American Option

American Option

American Option

Options can be called a versatile financial product. Options are a type of derivative that depends on the value of the underlying asset. The underlying asset can be a commodity, currency, stock, index, or any other security. Now, the option contract is a financial contract that gives the investor an opportunity to buy or sell an asset at a pre-determined price at a specific date. (more…)
Settlement of Future Contract

Settlement of Futures Contract – Complete Understanding

Settlement of Futures Contract

Derivatives settlement is a business process where the contract is executed on a pre-decided date and at a pre-determined price. On the settlement date, a person having a short position either deliver the actual underlying asset which is called as Physical Delivery for which the derivative contract has been undertaken. The other method is the Cash settlement method in which the cash position is transferred from the buyer to the seller on the settlement date. (more…)
Which one is better, an MBA in finance, or a CFA?

Which one is better, an MBA in finance or a CFA?

Which one is better, an MBA in finance, or a CFA?

Pursuing an MBA in finance or a CFA largely depends upon the area of interest: MBA Master’s in Business Administration gives an introduction to various areas of business like marketing, human resources, operations management, IT, and Finance. The MBA degree works not only in the business sector but in the government sector, public sector, and private businesses too. Pursuing an MBA is about learning various core subjects as they are applicable in various fields. (more…)
Salary After CFA

Salary After CFA

Salary After CFA

In the long term, your salary would depend on how you perform in a particular role. A lot depends on which industry and the role you want to pursue your career as well as where in the world you intend to work. The CFA has a strong reputation for financial knowledge, skill, and determination, stronger than university degrees. (more…)
Are there any benefits of doing CFA after CA?

Are there any benefits of doing CFA after CA?

Are there any benefits of doing CFA after CA?

Yes, there are some undeniable benefits: Companies will hire you based on your double degree because they will assume that you know a lot. There are many people in many different companies who think alike. Your value will increase after you quit because you now have, experience. You can now demand a higher salary. You can also ask for a pay hike once you have experience. (more…)
What are Forward Contracts

What are Forward Contracts – Full Details

What is Forward Contracts? A forward contract is an agreement to buy or sell an asset at a certain price on a certain date in the future. Since the forward contract implies that underlying assets would be delivered on the specified date in the future which is considered as a type of derivative. These contracts are mostly traded in the over-the-counter market and are easily customized. For Example- Ram takes the long position agreeing to purchase the underlying asset at a future date for a specified price while Rohan takes the short position in the market agreeing to sell the asset on the same date for that same price. (more…)
Mutual Funds

What are Mutual Funds?

What are Mutual Funds? Even a small organism like ant eat some part of food, and then keep a part for future. Similarly, we must also use of what we earn but also save a part of it for future. But what if this saved part lose value over the time, like 100 rupees saved today will not remain 100 after Two years, it will lose its value due to inflation effect. So, first step always will be to save a part, but then another step after that we will have to keep that in place where it can give you good return value over the time. (more…)
Butterfly Options Trading Strategy

Butterfly Options Trading Strategy

What is Butterfly Options Trading Strategy? Butterfly Option is a neutral trading option with limited risk and limited profit potential. It is the combination of the various bull and bears spreads. It is used when the trader believes that stocks underlying price will change very little over its lifetime. The butterfly option can be traded either upside or downside. Components of Butterfly Option The butterfly options strategy is a three-staged model the body (the middle position shaped as inverted alphabet V)and 2 wings (the 2 opposite spread). (more…)
What is Principal Protected Notes?

What is Principal Protected Notes?

Principal Protected Notes (PPNs):
  • Appeals to the conservative investors.
  • The return earned by the investor depends on the performance of a stock, a stock index, or other risky assets, but the initial principal amount invested is not at risk.
Example:
  • Suppose that the 3-year interest rate is 6% with continuous compounding. This means that 1,000e-006x3 = $835.27 will grow to $1,000 in 3 years.
  • The difference between $1,000 and $835.27 is $164.73. Suppose that a stock portfolio is worth $1,000 and provides a dividend yield of 1.5% per annum. Suppose further that a 3-year at-the-money European call option on the stock portfolio can be purchased for less than $164.73.
  • A bank can offer clients a $1,000 investment opportunity consisting of:
  1. A 3-year zero-coupon bond with a principal of $1,000
  2. A 3-year at-the-money European call option on the stock portfolio
  • If the value of the portfolio increases the investor gets whatever $1,000 invested in the portfolio would have grown to. (This is because the zero-coupon bond pays off $1,000 and this equals the strike price of the option.) If the value of the portfolio goes down, the option has no value, but the payoff from the zero-coupon bond ensures that the investor receives the original $1,000 principal invested.
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