format. The documents include PAN card, Aadhar card, address proof and identity proof.

4. Application process: The process of how to buy IPO is not complicated at all. Use the bank or trading account for the application. Be aware of the Application Supported by Blocked Amount (ASBA) facility, which is compulsory for IPO applications that authorise banks to block money for the same. Specify the PAN number, Demat account number, bank account details and bidding details in the form.

5. Bidding: Bid for shares as per the lot sizes mentioned in the prospectus. The lot size specifies the minimum number of shares that must be applied during an IPO. There is a bid price where the company sets a price band. The upper limit is known as the cap price, while the lowest is called the floor price. Investors can bid for shares in this price range.

6. Allotment: There are possibilities of receiving lesser shares than expected or even none of them. In such cases, the bank unlocks the bid amount partially or entirely and credits the allotted shares to Demat accounts.

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Beginners guide to investing in stocks

Stock investments can be an efficient method to build wealth over a long tenure. If people learn the art of investing safely and wisely, these investments will be a boon for them. Many people earn from stocks and other investments. Some treat it as a primary business, whereas others use it as a secondary source of income. Investing in stocks has become a trend.

For those who are learning how to invest in stocks, it is safer to keep some investment goals in mind, learning their functionality, and the risk assessment.

The definition of stocks

Stocks are equity investments representing legal ownership in a company. When people buy the shares of a company, they become part-owners of it. Corporates issue stocks to raise money in two variations, namely common stocks, and preferred stocks.

Common stocks entitle stockholders to hold a proportion of the company’s profits or losses. On the other hand, preferred shares provide a predetermined dividend payment.

How to earn through stock investments?

People can earn profit by owning stocks when share prices rise, or from quarterly payments for dividends. Their investments accumulate over time, and in return, they get stable returns because of the compound interest. Benjamin Graham is titled as the father of value investing. He has preached that the real money in funding will have to be made not by buying and selling, but from owning and holding securities, receiving interest and dividends, and benefiting from their long-term increase in value.

Why do stock prices fluctuate?

The stock market is like an auction where buyers and sellers can be corporations, individuals, or even governments. The stock price will decline when the sellers are more than the buyers and vice versa.

A firm’s performance does not directly influence its stock price. The fluctuation is decided by the investors’ reactions to the price. Companies that have stocks with excellent performance would see a rise in the number of buyers, consequently leading to an increase in its amount. The opposite also takes place when companies underperform.

What is capitalisation?

The sum of the total outstanding shares multiplied by the share price determines the capitalisation of the stock. The market cap is much superior to share market price because it allows company evaluation and differentiation in the same industry.

The market caps segregate companies based on their share price:

1. Small-cap: USD 300 million to USD 2 billion 2. Mid-cap: Between USD 2 billion and USD 10 billion 3. Large-cap: USD 10 billion or more

People with a brokerage account or investment apps can purchase stocks directly. They can store their records on the computer or smartphone. Some apps also offer zero-commission trades that can be helpful.

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What is an EBITDA calculator?

Many people invest in all kinds of financial resources like loans, EMIs, mutual funds, securities, etc. These investments hold lots of value for future expenses as they offer returns on each receipt. It is vital to track all the finances and check the rate of returns as they change with time, depending upon the plan chosen by the investor.

Companies also invest in lots of resources to increase their capital gains. Financial calculators can be used to determine the amount of return on investment. A company’s financial performance can be evaluated using the EBITDA calculator. It is treated as a proxy for a company’s cash flow from its entire operation.

The term is an abbreviation for:

E = Earnings B = Before I = Interest T = Taxes D = Depreciation A = Amortization

It is a variation of operating income excluding non-operating and non-cash expenses. The purpose of deducting them is to eradicate the factors that cause discretion to business owners such as debt financing, capital structure, methods of depreciation, and taxes up to a certain extent. It exhibits a firm’s financial performance without taking its capital structure into account.

The formula for calculation is:

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization On the other hand, EBITDA margin calculation is a profitability ratio measuring the earnings of a company before the application of interest, taxes, depreciation, and amortization, as a percentage of revenue.

The formula is:

EBITDA Margin = EBITDA/Revenue

The earnings get calculated by taking sales revenue and deducting operating expenses, such as the cost of goods sold (COGS), selling, general, & administrative expenses (SG&A), but excluding depreciation and amortization. The margin does not affect the company’s capital structure, non-cash expenses, and income taxes. The ratio can be used in combination with other profitability ones for evaluation of a company.

On the other hand, a future value calculator allows investors to predict the amount of profit that can be generated by various investments with varying degrees of accuracy. The FV calculation depends upon the expectation of a stable growth rate. If a sum of money is placed in a savings account with a guaranteed interest rate, then the FV is easy to determine accurately. But investments in the stock market or other securities with a higher volatile rate of return can be challenging to predict.

There are two formulas for calculating the future value of an investment:

1. Simple Annual Interest: FV = I x (1 + (R x T)) 2. Compound Annual Interest: FV = I x (1 + R)T I = Investment Amount R = Interest Rate T = Tenure

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Trading in gold futures vs currency options

Depending on a variety of circumstances – economic growth, political changes, central bank policies, and so on, the value of currencies keeps shifting toward one another. These fluctuations affect both importers and exporters, whose fortunes depend to a large extent on the currency's value.

They use derivatives such as currency options in India and futures to guard against those fluctuations. It is not just importers and exporters, of course, that trade in these. Speculators, too, are active participants, hoping to turn the exchange rate movement into a profit.

There are two types of currency volatility being hedged, and these are by options and futures. An option gives you the right to buy a currency at a specified rate in the future, but not the obligation. So, there is a choice here: your contract can only be exercised if you find the price favourable. There is no option in currency futures: you must exercise the right.

Types of currency options Following are the types of currency options – the put option and the call option. A put option gives you the right but not the obligation to sell currency on a given date at a specific price.

The other currency option type is the call option which gives you the right to purchase currency at a specific rate. This works when you expect the INR 's value to fall against another currency such as the dollar.

Currency futures were introduced in India around 2008, and then options were introduced in 2010. Today, the National Stock Exchange (NSE) derivatives segment offers trading services in derivative instruments such as currency futures on four currency pairs, cross-currency futures and three currency pair options. On the Indian rupee, you can buy currency options against other currencies like the euro, pound sterling, and the US dollar.

Trading in Gold Futures Indians, and elsewhere around the world, are still finding gold as an investment. Many people regard gold as a safe asset which earns good returns. Equity has, of course, outperformed gold in India in the last few years.

There is another way to invest in gold without holding the metal, and that's buying futures. Since gold prices move in the opposite side to those of many other assets like equity, it is an excellent source of hedging. Of course, holding and trading gold in physical form are not very convenient due to safety concerns and the assessment of metal purity.

Of course, you can hold these futures until maturity and take metal delivery. Gold futures are an excellent choice for those who want to benefit from price changes in precious metal. The contracts are offered in various sizes so that you can find one appropriate for your budget.

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Difference between NPV calculator and margin calculator

Net present value (NPV) is an essential term in the finance world. It deals with cash flow. It means comparing the real value of cash inflows over time to the current value of cash outflows. Investors use it to gauge the profitability of future investment. To do such calculations, you can use NPV calculators or net present value calculators that are available online.

We use the present value of the annuity calculators because, over time, the value of money varies. In the future, it may be higher or lower, depending on the rate of inflation and the rate of return. When the rate of return is higher than the rate of inflation, the value of capital would be higher.

If the rate of return is lower than that of inflation, the value of money will be lower. This value is evolved by the NPV so that in future the present value of money can be compared with that.

How to calculate NPV?

The method requires complicated calculations, and the use of NPV calculator India is preferable. But at times, knowing how that works is wise. The formula for calculating NPV is as follows:

NPV = [Cn/(1+r)^n], where n={0-N}

Cn is the difference between cash flows

R is the discount rate

N is the duration in years

The NPV indicates whether future earnings will outweigh the anticipated costs. If the NPV is positive, an investment will be considered profitable. If it is negative, the costs would be more than the returns, and therefore the investment would be deemed unprofitable.

There is a set of drawbacks to the present value calculator. It makes assumptions about future returns and costs which might not be right. It does not consider the investment risks or a project cost escalation.

What is SPAN Margin?

SPAN Margin is the minimum margin requirement that gets blocked as per the mandate of the exchange for futures and options contracts. The Margin gets calculated using the software-SPAN (Standard Portfolio Risk Analysis), which is based on an advanced set of algorithms which calculates approximately the margin of each derivative position to its worst probable one-day shift.

SPAN Margin is used widely across all stock exchanges globally to calculate an investor's margin money amount to cover possible losses.  A SPAN calculator is used to estimate the margin.

SPAN Margin defines margin requirements based on a global one-day risk assessment for a trader's account. SPAN margins are measured using risk arrays and risk scenarios as conditions.

Such situations are referred to as risk scenarios and calculate gains (or losses) in terms of price change, volatility change, and time-to-expiration decreases.

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Basics and FAQ on commodity trading

A commodity is a category of assets/goods which are essential in everyday life such as food, energy, or metals. A material is by definition, replaceable and exchangeable. This is as any form of movable good that can be purchased and sold, except for actionable claims and cash.

Trading of commodities in India began a long way back in time, even before in many other countries. But foreign invasions and rulings, natural calamities, and many policies of the government and their modifications were significant reasons for diminishing commodity trade. Even though other forms of stock market/share market trading exist today, commodity trading has reclaimed its importance.

In 2015, the commodity trading regulatory body – Forward Market Commission (FMC) merged with India's Securities and Exchange Board (SEBI). Commodity trading in these markets includes standard agreements following the instructions so that trading can be done without visual scrutiny. Let us understand commodity trading meaning

In general, commodities are categorised into four types:

• Energy • Agriculture • Metals • Livestock and meat

The best way to capitalise in commodities is through a futures contract, which is a deal to buy or sell a specific amount of a commodity at a fixed price at a future time.

Futures are on every commodity category. Traders use these contracts as a prevention against the risks associated with the price swing of the implicit trade good or raw material of futures. Commodity trading involves high risk to novice investors.

On the commodity futures market, more than 100 commodities get traded. Of these commodities, 50-plus get traded actively. These include bullion, iron, resources to agriculture, energy goods, etc.

Commodity trading is a smart way to spread your portfolio, but, especially for new investors, it involves risk. Future contracts are incredibly volatile and have a higher entry-level threshold, making it a costly investment.

How to choose a commodity broker?

A crucial part of the investment experience is selecting the right commodity broker. The vast scope of the market has brought many brokers employment. But, reputation and expertise mark a reliable broker 's impression. Each investor should filter thoroughly while choosing a broker. The charges a broker quotes to a customer might vary from place to place. Depending on the bid and the fee discounts, select a broker wisely. Comparison of brokers may often go futile based on their charges.

Before retaining a broker, the investor will verify whether the sites or media are going live with the investment. Novice investors are encouraged to offer a demonstration of the application or media. In the market, a broker with a useful and constructive customer service department is highly regarded.

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Understand copper and silver futures trading in India

For several reasons, Silver is in high demand in India – it is considered auspicious; it is a relatively good store value and a good investment. It is used for jewellery, ornamentation, and cutlery, but it is also suitable for many industrial and scientific use, in electronics, medicine, etc.

In the past, silver, in the form of coinage, was used as currency. Silver is also literally consumed in India-a thin silver foil layer is considered a must for many sweets! People also think of investing in silver futures as an option to create wealth.

Like gold, silver futures are a relatively safe investment. When the economy declines, people tend to exit equity and put in precious metals such as gold and silver. Since silver is convenient as a hedge against inflation, during inflationary times, demand and prices could rise.

Silver as an investment is in considerable demand, especially in India. But there is a better way to invest in silver without having to buy the metal. Buying silver can be fraught with problems due to protection concerns and the quality of the metal. You can invest in the silver futures to get around this issue.

You will take the services of a broker, who is a member of the commodity exchange, to invest in the silver futures. You will need to give the broker an initial margin before trading. That is, you have got to pay a certain percentage of the exchange transactions that you make. The margins in these futures are generally low.

Investment in these is also open to smaller investors. Since these are available in various sizes, such as 1 kg, 5 kg, and 30 kg, smaller investments can be made.

Copper futures

Copper is not a metal that draws significant attention compared with other metals such as steel and aluminium. But in every home and workplace, there are considerable quantities thereof. Copper wires and pipes are used extensively in homes, offices, and factories, due to their excellent conductivity and other properties.

Several factors influence copper demand and prices. These include supply, economic growth, and developments in political matters.

Because copper demand will be high in the future, investment in copper futures seems to be a profitable venture. Trading in these futures takes place on Indian commodity exchanges such as the Multi-Commodity Market.

The significant advantage of copper futures trading is the leverage. Margins are quite low in these futures and allow investors to take significant positions in the metal. It enables end-users to hedge off price volatility. Speculators too can benefit from price fluctuations and transform profits. There is also an option for investors who want their portfolio to diversify.

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How does a sub-broker earn in India?

A broker's dictionary meaning is "a person who buys and sells products and assets to others," in exchange for which he commands a "brokerage" fee or charge. In India, investors may use a brokerage firm to buy and sell shares or related investment products.

A brokerage firm appoints sub-brokers who are paid a commission for each of their customers' transactions. That commission is what acts as the primary income source. Therefore, how much a sub-broker receives depends on two things: one, the percentage sum that the broker shares, and two, the number of clients that he or she may draw. Consequently, sub-broker income would rely primarily on his or her skills.

Let us look at the different factors impacting the sub-broker salary –

• Since the income depends on commissions, choosing the right broker is essential. • Another factor affecting sub-broker profits is the type of infrastructure and facilities a broker provides. Without marketing, infrastructure, and other resources, it is hard to gain customers, thereby affecting sales. • When you ask the question: how much does a sub-broker earn? There is one crucial factor contributing a great deal to this, and that is knowledge. He or she must know something about stocks so that they can advise clients on the best shares to buy. • Also, sub-brokers need to learn a bit about the economy and monitor global financial and geo-political developments because these often impact stock prices. • The cost involved also depends on how much a sub-broker earns. There are two types of expenses – capital and working. There are some fixed, one-time costs like the parked deposit with broker charges and registration fees. Then there are charges on establishing offices, computers, telephone lines and so on. Working expenses include office rentals, staff salaries, telephone bills, etc. • Another factor to consider when choosing a broker is the type of products that they are offering(s). If the broker offers a wide variety of products to match specific investor needs, the sub broker may draw more clients, thus improving their earnings.

Sub Broker Business Model

All registered stockbrokers in the country run a sub broker program. Each of these broking houses has purchased licenses to trade.

These large stockbroking houses like Angel broking, Sharekhan, etc. have started this sub-broker business model where they can provide service to those unable to obtain a broking license.

A stockbroking license comes at a very high cost, and not every business owner can afford it, resulting in a business partner or sub brokerage practice.

A large broking house may provide its franchise in the stock sub-broker business owner, who aspires to become a stockbroker themselves.

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What are the basics of options trading?

The stock market includes several products for investment and trading purposes. Some of them are equity, IPO, NCDs, mutual funds, bonds, derivatives, etc. It is essential to understand each of these products for successful investment strategies and profit gains. Many people are new to this process and require knowledge of the basics of investment and trade. Incomplete or no understanding of the market can lead to losses and financial instability.

Derivatives are contracts made between two parties who are willing to buy or sell an asset at a fixed rate and a fixed time. These are tools that help in managing risks by transferring the risks to those who are ready to take it. Derivatives are of four types – Forwards, Futures, Options and Swaps. Futures and options trading is used to reduce risks and make profits in highly volatile situations. The prices of goods may suddenly rise or fall, thus displaying the importance of future contracts.

Futures are contracts made between two parties to buy or sell an asset at a fixed price in the future. It helps in reducing the probability of risks and losses that are involved, irrespective of the market fluctuations. In this manner, future demands and price can be predicted, with a reduction in the losses. Lesser margins can be used during trade with the help of futures.

On the other hand, options give buyers the right to buy and sell assets without any obligation. Sellers are under the obligation to buy or sell the asset according to the buyer’s decision. For option buyers, the return potential is unlimited with the loss limited to the premium only. Option sellers have limited return potential with higher chances of risking the premium.

Following are some tips on how to trade options in India:

1.       Be aware of the period to avoid getting lost in the pressure.

2.       Look for stocks with high volume and liquidity.

3.       Go for volatile stocks.

4.       Trade through inexpensive stockbrokers.

5.       Pay attention to the risks.

6.       Do not choose trading products that are hard to understand.

One of the ways of understanding this type of trading is the lot size concept. The F&O market has lot sizes allocated by SEBI, and only those are allowed to trade.

The F&O stock list with lot size is:

1.       NIFTY – 75

2.       Bank NIFTY – 40

3.       ACC – 400

4.       Asian Paints – 600

5.       Britannia Industries – 200

6.       Reliance Industries – 1000

The market price of the stock or index determines the lot sizes. Lot sizes are fixed at the relevant number of shares which if multiplied by the current market price would give a specific notional value that changes continuously.