Frequently Asked Questions on Derivatives Trading
At NSE
NATIONAL STOCK EXCHANGE OF INDIA LIMITED
Derivatives Trading
QUESTIONS & ANSWERS
1.
What are derivatives?
Derivatives, such as futures or options, are financial contracts which derive their value from a spot price, which is called the
“underlying”. For example, wheat farmers may wish to enter into a contract to sell their harvest at a future date to eliminate the risk of a change in prices by that date. Such a transaction would take place through a forward or futures market. This market is the
“derivatives market”, and the prices of this market would be driven by the spot market price of wheat which is the “underlying”. The term “contracts” is often applied
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All the futures contracts are settled in cash at NSE.
Options : An Option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and at a stated price. While a buyer of an option pays the premium and buys the right to exercise his option, the writer of an option is the one who receives the option premium and therefore obliged to sell/buy the asset if the buyer exercises it on him.
Options are of two types - Calls and Puts options :
“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 given future date.
“Puts” give the buyer the right, but not the obligation to sell a given quantity of underlying asset at a given price on or before a given future date. All the options contracts are settled in cash.
Further the Options are classified based on type of exercise. At present the Exercise style can be European or American.
American Option - American options are options contracts that can be exercised at any time upto the expiration date. Options on individual securities available at NSE are American type of options.
European Options - European options are options that can be exercised only on the expiration
a.)When Cut and Chop entered into a contract to sell the business premises on 1 May
According to ASC 410-20-25-10, instances may occur in which insufficient information to estimate the fair value of an asset retirement obligation is available. For example, if an asset has an indeterminate useful life, sufficient information to estimate a range of potential settlement dates for the obligation might not be available. In such cases, the liability would be initially recognized in the period in which sufficient information exists to estimate a range of
a. Information available before the financial statements are issued or are available to be issued indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. Date of the financial statements means the end of the most recent accounting period for which financial statements are being presented. It is implicit in this condition that it must be probable that one or more future events
(A) if such contract or interest therein has a basis for determining gain or loss in the hands of a transferee determined in whole or in part by reference to such basis of such contract or interest therein in the hands of the transferor,
Section 3.2 Authority. The Seller has full corporate power, authority and legal right to execute and deliver, and to perform its obligations under this Agreement and to consummate the transactions contemplated hereunder, and has taken all necessary action to authorize the purchase hereunder on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly executed by the Seller and constitutes a legal, valid, and binding obligation of the Seller enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or other similar laws from time to time in effect, which affect the enforcement of creditors' rights in general and by general principles of equity regardless of whether such enforceability is considered in
CA s596AB prohibits a person from entering into agreements with the intention of, or with intentions that include the intention of:
u. P2) This implies that the seller who intends to enter a contract with a customer has a duty to disclose exactly what the customer is buying and what the terms of the sale are.
(2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of any commodity for future delivery, or any option on a commodity for future delivery, or any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o (d));
Presence or absence of a fixed maturity date: Although fixed maturity dates existed, postponing maturity suggests a lack of intent to require repayment. This factor supports the treatment of the advances as equity because the directors did not intend to request repayment and continually extended the maturity dates, never enforcing them.
a. Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. Date of the financial statements means the end of the most recent accounting period for which financial statements are being presented. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss.
There are many ideas about the correct basis for contractual obligation. They include promise, consideration, and cause. All jurisdictions follow at least one. In Thomas E. Davitt’s The Elements of Law, the author articulates a very credible argument for the basis for contractual obligation being one of those named above. Davitt simplifies the arguments for all of these and names one correct basis: the promise itself. Generally Thomas E. Davitt, S.J., The Elements of Law, 272 (1959). This paper will argue in favor of Davitt’s writings. The basis for contractual obligation is the promise itself. In order to effectively argue in favor of one basis over the possible others, it is necessary to discuss and rule out the others.
Briefly describe the current state of Next Day Air Service's office automation, system integration, and networking. Begin by explaining how each department uses information technology, what hardware it uses, and what functions currently are automated. Also assess which department is most in need of a network.
THIS VEHICLE SALES AGREEMENT is made this day of _, 20 _, by and among _______ ________________ (hereinafter known as "Seller") and ___ _ __________, (hereinafter known as "Buyer"). Buyer and Seller shall collectively be known herein as "the Parties".
SAB 104 lays down the following conditions that should all be fulfilled to enable revenue recognition in cases on non-delivery of goods: (1) The risks of ownership need to have been transferred to the purchasers, (2) The customers have made commitments, preferably written, to procure the goods, (3) The purchasers call for the ‘bill and hold’ transactions, (4) The buyers should be
terms of time can be managed in this scenario, as there is no specific delivery