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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A lull before the storm


We live in this age of information overload or rather a deluge. Here are some interesting statistics of what one deals with on a daily basis:

  • 90% of all the data in the world has been generated over the last two years
  • Indians spend 5 hours a day consuming content in one form or other (National Book Trust)
  • “Between the dawn of civilization through 2003 about 5 exabytes of information was created. Now, that much information created every 2 days” (Eric Schmidt – former Google CEO)
  • 28% of office workers time is spent dealing with emails
  • The typical Internet user is exposed to 1,707 banner ads per month

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