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Thursday, 30 June 2011

FUTURES MARKET

FUTURES MARKET – the future less market

Discipline is the only tool which aids you to persist with your dreams. This is true to any phenomenon and so money market is not just an exception.

Let me torch you on FUTURES MARKET in this post of mine. Futures & Options are twin children which act as complimentary tools to edge against cash market holdings. But then where have we bothered about pure theories and it is a known fact that once we learn alphabets, we bet, we qualify ourselves as an Oncology Specialist and start prescribing medicines. It is absolutely true and by denying you are fooling yourselves not me. 

OPTION is just an ICE CREAM which melts since getting exposed to the atmosphere. In Option Market there is something like time value which gets deteriorated as it progress towards the expiry. After knowing the risk attached to it, if you wish to taste the liquor, place your fingers and check its liquidity, open interest position, put-call ratio and do trade strictly with a time frame of maximum two days. Why do I say so? The risk attached to option is that you don’t own a single share and it is just horse-trading your hard earned money.

 
Future market arrives with an assigned lot size for each and every specific counter and you should possess sufficient fund as Margin money to trade in Futures. This is known to everyone but to play it safe is an unexplored question. Do ensure you have double the margin money in your account to safeguard against any inverse reaction of stock market against your expectation. A better strategy would be to hedge your futures month on month, to leverage your position and take a call after watching the market and script movement carefully. This might seem a difficult task, so better use “OPTIONS” as the edging tool. Truly options are only pure hedging tools so if you trade in futures, ensure you take a contra position in option market just against your expectation because this would prevent you from windfall loss. Futures market is roughly a market which doesn’t have a future of its own and then where from it will guarantee your future??



What we want is to hatch Gold in a single day/week/month? But then it is you who get lost chasing your unknown dream in stock market whereas market has remained still. Stock Market was there during the Great Depression of 1929, it was there during the massive bull run of 2005-07 and it is there even after the Recent Recession of 2008-2009. Men do come, try, vanish and go. But market is firmly placed where it is. Now the decision is yours!!!!????

3 comments:

  1. future mkt highly volatille.But keep double the magin reqd.The strategy of stoploss will not work because your loss will never stop.

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  2. Very Well written :) Nice to find your Blog!

    ReplyDelete