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A study on

ONLINE TRADING IN FUTURES AND OPTIONS

AT

FIRST GLOBAL SECURITIES .LTD

In partial fulfillment of the requirements for the award of the degree in

MASTER OF BUSINESS ADMINISTRATION

Submitted by

RAGHUNADHAREDDY.G

H.T.No. 07107110

Under the guidance of

MISS. ARUNA REDDY.G

Asst.Professor

MALLA REDDY INSTITUTE OF MANAGEMENT

(Affiliated to Osmania University)

MAISAMMAGUDA, DHULAPALLY,

SECUNDERABAD 500014.

2007-2009

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DECLARATION

I hereby declare that this project entitled A STUDY ON ONLINE TRADING IN

FUTURES AND OPTIONS has been carried out by means under the able guidance of

MISS.ARUNAREDDY. Asst.Professor MALLA REDDY INSTITUTE OF

MANAGEMENT.

This project report is submitted in partial fulfillment of the requirement from the award

of Master of Business Administration Degree.

I also declare that this project is a result of my own efforts and has not been submitted to

any other university for any other degree or diploma.

Date :

Place : Secunderabad RAGHUNADHAREDDY.G

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ACKNOWLEDGEMENT

I wish to thank the management ofFIRST GLOBAL SECURITIES.LTD

for their kind gesture of allowing me to undertake this project and its various employees who lent

their helping hand towards the completion of this study.

I am particularly in debited to Mr. KRISHNA.B of FIRST GLOBAL

SECURITIES.LTD for giving me the opportunity to undertake this project in the esteemed

organization

I thank Dr. SRINIVASA SASHTRY, Mr. UDAY KUMAR, H.O.D and all my faculty

members who motivated me in the completion of this project

Special thanks to my faculty cum guide Miss. ARUNA REDDY.G for the helpful

comments and information regarding the logic and documentation of the project.

Last but not least, I am thankful to my parents to all my friends for their wholehearted

support and suggestions, which helped me in completing this project.

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ABSTRACT:

The present project A Study on tax saving schemes of different mutual funds comprises of

seven units.

Unit-I Deals with introduction about the project, objectives of the study, need, scope

Research design, data sources, limitations, data collection methods & sampling plan are

discussed.

UNIT-II In this unit, information regarding the project topic, is A STUDY ON TAX SAVING

SCHEMES OF DIFFERENT MUTUAL FUNDS collected

UNIT-III In this unit Industry profile i.e. Industry over view, primary and secondary market,

and laws governing capital market, regulators, and need of capital market. About NSE:

promoters, corporate structure, milestones of NSE and company profile are discussed.

UNIT-IV In this unit, analysis of data and interpretation is done and presented.

UNIT-V In this unit findings of the study are presented.

UNIT- VI In this unit, suggestions to the project is presented.

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CONTENTS

Chapter no Name of the concept Page no

I Introduction 1

Objectives 2

Need of the study 3

Scope of the study 4

Research Methodology 5

Limitations 6

II Review of literature 7- 41

III Industry profile 42- 45

Company profile 46- 59

IV Data analysis and interpretation 60-83

VSummary

84

VI Suggestions 85

VII Conclusion 86

Bibliography

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EVOLUTION OF DERIVATIVES:

Derivatives have probably been around for as long as people have been trading with one

another. Forward contracting date back at least to the 12th century, and may well have been

around before then. Merchants entered into contracts with another for future delivery of specified

amount of commodities as specified price. A primary motivation for pre-arranging a buyer or

seller for a stock of commodities in early forward contracts was to lessen the possibility that

large swings would inhibit marketing the commodity after a harvest.

The following factors have contributed to the growth of financial derivatives:

Increased volatility in asset prices in financial markets.

Increased integration of national financial markets with the international markets.

Marked improvement in communication facilities and sharp decline in their costs.

Development of more sophisticated risk management tools, providing economic agents a wider

choice of risk management strategies.

Innovations in the derivatives markets, which optimally combine the risks and returns over a

large number of financial assets leading to higher returns, reduced risk as well as

transactions costs as compared to individual financial assets.

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OBJECTIVES OF THE STUDY:

To analyze the derivatives market in India.

To analyze the operations of futures and options.

To find the profit/loss position of futures buyer and seller and also the option writer and

option holder.

To study about risk management with the help of derivatives.

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NEED OF THE STUDY

The turnover of the stock exchange has been tremendously increasing from last 10 years.

The number of trades and the number of investors, who are participating, have increased. The

investors are willing to reduce their risk, so they are seeking for the risk management tools

Prior to SEBI abolishing the BADLA system, the investors had this system as a source

of reducing the risk, as it has many problems like no strong margining system, unclear expiration

date and generating counter party risk. In view of this problem SEBI abolished the BADLA

system.

After the abolition of the BADLA system, the investors are seeking for a hedging system,

which could reduce their portfolio risk, SEBI thought the introduction of the derivatives trading,

as a first step it has set up a 24 member committee under the chairmanship of Dr.L.C. Gupta to

develop the appropriate framework for derivatives trading in India, SEBI accepted the

recommendation of the committee on may 11, 1998 and approved the phase introduction of the

derivatives trading beginning with stock index futures.

There are many investors who are willing to trade in the derivatives segment, because of

its advantage like limited loss unlimited profit by paying the small premiums.

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SCOPE OF THE STUDY:

The study is limited to Derivatives with special reference to futures and option in the

Indian context and the First global securities.ltd, has been taken as a representative sample for

the study. The study cant be said as totally perfect. The study has only made a humble attempt at

evaluation derivatives market only in India context. The study is not based on the international

perspective of derivatives markets, which exists in NASDAQ, CBOT etc.,

RESEARCH METHODLOGY

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The following are the steps involved in the study:

1. SELECTION OF THE SCRIP:

The scrip selection is done on random and the scrip selected is Reliance Communication

and ICICI bank. The Lot size of Reliance Communication is 350 and ICICI bank is 175.

Profitability position of the futures buyer and seller and also the option holder and option writer.

2. DATA COLLECTION :

The data of the Reliance Communication and ICICI bank have been collected from

Business line and the internet. The data consist of the January contract and the period of 27th

December, 2008 to 31st January, 2009.

3.ANALYSIS:

The analysis consists of the tabulation of the data assessing the profitability positions of

the futures buyer and seller and also option holder and the option writer, representing the data

with graphs and making the interpretation using data.

LIMITATIONS OF THE STUDY:

The following are the limitation of this study

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The study is conducted in short period, due to which the study may not be detailed all

aspect.

Lack of time on performing the project in detail study.

The scrip chosen for analysis id Reliance Communication, ICICI bank.

The data collected is completely restricted to 31st January, 2009; hence this analysis

cannot be taken universal.

DERIVATIVES

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The emergence of the market for derivatives products, most notably forwards, futures and

options, can be tracked to the willingness of risk-averse economic agents to guard themselves

against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial

markets are marked by a very high degree of volatility. Through the use of derivative products, it

is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of

risk management, these generally do not locking-in asset prices, derivative product minimizes

the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-

averse investors.

Derivatives are risk management instruments, which derive their value from an

underlying asset. The underlying asset can be bullion, index, share, bonds, currency, interest etc.,

Banks, securities firms, companies and investors to hedge risks, to gain access to cheaper money

and to make profit, use derivatives are likely to grow even at a faster rate in future.

DEFINATION:

Derivative is a product whose value is derived from the value of an underlying asset in

contractual manner. The underlying asset can be equity, forex, commodity or any other asset.

Securities contracts (regulation) act, 1956 (SCR act) defines derivative to secured or

unsecured, risk instrument or contract for differences or any other form of security.

A contract which derives its value from the prices, or index of prices, of underlying securities.

EVOLUTION OF DERIVATIVES:

Derivatives have probably been around for as long as people have been trading with one

another. Forward contracting date back at least to the 12th century, and may well have been

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around before then. Merchants entered into contracts with another for future delivery of specified

amount of commodities as specified price. A primary motivation for pre-arranging a buyer or

seller for a stock of commodities in early forward contracts was to lessen the possibility that

large swings would inhibit marketing the commodity after a harvest.

The following factors have contributed to the growth of financial derivatives:

Increased volatility in asset prices in financial markets.

Increased integration of national financial markets with the international markets.

Marked improvement in communication facilities and sharp decline in their costs.Development of more sophisticated risk management tools, providing economic agents a wider

choice of risk management strategies.

Innovations in the derivatives markets, which optimally combine the risks and returns over a

large number of financial assets leading to higher returns, reduced risk as well as

transactions costs as compared to individual financial assets.

FUNCTION OF DERIVATIVES MARKETS:

The following are the various functions that are performed by the derivatives markets. They

are:

Prices in an organized derivatives market reflect the perfection of market participants about the

future and lead the price of underlying to the perceived future level.

Derivatives market helps to transfer risks from who have them but may not like them to those

who have an appetite for them

Derivatives trading acts as a catalyst for new entrepreneurial activity.

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Derivatives markets help increase saving and investment in long run.

PARTICIPANTS:

The following three broad categories of participants in the derivatives market:

SWAPS

OPTIONS

FUTURES

FORWARDS

DERIVATIVES

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HEDGERS:

Hedgers face risk associated with the price of an asset. They use futures or options markets

to reduce or eliminate this risk.

SPECULATORS:

Speculators wish to bet on future movements in the price of an asset. Futures and options

contracts can give them an extra leverage; that is, they can increase both the potential gains and

potential losses in a speculative venture.

ARBITRAGEURS:

Arbitrageurs are in business to take of a discrepancy between prices in two different

markets, if, for example, they see the futures price of an assets getting out of line with the cash

price, they will take offsetting position in the two markets to lock in a profit.

SELF CLEARING MEMBER:

A SCM clears and settles trades executed by him only either on his own account or on

account of his clients.

TRADING MEMBER CLEARING MEMBER:

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Trading Member Clearing Member is Clearing Member who is also a Trading Member.

Trading Member Clearing Member may clear and settle his own proprietary trades and clients

trades as well as clear and settle for other TMs

PROFESSIONAL CLEARING MEMBER:

Professional Clearing Member is a clearing Member who is not a Trading member.

Typically, banks or custodians could become a Professional Clearing Member and clear and

settle for Trading Members.

TYPES OF DERIVATIVES :

FORWARDS:

A forwards contract is a customized contract between two parties, where settlement takes

place on a specific date in the future todays pre-agreed price.

FUTURES:

DERIVATIVES

OPTIONS FUTURES FORWARDSWAPS

OPTIONINDEX

OPTIONSTOCKS

PUTOPTION

CALLOPTION

PUTOPTION

CALLOPTION

INDEXFUTURES

STOCKFUTURES

INTERESTRATE

CURRENCY

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A futures contract is an agreement between two parties to buy or sell an asset at a certain

time at a certain price.

OPTIONS:

Options are of two types-calls and puts. Calls give the buyer the right but not the

obligation to buy a given quantity of the underlying asset, at a given price on or before a give

future date. Puts give the buyer the right, but not the obligation to sell a given quantity of the

underlying asset at a given price on or before a given date.

WARRANTS:

Options generally have lives of up to one year; the majority of options traded on options

exchanges having a maximum maturity of nine months. Longer-dated options are called

warrants and are generally traded over-the counter.

LEAPS:

The acronym LEAPS means long-term Equity anticipation securities. These are options

having a maturity of up to three years.

BASKETS:

Basket options are options on portfolios of underlying assets. The underlying asset is

usually a moving average of a basket of assets. Equity index options are a form of basket options.

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SWAPS:

Swaps are private between two parties to exchange cash floes in the future according to

prearranged formula. They can be regarded as portfolios of forward contracts. The two

commonly used Swaps are:

INTEREST RATE SWAPS:

These entail swapping only the related cash flows between the parties in the same currency.

CURRENCY SWAPS:

These entail swapping both principal and interest between the parties, with the cash flows

in on direction being in a different currency than those in the opposite direction.

DIFFERENT TYPE OF SWAPS ARE AS FOLL

ACCRETING SWAPS:

An interest rate swap under which the notional principal increases over the maturity of

the swap.

AMORTIZING SWAPS:

An interest rate swap where two floating rate streams are exchanged, which are linked to

two different reference rate

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BASICS SWAPS:

An interest rate swap where two floating rate streams are exchanged, which are linked to

two different reference rates.

CALLABLE SWAPS:

A fixed - to- floating interest rate swap under which the fixed rate payer has the right to

terminate the contract before the specified maturity.

CROSS CURRENCY SWAPS:

A currency swap under which even the underlying principal amount is exchanged in the

beginning and underlying amount is exchanged in the beginning and re-exchanged in the end.

FORWARD START SWAPS:

An interest rate swap under which the effective date is a long time after the trade date.

PLAIN VANILLA SWAPS:

The basic interest rate swap whereby one party makes interest payments on a fixed rate

basics, and the other on a floating rate basis.

PUTTABLE SWAPS:

A fixed-to-floating interest rate swap under which the fixed rate receiver has the right to

terminate the contract before the specified maturity.

ROLLER COASTER SWAPS:

An interest rate swap under which the notional principal increases as well as decreases

over the maturity of the swap.

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ZERO COUPON SWAPS:

An interest rate swaps having no periodic interest payments. The payment is made in a

lump sum on the maturity date.

SWAPTION:

Swaptions are options to buy or sell a swap that will become operative at the expiry of

the options. Thus a swaption is an option on a forward swap.

DERIVATIES TRADING AT NSE / BSE:

The derivatives trading on the National Stock Exchange commenced with

S&P CNX Nifty Index futures on June 12, 2000. The trading in index options commenced on

June 4, 2001 and trading in options on individual securities commenced on July 2. 2001. Single

stock futures were launched on November 9, 2001. The index futures and options contract on

NSE is based on S&P CNX Nifty Index. Currently, the futures contracts have a maximum of 3-

months expiration cycles. Three contracts are available for trading, with 1 month, 2months and

3monthsexpiry. A new contract is introduced on the next trading of Derivatives is taking place

with SENSEX comprising 30 scripts for Index Futures and Options.

RATIONALE BEHIND THE DEVELOPMENT OF DERIVATIVES:

Holding portfolios of securities is associated with the risk of the possibility that the

investor may realize his returns, which would be much lesser than what he expected to get. There

are various factors, which affect the returns:

1. Price or dividend (interest)

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2. Some are internal to the firm like-

Industrial policy

Management capabilities

Consumers preference

Labour strike, etc.

These forces are to a large extent controllable and are termed as non systematic risks. An

investor can easily manage such non-systematic by having a well-diversified portfolio spread

across the companies, industries and groups so that a loss in one may easily be compensated with a

gain in other.

There are yet other of influence which are external to the firm, cannot be controlled and

affect large number of securities. They are termed as systematic risk. They are:

1.Economic

2.Political

3.Sociological changes are sources of systematic risk.

For instance, inflation, interest rate, etc. their effect is to cause prices of nearly all-

individual stocks to move together in the same manner. We therefore quite often find stock prices

falling from time to time in spite of companys earning rising and vice versa. Rational Behind the

development of derivatives market is to manage this systematic risk, liquidity in the sense of being

able to buy and sell relatively large amounts quickly without substantial price concession.

In debt market, a large position of the total risk of securities is systematic. Debt

instruments are also finite life securities with limited marketability due to their small size relative

to many common stocks.

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FUTURES

DEFINITION:

A Futures contract is an agreement between two parties to buy or sell an asset a certain time in

the future at a certain price. To facilitate liquidity in the futures contract, the exchange specifies certain

standard features of the contract. The standardized items on a futures contract are:

Quantity of the underlying

Quality of the underlying

The date and the month of delivery

The units of price quotations and minimum price change

Location of settlement

FEATURES OF FUTURES:

Futures are highly standardized.

The contracting parties need not pay any down payments.

Hedging of price risks.

They have secondary markets to.

TYPES OF FUTURES:

On the basis of the underlying asset they derive, the futures are divided into two types:

I. STOCK FUTURES :

The stock futures are the futures that have the underlying asset as the individual securities.

The settlement of the stock futures is of cash settlement and the settlement and the

settlement price of the future is the closing price of the underlying security.

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II. INDEX FUTURES :

Index futures are the futures, which have the underlying asset as an Index. The Index

futures are also cash settled. The settlement price of the Index futures shall be the closing

value of the underlying index on the expiry date of the contract.

PARTIES IN THE FUTURES CONTRACT:

There are two parties in a future contract, the buyer and the seller. The buyer of the futures

contract is one who is LONG on the futures contract and the seller of the futures contract is who is

SHORT on the futures contract.

The pay off for the buyer and the seller of the futures of the contracts are as follows:

PAY-OFF FOR A BUYER OF FUTURES:

Profit

FP

F

0 S2 S1

FL

Loss

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CASE 1:-The buyer bought the futures contract at (F); if the future price goes to S1 then the buyer gets

the profit of (FP).

CASE 2:- The buyer gets loss when the future price goes less then (F), if the future price goes to S2

then the buyer gets the loss of (FL).

PAY-OFF FOR A SELLER OF FUTURES:

Profit

FL

S2 F S1

FP

Loss

F FUTURES PRICE

S1, S2 SETTLEMENT PRICE

CASE 1:- The seller sold the future contract at (F); if the future goes to S1 then the seller gets the

profit of (FP).

CASE 2:- The seller gets loss when the future price goes greater than (F), if the future price goes

to S2 then the seller gets the loss of (FL).

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MARGINS:

Margins are the deposits with reduce counter party risk, arise in a futures contract. These

margins are collect in order to eliminate the counter party risk. There are three types of margins:

INITIAL MARGIN:

Whenever a futures contract is signed, both buyer and seller are required to post initial

margins. Both buyer and seller are required to make security deposits that are intended to guarantee

that they will infact be able to fulfill their obligation. This deposits are initial margins and they are

often referred as purchase price of futures market.

MAKING TO MARKET MARGINS:

The process of adjusting the equity in an investors account in order to reflect the change

in the settlement price of futures contract is known as MTM margin.

MAINTENANCE MARGIN:

The Investor must keep the futures account equity equal to or grater the certain

percentage of the amount deposited as initial margin. If the equity goes less than that percentage of

initial margin, then the investor receives a call for an additional deposit of cash known as

maintenance margin to bring the equity upto the initial margin.

Role of Margins:

The role of margins in the futures contract is explained in the following example. S sold a

sathyam June futures contract to B at Rs.300; the following table shows the effect of margins on

the contract. The contract size of sathyam is Rs.1200. The initial margin amount is say Rs.20,000/-,

the maintenance margin is 65% of initial margin.

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PRICING THE FUTURES:

The fair value of the futures contract is derived from a model known as the cost

of carry model. This model gives the fair value of the contract.

COST OF CARRY:

F = S (1+r+q)t

Where

F Future Price

S Spot price of the underlying

r Cost of financing

q Expected Dividend Yield

t Holding period.

FUTURES TERMINOLOGY :

SPOT PRICE :

The price at which an asset trades in the spot market.

FUTURES PRICE:

The price at which the futures contract trades in the futures market.

CONTRACT CYCLE:

The period over which contracts trades. The index futures contracts on the NSE have one

month, two - month and three month expiry cycle which expire on the last Thursday of the month.

Thus a January expiration contract expires on the last Thursday January and a February expiration

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contract cases trading on the last Thursday of February. On the Friday following the last Thursday, a

new contract having a three month expiry is introduced for trading.

EXPIRY DATE:

It is the date specifies in the futures contract. This is the last day on which the contract will be

traded, at the end of which it will cease to exist.

CONTRACT SIZE:

The amount of asset that has to be delivered under one contract. For instance, the contract size

on NSEs futures market is 200 niftiest.

BASIS:

In the context of financial futures, basis can be defined as the futures price minus the spot

price. There will be different basis for each delivery month for each contract. In a normal market, basis

will be positive. This reflects that futures prices normally exceed spot prices.

COST CARRY:

The relationship between futures prices and spot prices can be summarized in terms of what is

known as the cost of carry. This measures the storage cost plus the interest that is paid to finance the

asset less the income earned on the asset.

OPEN INTEREST:

Total outstanding long or short position in the market at any specific time. As total long

positions in the market would be equal to short positions, for calculation of open interest only one side

of the contract is counter.

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FORWARDS

DEFINITION:

A forward contract is an agreement to buy or sell an asset on a specified for a specified price.

One of the parties to the contract assumes a long position and agrees to buy the underlying asset on a

certain specified future date for a certain specified price. The other party assumes a short position and

agrees to sell the asset on the same date for the same price. Other contract details like delivery date,

price and quantity are negotiated bilaterally by the parties to the contract. The forward contracts are

normally traded outside the exchanges.

SAILENT FEATURES:

They are bilateral contracts and hence exposed to counter party risk.

Each contract is custom designed, and hence is unique in terms of contract size expiration date

and the asset type and quality.

The contract price is generally not available in public domain.

On the expiration date, the contract has to be settled by delivery of the asset.

If the party wishes to reverse the contract, is has compulsorily go to the same counter-party,

which often results in high prices being charged. However, forward contracts in certain markets have

become very standardized, as in the case of foreign exchange, thereby reducing transaction costs and

increasing transactions volume. This process of standardization reaches its limit in the organized

futures market.

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Forward contracts are very useful in hedging and speculation. The classic hedging application

would be that of an exporter who expects to receive payment in dollars three months later. He is

exposed to the risk of exchange rate fluctuations. By using the currency forward market to sell dollars

forward, he can lock on to a rate today and reduce his uncertainty, Similarly hence can reduce his

exposure to exchange rate fluctuations by buying dollar forward.

If a speculator has information or analysis, which forecasts an upturn in a price, then he can go

long on the forward, wait for the price to rise, and then take a reversing transaction to book profits.

Speculators may well be required to deposit a margin upfront. However, this is generally a relatively

small proportion of the value of the assets underlying the forward contract. The use of forwardmarkets here supplies leverage to the speculator.

A forward contract for the future delivery of a particular underlying asset must have the

following information:

i. Name of the principal party

ii. Name of the counter party

iii. Name of the underlying asset to be delivered

iv. Amount of contract

v. Date of delivery

vi. Place of delivery

vii. Price agreed upon

viii. The date when the contract is sold

ix. The value date

x. Other terms and conditions

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LIMITATIONS:

Lack of centralization of trading

Illiquidity, and

Counter-party risk

DIFFERENCE BETWEEN FORWARDS & FUTURES

Futures are standardized forward contracts. The standardization in features the segregates the

futures as a distinct class of forward contracts as against the general OTC forward contracts, are

brought out in below table.

Sl.no. FORWARDS FUTURES1. Forward contracts are traded over the counter. Futures are traded on organized exchanges.2. Forward contracts are bilateral contracts and

hence, the parties to the contract are exposed

to the counter-pay default risk. In case of the

default of the opposite party, a trader in

forwards has to seek legal recourse under

Indian Contract Act, 1872 which is expensive

and time consuming.

Futures deal not with one another but with the

clearing house of the exchange. As is the case

with trading in share on stock exchanges

where every buyer or seller buys or sells the

share from or to the clearing house of the

exchange, in case of futures also the default

risk is bourn by the clearing house of

exchange in which the trading taking place.

The buyers and sellers are thus insulated from

the counter party default risk.3. Forward contracts are highly customized and

each contract is unique in size, maturity and

Futures contract are standardized in terms of

size, expiry and asset quality. For example, on

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asset quality. futures contract in the nifty index is for 200

units of index baskets, contract for the three

months viz., current month and the next two

month, are available and composition of nifty

is well-defined (quality).4 Settlement of contract normally takes place

through delivery. If, however, a party wishes

to reverse the contract before expiry, it has to

go to the same counter-party.

Settlement of contracts can be either through

delivery of the underlying or through a cash

settlement of the difference in contract price

and the actual ruling market price of the

underlying on the expiry date. Futures

position, however, can be easily closed out

by any party by entering into an opposite

contracts on the same exchange. Any

difference in the two contract prices viz.,

initial contracted price & reversing contractprice, will be its profit or loss.

5. Forward contracts normally result in delivery. Delivery is rate in the futures contracts and

the majority of the contracts are closed out

before maturity by the participants and are

settled by payments of differences without

any actual delivery of the underlying assetstaking place.

6. Forward markets are normally preferred by

the hedgers who need customized contracts. It

does not really help the markets in price

Futures market, due to its ease of access,

attracts all three classes of traders viz.,

hedgers, speculators, arbitrageurs and greatly

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discovery. helps in price discovery of the underlying.7. Forwards do not require payment of margins. Exchanges have well-defined margin payment

requirement for the futures trading. The

margin is collected by the exchange from the

traders at the end of trading day on which the

contract is entered into. The margin is

marked-to-market at the end of every

subsequent trading day based on the days

closing prices and traders with adverse

margins are required to pay the differences.

OPTIONS

DEFINITION:

Option is a type of contract between two persons where one grants the other the right to buy a

specific asset at a specific price within a specific time period. Alternatively the contract may grant the

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other person the right to sell a specific asset at a specific price within a specific time period. In order to

have this right, the option buyer has to pay the seller of the option premium.

The assets on which option can be derived are stocks, commodities, indexes etc. If the

underlying asset is the financial asset, then the option are financial option like stock options, currency

options, index options etc., and if options like commodity option.

Three parties are involved in the option trading, the option seller, buyer and the broker.

1. The option seller or writer is a person who grants some one else the option to buy or sell. He

receives a premium on its price.

2. The option buyer pays a price to the option writer to induce him to write the option.3. The securities broker acts as an agent to find the option buyer from seller and receives a

commission or fee for it.

PROPERTIES OF OPTION:

Options have several unique properties that set them apart from other securities. The following

are the properties of option:

Limited Loss

High leverages potential

Limited life.

PARTIES AN OPTION CONTRACT:

BUYER OF THE OPTION:

The buyer of an option is one who by paying option premium buys the right but not the

obligation to exercise his option on seller/writer.

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WRITER/SELLER OF THE OPTION:

The writer of the call/put options is the one who receives the option premium and is their by

obligated to sell/buy the asset if the buyer exercises the option on him.

TYPES OF OPTIONS:

The options are classified into various types on the basis of various variables. The following

are the various types on options.

ON THE BASIS OF THE UNDERLYING ASSET:

On the basis of the underlying asset the option are divided in to two types:

INDEX OPTIONS

The Index options have the underlying asset as the index.

STOCK OPTIONS:

A stock option gives the buyer of the option the right to buy/sell stock at a specified price.

Stock option are options on the individual stocks, there are currently more than 50 stocks, there are

currently more than 50 stocks are trading in the segment.

ON THE BASIS OF THE MARKET MOVEMENTS:

On the basis of the market movements the option are divided into two types. They are:

CALL OPTION:

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A call option is bought by an investor when he seems that the stock price moves

upwards. A call option gives the holder of the option the right but not the obligation to buy an

asset by a certain date for a certain price.

The name of the company whose shares are to be bought.

The number of shares to be purchased.

The purchase price or the exercise price or the strike price of the shares to be brought.

The expiration date, the date on which the contract or the option expires.

PUT OPTION:

A put option is bought by an investor when he seems that the stock price moves

downwards. A put options gives the holder of the option right but not the obligation to sell and

asset by a certain date for a certain price.

The name of the company share to be sold.

The number of shares to be sole.

The selling price or the striking price.

The expiration date of the option.

III. ON THE BASIS OF EXERCISE OF OPTION:

On the basis of the exercising of the option, the options are classified into two categories.

AMERICAN OPTION:

American options are options that can be exercised at any time up to the expiration date, most

exchange-traded option are American.

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EUROPEAN OPTION:

European options are options that can be exercised only on the expiration date itself. European

options are easier to analyze than American options.

PAY-OFF PROFILE FOR BUYER OF A CALL OPTION

The pay-off of a buyer options depends on a spot price of a underlying asset. The following

graph shows the pay-off of buyer of a call option.

S - Strike price OTM Out of the money

SP- Premium/loss ATM At the money

E1 Spot Price 1 ITM In the money

E2 Spot price 2

SR Profit at spot price E1

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CASE1:- (Spot price>Strike Price)

As the spot price (E1) of the underlying asset is more than strike price (S). The buyer

gets profit of (SR), if price increases more than E1 then profit also increase more than SR.

CASE2:- (Spot price

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E2 Spot price 2


CASE1:- (Spot price>Strike Price)

As the spot price (E1) of the underlying asset is more than strike price (S). The seller

gets profit of (SR), if price increases more than E1 then profit also increase more than SR.

CASE2:- (Spot price

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The pay-off of the buyer of the option depends on the spot price of the underlying asset. The

following graph shows the pay-off of the buyer of put option.




E2 Spot price 2


CASE1:- (Spot priceStrike price)

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As a spot price (E2) of the underlying asset is more than strike price (s). The buyer gets

loss of (SP), if price goes more than E2 than the of buyer is limited to his premium (SP).

PAY-OFF PROFILE FOR SELLER OF A PUT OPTION

The pay-off of the seller of the option depends on the spot price of the underlying asset. The

following graph shows the pay-off of the buyer of put option.




E2 Spot price 2


CASE1:- (Spot price

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As the spot price (E1) of the underlying asset is more than strike price (S). The seller

gets the profit (SR), if price increases less than E1 then profit also increase more than (SR).

CASE2:- (Spot price>Strike price)

As a spot price (E2) of the underlying asset is more than strike price (s). The seller gets

loss of (SP), if price goes more than E2 than the Profit of seller is limited to his premium (SP).

FACTORS AFFECTING THE PRICE OF AN OPTION

STOCK PRICE:

The pay-ff from a call option is a amount by which the stock price exceeds the strike price.

Call options therefore become more valuable as the stock price increases and vice versa. The pay-off

from a put option is the amount; by which the strike price exceeds the stock price. Put options

therefore become more valuable as the stock price increases and vice versa.

STRIKE PRICE:

In case of a call, as a strike price increases, the stock price has to make a larger upward move

for the option to go in-the-money. Therefore, for a call, as the strike price increases option becomes

less valuable and as strike price decreases, option become more valuable.

TIME TO EXPIRATION:

Both put and call American options become more valuable as a time to expiration increases.

Volatility:

The volatility of a stock price is measured of uncertain about future stock price movements. As

volatility increases, the chance that the stock will do very well or very poor increases. The value of

both calls and puts therefore increase as volatility increase.

RISK-FREE INTEREST RATE:

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The put option price decline as the risk-free rate increases where as the prices of call always

increase as the risk-free interest rate increases.

DIVIDENDS:

Dividends have the effect of reducing the stock price on the x dividend rate. This has an

negative effect on the value of call options and a positive effect on the value of put options.

PRICING OPTIONS:

The black scholes formula for the price of European calls and puts on a non-dividend paying

stock are:

CALL OPTION:

PUT OPTION:

where

C = VALUE OF CALL OPTION

S = SPOT PRICE OF STOCK

N = NORMAL DISTRIBUTION

V = VOLATILITY

X = STRIKE PRICE

C = SN(D1) Xe -r t N(-D2)-

P = Xe-rt N(-D2)-SN(-D2)

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r = ANNUAL RISK FREE RETURN

t = CONTRACT CYCLE

Ln (S/X) + (r+v2/2)t

d1 = --------------------------

v t

d2 = d1 v t

OPTIONS TERMINOLOGY:

STRIKE PRICE:

The Price specified in the options contract is known as strike price or Exercise price.

OPTIONS PREMIUM:

Options Premium is the price paid by the options buyer to the option seller.

EXPIRATION DATE:

The date specified in the options contract is known as expiration date.

OUT-OF-THE-MONEY OPTION:

An out-of-the-money option is an option that would lead to negative cash flow if it is exercised

immediately.

IN-THE-MONEY OPTION:

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An In the money option is an option that would lead to positive cash inflow ti the holder if it

exercised immediately.

AT-THE-MONEY OPTION:

An at the money option is an option that would lead to Zero cash flow if it is exercised

immediately.

MONEYNESS PUT OPTIONS CALL OPTIONS

Out-of-the Money Spot Price>exercise Price Spot Price

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Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich

heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers

Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition

in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The

Exchange's pivotal and pre-eminent role in the development of the Indian capital market is

widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of

Persons (AOP), the Exchange is now a demutualised and corporatized entity incorporated under

the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatization and

Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).

With demutualization, the trading rights and ownership rights have been de-linked

effectively addressing concerns regarding perceived and real conflicts of interest. The Exchange

is professionally managed under the overall direction of the Board of Directors. The Board

comprises eminent professionals, representatives of Trading Members and the Managing

Director of the Exchange. The Exchange provides an efficient and transparent market for tradingin equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a

proprietary system of the Exchange and is BS 7799-2-2002 certified. The Surveillance and

clearing & settlement functions of the Exchange are ISO 9001:2000 certified

NSE

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The National Stock Exchange of India Limited has genesis in the report of the High

Powered Study Group on Establishment of New Stock Exchanges, which recommended

promotion of a National Stock Exchange by financial institutions (FIs) to provide access to

investors from all across the country on an equal footing. Based on the recommendations, NSE

was promoted by leading Financial Institutions at the behest of the Government of India and was

incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the

country.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act,

1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment

in June 1994. The Capital Market (Equities) segment commenced operations in November 1994

and operations in Derivatives segment commenced in June 2000.

OUR MISSION

NSE's mission is setting the agenda for change in the securities markets in India. The

NSE was set-up with the main objectives of. Establishing a nation-wide trading facility for

equities, debt instruments and hybrids, Ensuring equal access to investors all over the country

through an appropriate communication network, Providing a fair, efficient and transparent

securities market to investors using electronic trading systems, Enabling shorter settlement

cycles and book entry settlements systems, and

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MEETING THE CURRENT INTERNATIONAL STANDARDS OF

SECURITIES MARKETS.

The standards set by NSE in terms of market practices and technologies have become

industry benchmarks and are being emulated by other market participants. NSE is more than a

mere market facilitator. It's that force which is guiding the industry towards new horizons and

greater opportunities.

EQUITY SHARES

By investing in shares, investors basically buy the ownership right to the company. When

the company makes profits, shareholders receive their share of the profits in the form of

dividends. In addition, when company performs well and the future expectation from the

company is very high, the price of the companys shares goes up in the market. This allows

shareholders to sell shares at a profit, leading to capital gains.

Investors can invest in shares either through primary market offerings or in the secondary

market. The primary market has shown abnormal returns to investors who subscribed for the

public issue and were allotted shares.

STOCK EXCHANGE:

In a stock exchange a person who wishes to sell his security is called a seller, and a

person who is willing to buy the particular stock is called as the buyer. The rate of stock depends

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on the simple law of demand and supply. If the demand of shares of company x is greater than its

supply then its price of its security increases.

In Online Exchange the trading is done on a computer network. The sellers and buyers log on to

the network and propose their bids. The system is designed in such ways that at any given

instance, the buyers/sellers are bidding at the best prices.

The transaction cycle for purchasing and selling shares online is depicted below:

48

Client

Member/Broking firm.

Stock Exchange

(BSE / NSE)Member/Broking firm.

Client

Transaction cle

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COMPANY PROFILE

FIRST GLOBAL is a multinational firm of Indian origin, with operations spread all over

India and in major financial centers like London & New York. First Global is a composite

member of Bombay Stock Exchange Ltd. (BSE). National Stock Exchange of India Ltd. (NSE),

London Stock Exchange and NASDAQ.

First Global is an international, full-services securities house, servicing primarily an

institutional client base, across the US, UK, Continental Europe and India. It is also servicing

retails clients in India through a pan India network of branches.

First Global Stock broking Pvt. Ltd is registered with Securities and Exchange Board of

India and is a member of BSE AND NSE. It is also registered with SEBI as Portfolio Manager.

FG States, is a registered broker-dealer, member NASD/SIPC, with its principal office in New

York. First Global (UK) Ltd., the regulated by the Financial Services Authority (FSA), and is a

member of the London Stock Exchange. Through FG (UK) Ltd., we trade across UK & Europe,

in diverse markets like Finland, Spain, Germany, France, etc.

First Global employs some of the finest analytical minds in the business, with its people

having consummate skills in financial analysis, mathematics, statistics and accounting.

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Within the institutional set, First Global deals primarily with Hedge Funds, and devises

aggressive trading strategies for them, including long/short combinations.

First Global covers stocks on a fundamental and technical basis across major market\est.

like India the US and Europe. In addition to this, it tracks select commodities and major world

economies,. Nearly all major sectors like Consumers, Cyclical, Semiconductors, Software,

Networking. Biotech Automobiles and pharmaceuticals fall within the ambit of our coverage,

through our analysts, numbering over 20 presently and growing.

First Global prides itself only on one aspect its ability to continually make money through itsresearch, both Technical and Fundamental, for its clients.

What sets us apart is our consistent delivery of value to our clients portfolios we view

our success as a complete securities house, through the narrow prism of our clients portfolios. If

their portfolios do well as a result of our advice, we sleep well. Otherwise, we dont.

This is the reason why investors and money managers across the world value First Global highly

we are neutral, we are completely independent, we have no conflicts like Corporate Finance,

Proprietary trading etc., our research is arguably the best in the business (our track-record shows

it) and all put together, we help our clients make money.

THE POWER OF KNOWLEDGE PEDIGREE COUNTS

Indias only Internationally Ranked securities Firm First Global is the only Indian

brokerage house rated by Asia Money in Asias top 10 list of best International research houses,

as far back as 2000 and rated No.3 in Asia in the best buy/sell recommendation category.

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INDIANS BEST RESEARCH HOUSE

Our team of analyst research more than 150 Indian companies, apart from researching

most global companies like Intel, Microsoft, Vodafone etc. which also includes field research

for in-depth corporate and stock. No wonder, when it comes to making accurate

Investment decisions, our customers never go wrong. The Foreign Institutional Investors (FIIs)

Choice The worlds largest FIIs trust us with their investments, thus making us one of the largest

institutional brokerage houses in India. When we talk, People Listen Our views on stocks and

markets trigger major money flows at times giving us that leading edge to influence market

trends.

Indias Truly Global Securities Company We also have our presence in UK & US

through a network of fully functional offices in these regions already keeping us ahead in the

globalization race.

ROCK SOLID BALANCE SHEET

With an extremely high capital adequacy. First Global is one of the best capitalized

securities firm in India. In fact, we have a higher capital base than a number of foreign securities

firms operating in India.

THE POWER OF CONVENIENCE CUSTOMER IS THE KING

It takes accurate research, constant investment advice and timely action to make or save

money in the stock markets. Our internationally ranked research and advice comes as smooth as

silk so you can make the right investment moves at the right time.

CONVENIENCE TRADING OPTIONS

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We offer you multiple options for executing order on Equity and F&O segments as well

as Commodes. Customers can trade through a telephone call or personal visit to the nearest First

Global bran ch or can do online trading sitting at their homes or offices through e-trading

websites or can call up on our toll free number from anywhere in India,

ACCOUNT EXECUTIVE

At First Global, Account Executive suggests when to buy/sell, what to buy/sell and also

keeps track of customer portfolio which helps in making right investment decisions. The

Accounts Executives offer one window service & also keep customers updated on the latest news

& view.

DEMAT SERVICES

To offer our customers one stop service, we are also making an application for becoming

a Depository participant.

PRODUCTS OFFERED

Equity Trading

Derivative Trading

Portfolio Management Services

Commodity Trading

Fundamental Research Reports

Trading Research Reports

Mutual Fund Distribution

Investment in IPOs

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EQUITY TRADING

Too long, you have tried to navigate the stock market on your own. Too many times, you

have felt overwhelmed by the difficulty of making money consistently. Too many times, your

broker has let you down, giving in accurate, poorly researched and downright disastrous advice

well, not any mo re first global is here. Say good bye to helplessness. Nervousness and

insecurity. Say a big hallo to confidence, security and peace of mind. Now you have on your

side, Indias pre-eminent brokerage house

First global is an international securities house with memberships of the London stock

exchange, NASDAQ, the national stock exchange of India limited ,and the Bombay stock

exchange ltd. First global offers expert investment advice based on its rich experience in the

fundamental and technical research and its exposure to the markets world over. It has schemes

designed to suit every investor right from the corporate investors, HNIs, day traders, Non-

resident Indians, and small Individual investors.

FIRST GLOBAL OFFERS OFFLINE TRADING OFF- LINE TRADING

An Offline Securities Trading account offers you the convenience of trading from your

home, office and even while you are traveling through the telephone or through SMS. You have

the option of calling up any of our branches and place an order on phone or SMS or you can even

visit our branch personally to trade through your account.

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FIRST GLOBAL OFFLINE SECURITIES TRADING ACCOUNT GIVES

YOU THE ADVANTAGE OF:

Pan India network of branch offices.NSE and BSE on an integrated platform.

Trade through phone, or in person at branch or though the dedicated team of Relationship

managers. Access to internationally acclaimed buy/sell recommendations in person, though

phone, SMS, E-Mail, etc .and make the right investment decision. Moving money (pay-outs &

pay-ins of funds) easily though a zero balance account with the designated banks even through

the web.

An account executives keeping a track of your portfolio in the market and suggest

timely actins to help you make or save money. Integrated online and offline trading- first Global

does not segregate Internet Trading from its regular clients, it is at the absolute discretion of the

clients, it is at the absolute discretion of the client whether he want to deal online or offline.

DERIVATIVE TRADING FUTURES AND OPTIONS

FIRST GLOBAL is an International securities house with

memberships of the London Stock Exchange, NASDAQ, The National Stock Exchange of India

Ltd. And the Bombay Stock Exchange Ltd. First Global offers expert investment advice based on

its rich experiences in fundamental and technical research and its exposure to the markets world

right from the corporate, HNIs, Day traders, Non-resident Indians, and small individual

Investors.

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FIRST GLOBAL OFFERS ONLINE TRADING AS WELL OFFLINE

TRADING FACILITIES. ONLINE TRADING

The online trading offers you the convenience of trading from your home, office and

even while you are travelling with your laptop. In case you are not in a position to go online, you

have the option of calling up any of our branches and place an order on phone or you can even

visit our branch personally to trade though your account.

First Global Online Securities trading account gives you the power to: Trade via web,

phone, or in person at a branch. Get access to internationally acclaimed buy/sell

recommendations and make the right investment decision. Move money (pay-outs & pay-ins of

funds) easily through a zero balance account with the designated banks through the payment

gateway. NSE and BSE on an integrated platform.

OFF-LINE TRADING

An Offline Securities Trading account offers you the convenience of trading from your

home, office and even while you are travelling through the telephone or through SMS or you can

even visit our branch personally to trade through your account.

First Global Offline Securities trading account gives you the advantage of:

Pan India Network of Branch offices. NSE and BSE on an integrated platform.

Trade through phone, or in person at branch or through the dedicated team of Relationship

Managers. Access to internationally acclaimed buy/sell recommendations in person, through

Phone, SMS, E-Mail, etc. and make the right investment decision. Moving money (pay-outs &

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pay-ins of funds) easily through a zero balance account with the designated banks even through

the web. Moving securities easily through a depository account with First Global.

An account executive keeping a track of your portfolio in the market and suggest

timely actions to help you make or save money. Integrated online and offline trading-First Global

does not segregate Internet Trading clients from its offline trading clients. It is at the absolute

discretion of the client whether he wants to deal online or offline. Too long, you have tried to

navigate the stock market on your own. Too many times, you have felt over whelmed by the

difficulty of making money consistently. Too many times, your broker has let you down, giving

inaccurate, poorly researched and downright disastrous advice.

DEMAT ACCOUNT

Indian Stock markets have come a long way in the last 10 years. The share certificates

have been replaced with paperless- dematerialized shares. The Depository system in India has

linked the issuers, the transfers agents, the brokers, the stock exchanges and the clearing-houses

through one system Depositories 9NSDL 7 CDSL) and their participants. The depositories

facilitated the holding of securities in the dematerialized form and securities transactions are

processed by means of account transfers through the demit slips just like the money is transferred

with cherub. We are in the process of getting membership of CDSL and NSDL. Once we are

registered we shall be providing the following facilities. The first Depository account for every

customer will be opened free of cost along with the Securities trading account and we will be

charging a concessional rate for the annual charges. For any additional depository account, the

regular charges would be applicable. The securities trading & depository account opening form

may be downloaded from our site and can be submitted at any of our branches or alternatively

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you can contact us and our account opening executives will get in touch with you.In case of

Online Trading, the depository account is integrated with the Online trading accountant you can

operate your depository account online through First Global online trading module. For such

account First Global will charge only concessional depository charges.

In case of Offline trading, the depository account is opened along with securities

trading account and provides the convenience to the investor to trade with First Global and also

hold their security in an account managed by First Global. For such account First Global charges

very nominal fees. First Global also offers stand alone depository account which offers

professional depository participant services to investors from all its offices at very competitiveprice.Services offered to Depository account holders.

Online transaction facility for both NSDL AND CDSL through Internet. Access to

client information on Web. Online facility for depository accounts through the branch network.

Periodic depository statement for clients for information on their account status.

ABOUT COMPANY

It is MNC company in research department it takes place at 4th rank. In this branch there

are five employess. Both they work hard and they co-operate each other.

MISSION AND VALUES

To be the premier business development and resource partner to leading wealth

management firms. We foster business growth and client satisfaction by providing customized

solutions, exceptional support and award-winning service excellence.

FIRST GLOBAL VALUES

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INTEGRITY:

We understand that integrity is fundamental to our organization. Our business and

reputation are built on acting in the best interests of the company, our employees, our advisors

and their clients.

OWNERSHIP:

We understand that to best serve our advisors and their clients, we must be reliable, be

dependable and take ownership of our role in creating a mutually successful partnership.

EDUCATION:

We are the recognized knowledge leader for wealth management firms. We are

committed to providing a learning environment for our advisors and our employees.

TEAMWORK:

We understand that cooperation applies to all levels of our company and across all

departments. We value those who listen, show interest and seek mutual collaboration. Our shared

goal is to find the best way to assist, guide and support our advisors and their clients.

RESOURCEFULNESS:

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We collectively use our expertise, experience, judgment, creativity and ingenuity to solve

problems and meet challenges in order to help wealth management firms grow while serving

their clients.

VERSATILITY:

We understand that we must be able and willing to adjust to any situation in support of

our advisors' needs, both as a firm and as individuals.

RELATIONSHIPS:

Building strong relationships is important to us. We value teamwork and enjoy partnering

with people who are passionate and enthusiastic about their work.

INITIATIVE:

We cultivate those who have the courage to create, make decisions and act on their

informed intuition to adapt their business practices without fear of failure. We value ingenuity

and inspired thinking

Marketing is the first step in building a successful financial services practice. Through

effective marketing you create awareness among your clients of the myriad of wealth

management services that you offer. 1st Global offers a comprehensive marketing calendar as

well as a variety of marketing materials available to use with your clients to help grow your

business.

DIRECT MAIL & NEWSLETTERS

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1st Globals mailing programs are designed to help you generate a continuous schedule

of financial services appointments with your clients. The program combines direct mail pieces

with supplemental marketing materials to help raise client awareness of your total wealth

management service offerings and invite them to your office for one-on-one meetings

MARKETING FIELD GUIDE

1st Global's Marketing Field Guide provides advisors with a comprehensive marketing

plan. The field guide incorporates a variety of mailing materials, client seminars, focused target

follow up lists and effective scripts for use by the advisor and staff. It is designed to promote an

advisor's unique ability to provide comprehensive holistic wealth management services.

Detailed plans are provided for each month including timelines for setup, deployment,

follow-up, and how to calculate the effectiveness of each plan's marketing component.

FINANCIAL SOLUTIONS

At 1st Global, the cornerstone of our corporate philosophy is the belief in comprehensive

wealth management, a holistic approach to financial services. Following this model, you do more

for your clients by understanding how all the pieces of their financial puzzle fit and work

together. This philosophy is symbolized by the Method 10, which describes the ten key areas

of wealth management that encompass comprehensive financial services.

To find out more on Method 10 or on the image to the left. As an independent

advisor partnering with 1st Global, you have the freedom to choose the right solutions for your

clients without pressure to promote or push proprietary products. 1st Global provides access to a

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large number of investment companies. With this flexibility, you are able to offer your clients a

full range of financial services, including

SECURITIES BROKERAGE SERVICES1st Global Capital Corp. offers wide-ranging access to information, a diverse portfolio of

financial products, premium services and advanced technology that enables advisors to meet

each unique client need. Securities brokerage services include:

Comprehensive access to financial products: stocks, bonds, CDs, mutual funds and

variable annuities

Consolidated client statements and year-end tax reports that are simple and easy to

understand

Brokerage account VIP privileges, including unlimited check writing, VISA platinum

debit/ATM cards, and automatic investment features

Online access for clients to view their brokerage accounts

World-class compliance support

Dedication to excellence in customer service

INSURANCE SERVICES

As an integral and often overlooked part of a comprehensive financial plan, insurance

solutions address many individual and business needs such as:

Asset protection

Business succession

Estate planning

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Non-qualified retirement strategies

Disability

Long-term care

1st Global Insurance Services offers access to over 80 different insurance companies so you

can select from a variety of solutions for your clients various and specific needs

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ICICI BANK

ANALYSIS

The analysis is carried out from 27-12-2008to 31-01-2009 i.e. around 5 weeks.

OVERVIEW:

ICICI Bank is India's second-largest bank with total assets of Rs. 3,446.58 billion (US$

79 billion) at March 31, 2007 and profit after tax of Rs. 31.10 billion for fiscal 2007. ICICI Bank

is the most valuable bank in India in terms of market capitalization and is ranked third amongst

all the companies listed on the Indian stock exchanges in terms of free float market

capitalisation*. The Bank has a network of about 950 branches and 3,300 ATMs in India and

presence in 17 countries. ICICI Bank offers a wide range of banking products and financial

services to corporate and retail customers through a variety of delivery channels and through its

specialised subsidiaries and affiliates in the areas of investment banking, life and non-life

insurance, venture capital and asset management. The Bank currently has subsidiaries in the

United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka

and Dubai International Finance Centre and representative offices in the United States, United

Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK

subsidiary has established a branch in Belgium.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the

National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are

listed on the New York Stock Exchange (NYSE).

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HISTORY:

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial

institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was

reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in

the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of

Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by

ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the

initiative of the World Bank, the Government of India and representatives of Indian industry.

The principal objective was to create a development financial institution for providing medium-

term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its

business from a development financial institution offering only project finance to a diversified

financial services group offering a wide variety of products and services, both directly and

through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first

Indian company and the first bank or financial institution from non-Japan Asia to be listed on the

NYSE.

BOARD MEMBERS

1. Mr. N. Vaghul, Chairman

2. Mr. Sridar Iyengar

3. Mr. Lakshmi N. Mittal 4. Mr. Narendra Murkumbi

5. Mr. Anupam Puri

6. Mr. Arun Ramanathan

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7. Mr. M.K. Sharma

8. Mr. P.M. Sinha

9. Prof. Marti G. Subrahmanyam

10. Mr. T.S. Vijayan

11. Mr. V. Prem Watsa

12. Mr. K.V. Kamath, Managing Director & CEO

13. Ms. Chanda Kochhar, Joint Managing Director &

Chief Financial Officer

INVESTOR RELATIONS:

ICICI Bank disseminates information on its operations and initiatives on a regular basis.

The ICICI Bank website serves as a key investor awareness facility, allowing stakeholders to

access information on ICICI Bank at their convenience. ICICI Bank's dedicated investor relations

personnel play a proactive role in disseminating information to both analysts and investors and

respond to specific queries.

PRICES OF ICICI BANK IN FUTURE MARKET.

FIRST WEEK.

DATE OPEN HIGH LOW CLOSE

27-12-2007 1165 1210.05 1163 1205.528-12-2007 1202 1235 1200 122731-12-2007 1240 1288 1237 128201-01-2008 1302.5 1352.05 1301 134702-01-2008 1339.05 1322.5 1248 1248

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1050

1100

1150

1200

1250

1300

1350

1400

OPEN HIGH LOW CLOSE

INTERPRETATION OF FIRST WEEK GRAPH:

Open value = 1165

High value = 1352.05

Low value = 1163

Close value = 1248

CALCULATION OF B.E.P. :

B.E.P = High Value + Low Value / 2

= 1352.05+1163/2

= 1257.52

SECOND WEEK:


03-01-2008 1238.5 1285 1233 1238.5

04-01-2008 1240 1302.2 1238 1287.5507-01-2008 1322.05 1394.25 1322.05 1394.2508-01-2008 1392.5 1410 1384.05 138409-01-2008 1388.5 1398 1360 1362.7

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1100

1150

1200

1250

1300

1350

1400

1450

OPEN HIGH LOW CLOSE

INTERPRETATION OF SECOND WEEK GRAPH:

Open value = 1238.5

High value = 1410

Low value = 1233

Close value = 1362.7



= 1410 + 1233 / 2

= 1321.50

THIRD WEEK:


10-01-2008 1370.65 1420 1370 1407

11-01-2008 1412 1452 1396 1435

14-01-2008 1448 1455 1429 1439

15-01-2008 1442 1474 1435 174116-01-2008 1468 1469 1459 1460

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1300

1320

1340

1360

1380

1400

1420

1440

1460

1480

1500

OPEN HIGH LOW CLOSE

INTERPRETATION OF THIRD WEEK GRAPH:

Open value = 1370.65High value = 1474

Low value = 1370

Close value = 1460



= 1474 + 1370/ 2

= 1422

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FOURTH WEEK:


17-01-2008 1432 1446 1430 1427

18-01-2008 1422.5 1429 1389 1392.221-01-2008 1368 1369 1341 1340.722-01-2008 1335.01 1362 1322.05 136023-01-2008 1347 1406 1347 1387

1260

1280

1300

1320

1340

1360

1380

1400

1420

1440

1460

OPEN HIGH LOW CLOSE

INTERPRETATION OF FOURTH WEEK GRAPH:

Open value = 1432

High value = 1446

Low value = 1322.05

Close value = 1387



= 1446 + 1322.05/ 2

= 1384.02

FIFTH WEEK:


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24-01-2008 1380 1405 1372.5 138825-01-2008 1385 1420 1382.1 140528-01-2008 1388 1392 1246 125029-01-2008 1239.85 1286 1201.10 1277.3030-01-2008 1299 1299.90 1191.10 1223.85

31-01-2008 1244 1224 1167 1187.40

0

200

400

600

800

1000

1200

1400

1600

OPEN HIGH LOW CLOSE

INTERPRETATION OF FIFTH WEEK GRAPH:

Open value = 1380

High value = 1420

Low value = 1167




= 1420 + 1167/ 2

= 1293.5

RELIANCE COMMUNICATION

OVERVIEW:

The Late Dhirubhai Ambani dreamt of a digital India an India where the common man

would have access to affordable means of information and communication. Dhirubhai, who

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single-handedly built Indias largest private sector company virtually from scratch, had stated as

early as 1999: Make the tools of information and communication available to people at an

affordable cost. They will overcome the handicaps of illiteracy and lack of mobility.

It was with this belief in mind that Reliance Communications (formerly Reliance Info comm)

started laying 60,000 route kilometers of a pan-India fiber optic backbone. This backbone was

commissioned on 28 December 2002, the auspicious occasion of Dhirubhais 70th birthday,

though sadly after his unexpected demise on 6 July 2002.

Reliance Communications has a reliable, high-capacity, integrated (both wireless and

wire line) and convergent (voice, data and video) digital network. It is capable of delivering a

range of services spanning the entire info comm (information and communication) value chain,

including infrastructure and services for enterprises as well as individuals, applications, and

consulting.

Today, Reliance Communications is revolutionizing the way India communicates and

networks, truly bringing about a new way of life.

BOARD OF DIRECTORS:

Shri Anil D. Ambani - Chairman

Prof. J Ramachandran

Shri S.P. Talwar

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Shri Deepak Shourie

Shri A.K.Purwar

BUSINESS:

Reliance Communications is the flagship company of the Anil Dhirubhai Ambani Group

(ADAG) of companies. Listed on the National Stock Exchange and the Bombay Stock

Exchange, it is Indias leading integrated telecommunication company with over 40 million

customers.

Our business encompasses a complete range of telecom services covering mobile and

fixed line telephony. It includes broadband, national and international long distance services and

data services along with an exhaustive range of value-added services and applications. Our

constant endeavour is to achieve customer delight by enhancing the productivity of the

enterprises and individuals we serve.

Reliance Mobile (formerly Reliance India Mobile), launched on 28 December 2002,

coinciding with the joyous occasion of the late Dhirubhai Ambanis 70th birthday, was among

the initial initiatives of Reliance Communications. It marked the auspicious beginning of

Dhirubhais dream of ushering in a digital revolution in India. Today, we can proudly claim that

we were instrumental in harnessing the true power of information and communication, by

bestowing it in the hands of the common man at affordable rates.

We Endeavour to further extend our efforts beyond the traditional value chain by

developing and deploying complete telecom solutions for the entire spectrum of Society.

VISION:

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We will leverage our strengths to execute complex global-scale projects to facilitate

leading-edge information and communication services affordable to all individual consumers and

businesses in India. We will offer unparalleled value to create customer delight and enhance

business productivity. We will also generate value for our capabilities beyond Indian borders and

enable millions of India's knowledge workers to deliver their services globally.

ANALYSIS

PRICES OF RELIANCE COMMUNICATION IN FUTURE MARKET.

FIRST WEEK:


27-12-2007 792 796.1 775.3 778.528-12-2007 782.1 799 791.1 795

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31-12-2007 782.1 784 771 775.601-01-2008 770 790.2 781.25 78302-01-2008 778.06 781.45 753 760

730

740

750

760

770

780

790

800

810

OPEN HIGH LOW CLOSE

INTERPRETATION OF FIRST WEEK GRAPH:

Open value = 792

High value = 799

Low value = 753

Close value = 760

CALCULATION OF BREAK EVEN POINT(BEP):

BEP = High Value + Low Value/2

= 799 + 753 / 2

= 776

SECOND WEEK:


03-01-2008 765 772.6 740.7 749.5

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04-01-2008 742 776.4 742 768.4507-01-2008 795 810 790 81008-01-2008 818 823 809 81209-01-2008 820 849 826 835

680

700

720

740

760

780

800

820

840

860

OPEN HIGH LOW CLOSE

INTERPRETATION OF SECOND WEEK GRAPH:

Open value = 765

High value = 849

Low value = 740.7

Close value = 835



= 849 + 740.7 / 2

= 794.85

THIRD WEEK:


10-01-2008 842 836 828 83111-01-2008 824 824 817 82214-01-2008 801 804 791.6 79215-01-2008 793 799 787 78816-01-2008 821 826 811 817

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750

760

770

780790

800

810

820

830

840

850

OPEN HIGH LOW CLOSE

INTERPRETATION OF THIRD WEEK GRAPH:

Open value = 842

High value = 836

Low value = 787

Close value = 817

CALCULATION OF BREAK EVEN POINT (BEP):


= 836 + 787 / 2

= 811.5

FOURTH WEEK:


17-01-2008 799 809 802 805

18-01-2008 792 799.6 782 788

21-01-2008 772 769 738 744

22-01-2008 741 738 722 729

23-01-2008 729 739 726 732

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660

680

700

720

740

760

780

800

820

OPEN HIGH LOW CLOSE

Interpretation of fourth week graph:

Open value = 799

High value = 809

Low value = 722

Close value = 732

Calculation of Break Even Point(BEP):


= 809 + 722 / 2

= 765.5

FIFTH WEEK:


24-01-2008 730 739 731 73525-01-2008 740 749 721 72628-01-2008 732 738 643 645

29-01-2008 650 659 612.9 645.4030-01-2008 650 659.70 636.50 642.831-01-2008 644.80 645 607.10 611.90

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0

1 0 0

2 0 0

3 0 0

4 0 0

5 0 0

6 0 0

7 0 0

8 0 0

O PEN HIG H L O W CL O S E

INTERPRETATION OF FIFTH WEEK GRAPH:

Open value = 730

High value = 749

Low value = 607.10




= 749 + 607.10 / 2

= 678.05

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NAM OF THE COMPANY: ICICI BANK

LOT SIZE: 175

DATE OPEN HIGH LOW CLOSE27-12-2007 1165 1210.05 1163 12.05.528-12-2007 1202 1235 1200 122731-12-2007 1240 1288 1237 128201-01-2008 1302.5 1352.05 1301 134702-01-2008 1339.05 1322.5 1248 124803-01-2008 1238.5 1285 1233 1238.504-01-2008 1240 1302.2 1238 1287.5507-01-2008 1322.05 1394.25 1322.05 1394.2508-01-2008 1392.5 1410 1384.05 1384

09-01-2008 1388.5 1398 1360 1362.710-01-2008 1370.65 1420 1370 140711-01-2008 1412 1452 1396 143514-01-2008 1448 1455 1429 143915-01-2008 1442 1474 1435 174116-01-2008 1468 1469 1459 146017-01-2008 1432 1446 1430 1427

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18-01-2008 1422.5 1429 1389 1392.221-01-2008 1368 1369 1341 134.722-01-2008 1335.01 1362 1322.05 136023-01-2008 1347 1406 1347 138724-01-2008 1380 1405 1372.5 138825-01-2008 1385 1420 1382.1 140528-01-2008 1388 1392 1246 125029-01-2008 1239.85 1286 1201.10 1277.3030-01-2008 1299 1299.90 1191.10 1223.8531-01-2008 1244 1224 1167 1187.40

INTERPRETATION OF JANUARY MONTH FUTURE MARKET OF ICICI

BANK:

OPEN VALUE = 1165

HIGH VALUE = 1474

LOW VALUE = 1163

80

0

200

400

600

800

1000

1200

1400

1600

OPEN HIGH LOW CLOSE

BEP

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CLOSE VALUE = 1187.40

CALCULATION OF BREAK EVEN POINT (B.E.P):-

B.E.P. = HIGH VALUE + LOW VALUE/ 2

= 1474 + 1163 / 2

= 1318.5

NAME OF THE COMPANY: RELIANCE COMMUNICATIONS

LOT SIZE:350


27-12-2007 792 796.1 775.3 778.528-12-2007 782.1 799 791.1 79531-12-2007 782.1 784 771 775.601-01-2008 770 790.2 781.25 78302-01-2008 778.06 781.45 753 76003-01-2008 765 772.6 740.7 749.504-01-2008 742 776.4 742 768.4507-01-2008 795 810 790 81008-01-2008 818 823 809 81209-01-2008 820 849 826 83510-01-2008 842 836 828 83111-01-2008 824 824 817 82214-01-2008 801 804 791.6 79215-01-2008 793 799 787 78816-01-2008 821 826 811 81717-01-2008 799 809 802 80518-01-2008 792 799.6 782 78821-01-2008 772 769 738 74422-01-2008 741 738 722 729

23-01-2008 729 739 726 73224-01-2008 730 739 731 73525-01-2008 740 749 721 72628-01-2008 732 738 643 64529-01-2008 650 659 612.9 645.4030-01-2008 650 659.70 636.50 642.831-01-2008 644.80 645 607 611.90

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0

1 0 0

2 0 0

3 0 0

4 0 0

5 0 0

6 0 0

7 0 0

8 0 0

9 0 0

O P E N H IG H L O W C L O S E

INTERPRETATION OF JANUARY MONTH FUTURE MARKET OF

RELIANCE COMMUNICATION :-

OPEN VALUE = 792

HIGH VALUE = 849

LOW VALUE = 607

CLOSE VALUE = 611.90

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CALCULATION OF BREAK EVEN POINT (B.E.P):-

B.E.P. = HIGH VALUE + LOW VALUE/ 2

= 849 + 607 / 2

= 728

SUMMARY

Derivatives are mostly used for hedging purpose

Derivatives market is an innovation to cash market. Approximately the average daily

turnover of the NSE derivative segments reaches to the equal stage of cash market.

In cash market the profit/loss of the investor depend the market price of the underlying

asset. The investor may incur huge profits or he may incur huge loss. But in derivatives

segment the investor the investor enjoys huge profits with limited downside.

In cash market the investor has to pay the total money, but in derivatives the investor has

to pay premiums or margins, which are some percentage of total money.

In derivative segment the profit/loss of the option writer is purely depend on the

fluctuations of the underlying asset.

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SUGGESTIONS

The derivative market is newly started in India and it is not known by every investor, so

SEBI has to take steps to

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