Reblog: 5 ways to Make money in Futures & Options

Derivatives or Futures and Options are leveraged instruments to trade in the stock market. There are broadly 3 groups of people who use derivatives-

  1. Short term traders for making quick buck– most of them want to make a quick buck. Leveraged trading means, you can potentially make 100% returns from a 10% movement in the stock. 100% returns from a 10% move looks lucrative! The only issue is you can lose bigger amount if stock moves in opposite direction
  2. Long term stock investors for hedging portfolio- these category of people may use derivatives for long term hedging of their portfolio or making some extra return on their stock holdings. They mainly use options. And, the idea is to hedge the portfolio, and not make great returns from short term trading
  3. Long term investors who buy special long term options with a long term view- These include big investors including Warren Buffett and many others buying warrants, convertible debentures, long term calls etc.

Majority of people who trade in derivatives come in the first category. More than 95% of traders lose money. Mostly these are young people who get job in corporate companies, open a new demat account and want to make some quick money. They are replaced by new traders (as new graduates complete college and get job). The cycle repeats.

Here is an interview of Nithin Kamath where he mentions –

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Reblog: How safe is my broker?

Investors are often cautioned about investment risk, market risk, etc. by their advisors and brokers. Investing in a particular asset or any equity share in particular, can give back good returns or, on the contrary, even wipe out the basic value of money that you have put in. But did anyone tell you that the broker himself can also cheat you? He can go bankrupt or be a fraud?
Not only have the small ones, but big investment firms have also given their clients a nightmare. If viewed from the brokerage company’s perspective, it is doing a business purely. Profits are their primary motto. And your money, except from the brokerage charges, is a secondary element for them.
So, how can a stock broker deceive you?

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Reblog: Who makes Money Consistently in Day Trading?

This is a blog post by Mastermind, Nooresh. The original post appears here.

One can understand the obsession for Day Trading by just doing a Search on Google for the Words like  – Day Trading, Intraday Trading Tips, Day Trading Tips and the number of sites that pop up catering to it.

BSE, an exchange in India, mentions itself to be the fastest exchange in the world.

Nifty 50 index is world’s most actively traded derivatives contract: Survey – Link

Majority of brokers have 90 – 96% of their business coming from Derivatives

There are a bunch of Discount Brokers with Rs. 0-20 as broking change.

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