What is market and Type of market ?
A market is a medium that allows buyers and sellers of a
specific good or service to interact in order to facilitate an exchange.
This type of market may either be a physical marketplace
where people come together to exchange goods and services in person, as in a
bazaar or shopping center, or a virtual market wherein buyers and sellers do not interact, as in an online
market
Type of market:
Primary Market: Company going Public and introduces stocks
in the market.
Ex. Initial Public Offering(IPO)
Secondry Market:
Ex Stocks,Derivatives
What is derivative ?
A derivative is a security with a price that is dependent
upon or derived from one or more underlying assets.
Explain Options ?
An options contract is an agreement between two parties to
facilitate a potential transaction on the underlying security at a preset
price, referred to as the strike price, prior to the expiration date. The two
types of contracts are put and call options, which can be purchased to
speculate on the direction of stocks or stock indices, or sold to generate
income
Type of options ?
1.Call Option 2.Put Option
What is call and put?
Call Option:Call
options give the option to buy at certain price, so the buyer would want the
stock to go up.Basically when you are Bullish(expecting price to go up) on some
dervivative stock/index then you would buy the Call Option.If underlying
security price goes up then value of its call option goes up.
Put Option:A put
option is an option contract giving the owner the right, but not the
obligation, to sell a specified amount of an underlying security at a specified
price within a specified time. This is the opposite of a call option, which
gives the holder the right to buy shares.
Basically when you are Bearish(expecting price to go down)
on some dervivative stock/index then you would buy the PUT Option.If underlying
security price goes up then value of its call option goes up.
What is limit order?
Limit order implies that buyer/seller wishes to buy/sell the
security on specified price only.
Ex.If Reliance Industries is currently trending at rs 1000
per share and you wish to buy Reliance Share at Rs 998, you can place limit
order at 998.
If the stocks ever touches 998 during that day, your order
will get executed. If it does not your order will expire by eod
Similar things are expected for sell side when you have
Reliance share and you wish to sell at rs 1002
What
is stop loss order?
A stop loss order is the opposite of a take profit order: It
is left to ensure that a transaction does not take place at a price worse than
the indicated target. It can be used to sell an existing instrument or to enter
into a new transaction.
What is
open interest ?
Open interest is the total number of open or outstanding
(not closed or delivered) options and/or futures contracts that exist on a
given day, delivered on a particular day.
Open interest is commonly associated with the futures and
options markets, where the number of existing contracts changes from day to day
– unlike the stock market, where the outstanding shares of a company's stock
remain constant once a stock issue is completed. However, the term "open
interest" is also sometimes used to refer to the number of buy market orders
that exist before the stock market opens.
An increase in open interest is typically interpreted as a
bullish signal, while decreasing open interest figures are generally
interpreted as a bearish sign.
What is
open order ?
An open order is an order to buy or sell a security that
remains in effect until it is either canceled by the customer, until it is
executed or until it expires. Open orders commonly occur when investors place
restrictions on their buy and sell transactions. A lack of liquidity in the
market or for a particular security can also cause an order to remain open.
Explain Trade Life Cycle ?
Trade Execution ==>Trade Clearance==>Trade Settlement
What is
margins and it's type?:
Loan provided by Broker to based on some collateral.
Ex. User has Trading account with broker SherKhan. Balance in is account RS 10000 Broker
may provide margins for some stocks based on the amount user has in trading
account. So you may be able to buy shares worth 10 times( 10000*10 )because of
the margin provided by broker.
What is
rrm mode ?
Risk Reduction Mode. When 90% of member’s effective deposit
is utilized towards margins, the trading terminal of member is placed in Risk
Reduction Mode wherein all new orders are checked for sufficiency of margins
What is
Intraday trading ?
Buying/Selling securities in same day. While buying/Selling user has to explicitly
specify if what kind of trade it is. i.e
Intraday(same day sell /purchase) or Delivery
What is
market status and time?
Time varies depending on geographical location
https://www.worldtimezone.com/markets24.php
What is
OTM,ATM.ATM.?
ITM: In the money
When user is holding call option of a stock/index at strike
price of rs 100 and current market price goes beyond 100 then it can be said in
the money.
Basic idea is if user exercises the right to sell/buy option
then user would be in profit.
So if strike price of Call Option is rs 100 and currently
its trending on rs 108 then it can be called ITM as user would get 108-100=8 as
Profit
ATM: At
the money Strike price and Current Price is same. In our example we
bought it at 100 and its currently trending on 100
OTM:Out
of the Money
Option that will not produce profit if exercised. So per our
example if strike price for our call option was 100 and if its trending at 90
then it can be termed as OTM
What is
buy and sell order
If user wants to purchase/nuy some stock/derivative and he
places such order on trading terminal or via broker then it would be called Buy
Order.
If user wants to Sell some stock/derivative and he places
such order on trading terminal or via broker then it would be called Sell
Order.
What is
trade?
Buy/Sell of Securities
What is
trade price
Price at which Buy/Sell Order got executes
Wht IOC
and say order
IOC: Immediate or Cancel. It type of buy/sell order which is
executes of the price matches with price quoted by the user
Ex. If user wants to purchase security at RS 1000 and and
current market price is 1000 or less
then order will get executed. Else it will get cancelled immediately
What is
spread order ?
A spread order is a combination of individual orders (legs)
that work together to create a single trading strategy. Spread types include
futures spreads, and combinations of
option/option, option/stock and stock/stock on the same or multiple
underlyings.