An option trading is very different then trading into equities. One important difference between equities and options is that equities give you a small piece of ownership in the company, while options are just contracts that give you the right to buy or sell the stock at a specific price (Strike Price) on a specific …
Ploughing back profits is the exact opposite of paying out dividends. When a company makes net profits, a portion of the net profits are paid out to the shareholders in the form of dividends. After the dividends are paid, the residual profits are transferred to the reserves and surplus in the balance sheet of the …
If you have seen investors getting confused between risk and uncertainty then they are not the only ones. Most people are unable to appreciate the difference between risk and uncertainty. When you invest in the markets or in any other asset class, there is an element of risk and also an element of uncertainty. In …
What should I use; fundamentals or technicals? This is a question that has plagued investors for a long time and there are still no clear answers. A lot of investors tend to look at fundamentals as a key to long term investing and technicals as a way to quick-fix trading. While the understanding is broadly …
You general memories of the volatility index VIX must be of the sharp rise in the VIX during times of extremely volatility or global geopolitical crisis. This is a trend we have seen quite often in the Indian markets. The Volatility Index (VIX) is also popularly referred to as the Fear Index as it shows …
One of the most popular measures of valuations in the stock markets is the P/E ratio or the Price / Earnings ratio. It essentially measures what the market is willing to pay for every rupee earned by the company. For example, if the P/E of a company is 15 then it means that the market …
Have you ever wondered why is it that companies with high ROE tend to have higher P/E Ratios? Take the case of sectors like FMCG and to a lesser extent IT and pharma. While IT and pharma have seen their ROE under pressure in the last few quarters, they still enjoy the highest levels of …
If you have been in the derivatives market for some time, you would have surely heard the now famous story of how Nick Leeson brought down Barings Bank of London. Leeson, who was heading the Barings trading desk out of Singapore, had heavily sold strangles on the Nikkei (Japanese index). Essentially, he had sold higher …
Today, non-delivery based trading on the stock exchanges ranges from 70-75% on a daily basis. This is largely driven by intraday traders who look to play more on the short term price volatility of the stock. For a trader to be successful in intraday trading there are 4 basic pre-conditions. Firstly, the trader needs to …
Do you know the basic difference between futures and forwards? Futures represent an improvement over forwards in two ways. Firstly, futures are traded on a recognized stock exchange and hence are extremely liquid. More importantly, future are standardized while forwards are not standardized, which is why they are often referred to as over the counter …
