An option is a contract written by a seller that conveys to the buyer the right but not the Obligation to buy

uy (in the case of a call option) or to sell (in the case of a put option) a Particular asset, at a particular price (Strike price / Exercise price) in future. In return for granting the option, the seller collects a payment (the premium) from the buyer. Exchange traded Options form an important class of options which have standardized contract features and trade on public exchanges, facilitating trading among large number of investors. They Provide settlement guarantee by the Clearing Corporation thereby reducing counterparty risk. Options can be used for hedging, taking a view on the future direction of the market, For arbitrage or for implementing strategies which can help in generating income for investors under various market conditions. OPTION TERMINOLOGY Index options: These options have the index as the underlying. In India, they have a European style settlement. E.g. Nifty options, Mini Nifty options etc. Stock options: Stock options are options on individual stocks. A stock option contract gives the holder the right to buy or sell the underlying shares at the specified price. They have an American style settlement. Buyer of an option: The buyer of an option is the one who by paying the option premium buys the right but not the obligation to exercise his option on the seller/writer. Writer / seller of an option: The writer / seller of a call/put option is the one who receives the option premium and is thereby obliged to sell/buy the asset if the buyer exercises on him.

 Call option: A call option gives the holder the right but not the obligation to buy an asset by a certain date for a certain price. Put option: A put option gives the holder the right but not the obligation to sell an asset by a certain date for a certain price. Option price/premium: Option price is the price which the option buyer pays to the option seller. It is also referred to as the option premium. Expiration date: The date specified in the options contract is known as the expiration date, the exercise date, the strike date or the maturity. Strike price: The price specified in the options contract is known as the strike price or the exercise price. American options: American options are options that can be exercised at any time up to the expiration date. European options: European options are options that can be exercised only on the expiration date itself. In-the-money option: An in-the-money (ITM) option is an option that would lead to a positive cash flow to the holder if it were exercised immediately. A call option on the index is said to be in-the-money when the current index stands at a level higher than the strike price (i.e. spot price > strike price). If the index is much higher than
2

the strike price, the call is said to be deep ITM. In the case of a put, the put is ITM if the index is below the strike price. At-the-money option: An at-the-money (ATM) option is an option that would lead to zero cash flow if it were exercised immediately. An option on the index is at-the-money when the current index equals the strike price (i.e. spot price = strike price). Out-of-the-money option: An out-of-the-money (OTM) option is an option that would lead to a negative cashflow if it were exercised immediately. A call option on the index is out-ofthe-money when the current index stands at a level which is less than the strike price (i.e. spot price < strike price). If the index is much lower than the strike price, the call is said to be deep OTM. In the case of a put, the put is OTM if the index is above the strike price.

2.1

GLOBAL MARKET

Prior to the nineteenth century, the scope for international nance was relatively limited. Italian banks of the Renaissance nance trade and government around the Mediterranean and farther north. Later, London and Amsterdam became the key centers, and their currencies and nancial instruments were the principal focus of players in the market. The worlds foremost marketplace New York Stock Exchange (NYSE), started its trading under a tree (now known as 68 Wall Street) over 200 years ago. Similarly, India's premier stock exchange Bombay Stock Exchange (BSE) can also trace back its origin to as far as 125 years when it started as a voluntary non-profit making association. News on the stock market appears in different media every day. We hear about it any time it reaches a new high or a new low, and we also hear about it daily in statements like 'The BSE Sensitive Index rose 5% today'. Obviously, stocks and stock markets are important. Stocks of public limited companies are bought and sold at a stock exchange. But what really are stock exchanges? Known also as the stock market or bourse, a stock exchange is an organized marketplace for securities (like stocks, bonds, options) featured by the centralization of supply and demand for the transaction of orders by member brokers, for institutional and individual investors. The exchange makes buying and selling easy. In world various stock market for each individual company. As following are the lists of various stock markets in the world. India has a well established capital market mechanism where in effective and efficient transfer of money capital or financial resources from the investing class to the entrepreneur class in the private and public sector of the economy occurs.

Indian capital market has a long history of organized trading which started with the transaction in loan stocks of the East India Company from that time it has undergone drastic changes to meet the requirements of the globalization. The Indian Capital Market had been dormant in the 70's and 80's has witnessed unprecedented boom during the recent years. There has been a shift of household savings from physical assets to financial assets, particularly the risk bearing securities such as shares and debentures.

List of international stock exchange: New York Stock Exchange (NYSE) NASDAQ OMX Tokyo Stock Exchange London Stock Exchange Shanghai Stock Exchange Hong Kong Stock Exchange Toronto Stock Exchange BM&F Bovespa Australian Securities Exchange Deutsche Brse

2.2

NATIONAL MARKET

Stock is nothing is but the Ownership of the company divided into small parts and each part is called as Stock. A person carrying a stock of a company holds that part of ownership in that company. A person holding maximum stocks has maximum ownership like directors, chairman etc. A Stock market is the place where buying and selling of stocks takes place. Now days due to internet and advanced technology buying and selling of stocks takes place anywhere in India and also from foreign country, there is no need to be physical present in exchanges like NSE and BSE. HISTORY OF INDIAN STOCK MARKET ORIGIN A bit about history of stock exchange they say it was under a tree that it all started in 1875. The stock market in India was the formation of the native share and stock brokers 'Association at Bombay in 1875, the precursor of the present day Bombay Stock Exchange. This was followed by the formation of associations/exchanges in Ahmadabad (1894), Calcutta (1908), and Madras (1937). In addition, a large number of ephemeral exchanges emerged mainly in buoyant periods to recede into oblivion during depressing times subsequently. Stock exchanges in India are, Bombay Stock Exchange National Stock Exchange Ahmadabad Stock Exchange Bangalore Stock Exchange Delhi Stock Exchange OTC Exchange Of India Pane Stock Exchange Vadodara Stock Exchange

BSE (Bombay Stock Exchange) The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act, 1956.

A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking comm Unity (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer

NSE (National Stock Exchange) NSE was incorporated in 1992 and was given recognition as a stock exchange in April 1993. It started operations in June 1994, with trading on the Wholesale Debt Market Segment. Subsequently it launched the Capital Market Segment in November 1994 as a trading platform for equities and the Futures and Options Segment in June 2000 for various derivative instruments.

MCX (Multi Commodity Exchange) MULTI COMMODITY EXCHANGE of India limited is a new order exchange with a mandate for setting up a nationwide, online multi-commodity market place, offering unlimited growth opportunities to commodities market participants. As a true neutral market, MCX has taken several initiatives for users in a new generation commodities futures market in the process, become the countrys premier exchange.

MCX, an independent and a de-mutualized exchange since inception, is all set up to introduce a state of the art, online digital exchange for commodities futures trading in the country and has accordingly initiated several steps to translate this vision into reality.

NCDEX (National Commodities and Derivatives Exchange) NCDEX started working on 15th December, 2003. This exchange provides facilities to their trading and clearing member at different 130 centers for contract. In commodity market the main participants are speculators, hedgers and arbitrageurs. Facilities Provided By NCDEX NCDEX has developed facility for checking of commodity and also provides a wear house facility By collaborating with industrial partners, industrial companies, news agencies, banks and developers of kiosk network NCDEX is able to provide current rates and contracts rate. To prepare guidelines related to special products of securitization NCDEX works with bank. To avail farmers from risk of fluctuation in prices NCDEX provides special services for agricultural. NCDEX is working with tax officer to make clear different types of sales and service taxes. NCDEX is providing attractive products like weather derivative

2.3

PESTEL

Political The capital market of India is very vulnerable. India has been politically instable in the past but it is a little politically stable now-a-days.the political instability of the country has a very strong impact on the capital market. The share market of India changes as the political changes took place. The BSE Index, SENSEX goes up and down with any kind of small and big political news, like, if there is news that a particular political party has withdrawn its support from the ruling party, and then the capital market will go down with a bang. The political stability of the country is very important for the stability and growth of capital market in India. The political imbalance or balance of the country is the major factor in deciding the capital market of India. The political factors include:

employment laws tax policy trade restrictions and tariffs political stability

Economical The economical measures taken by the government of India has a very strong relationship with the capital market. If the policies are supportive to the companies then the capital market takes it positively and if there is any other policy that is not supportive and it is not welcomed then the capital market goes down. Like, in the case of allocation of 3-G spectrum, those companies that got the license for 3-G, they witnessed sharp growth in their share values so the economic policies play a major part in the growth and decline of the capital market and again if there is relaxation on any kind of taxes on items of automobile industry then the share of automobile sector goes up and virtually strengthen the capital market .The economical factors include:

inflation rate economic growth exchange rates interest rates

Social India is a country of unity in diversity .India is socially rich but the capital market is not very attached with the social factors .Yes, there is some relation between the social factors with the capital market. If there is any big social factor then to some extent it affects the capital market but small social factors dont impact at all. Like, there was opposition of reliance fresh in many cities and many stores were closed. The share prices of the reliance fresh went down but the impact was on and individual firm there was not much impact on the capital market on a whole the social factors have not much of impact on the capital market in India. The social factors include:

emphasis on safety career attitudes population growth rate age distribution health consciousness

Technological The technological factors have not that much effect on the capital market. India is technological backward country. Same as social factors, technological factor can have an effect on an individual form but it cannot have a big impact on a whole of capital market. The Bajaj got a patent on its dts-i technology, and launched it in its new bike but it does not effect on capital market. The

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technological change in India is always on a lower basis and it doesnt effect on country as a whole. The technological factors include:

R&D activity technology incentives rate of technological change automation Environmental factors Initially the environmental factors dont play a vital role in the capital market. But the time has changed and people are more eco-friendly. This is really bothering them that if any firm or industry is environment friendly or not. An increasing number of people, investors, and corporate executives are paying importance to these facts; the capital markets still see the environment as a liability. They belie that it is of no use for their strategy. The environmental performance is even under-valued by the markets. Legal factors Legal factors play an important role in the development and sustain the capital market. Legal issues relating to any industry or firm decides the fate of the capital market. If the govt. of India or the parliament introduces a new law that can affect the running of the industry then the industry will be demotivated and this demonization will lead to the demonization of the investors and will result in the fall of capital market. Like after the Hardhat Mehta scam, new rules and regulations were introduced like PAN card was made necessary for trading

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2.3

CURRENT TRENDS

Derivatives have shown a recent development in Indian financial market. The continuously growing derivative market has the potential to generate a lot of profit and risk. Equity derivatives market in India has registered an "explosive growth" and is expected to continue the same in the years to come. Introduced in 2000, financial derivatives market in India has shown a remarkable growth both in terms of volumes and numbers of traded contracts. Since June 2000, derivatives market has exhibited exponential growth both in terms of volume and number of traded contracts. The market turnover has grown to more than Rs. 4356754.53 crores in 2010 2011. NSE alone accounts for 99 percent of the derivatives trading in Indian markets. The introduction of derivatives has been well received by stock market players. Trading in derivatives gained popularity soon after its introduction. In due course, the turnover of the NSE derivatives market exceeded the turnover of the NSE cash market. A comparison of the derivatives market over the last few years, among various countries gives rise to an interesting pattern. The exchange of the developed economies have shown robust growth, at the same time Indian market have emerged as the forth strongly along with the markets in US, Japan and Korea.

Top 5 Exchanges (by no. of Stock Index Option Contract traded)

EXCHANGE EUREX NSE-India Osaka SE Euronext.liffe TOTAL

No. of contracts No. of contracts % 371,504,525 155,988,661 138.16 traded in 2008 traded in 2003 1238.08 Change 141,261,516 10,557,024 90,965,674 76,525,955 45,256,382 13,231,287 56,898,050 8,609,973 587.50 34.50 425.63

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Total Derivative Turnover since Inception (RS. in Crores) Period 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 NSE (Rs. In cr.) 101,925 439,865 2,130,447 2,547,053 4,824,245 7,356,271 13,090,478 13,120,567 23,092,197 29,305,421 31,356,878

J. Product wise turnover in NSE since inception (RS. In Crores) Period Futures 2001200202 200303 200404 200505 200606 200707 200808 200909 201010 2365 21483 43952 554446 772147 1513755 2539574 3820667 5425598 6645576 Index Options 0 3765 9246 52816 121943 338469 791906 1362111 2051669 2667170 Futures 0 51515 286533 1305939 1484056 2791697 3830967 7548563 6537703 8076962 Stock Options 0 25163 100131 217201 168836 180253 193795 359137 372294 398355 2365 101926 439862 2130402 2546982 4824174 7356242 13090478 14387263 17788063 TOT AL

Source: 11 NSE

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2.4

MAJOR PLAYERS

Market Segments Securities markets provide a channel for allocation of savings to those who have a productive need for them. The securities market has two interdependent and inseparable segments: (i) primary market and (ii) secondary market. Primary Market Primary market provides an opportunity to the issuers of securities, both Government and corporations, to raise resources to meet their requirements of investment. Securities, in the form of equity or debt, can be issued in domestic /international markets at face value, discount or premium. The primary market issuance is done either through public issues or private placement. Under Companies Act, 1956, an issue is referred as public if it results in allotment of securities to 50 investors or more. However, when the issuer makes an issue of securities to a select group of persons not exceeding 49 and which is neither a rights issue nor a public issue it is called a private placement. Secondary Market Secondary market refers to a market where securities are traded after being offered to the public in the primary market or listed on the Stock Exchange. Secondary market comprises of equity, derivatives and the debt markets. The secondary market is operated through two mediums, namely, the Over-theCounter (OTC) market and the Exchange-Traded market. OTC markets are informal markets where trades are negotiated.

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Products and Participants Products Financial markets facilitate reallocation of savings from savers to

entrepreneurs. Savings are linked to investments by a variety of intermediaries through a range of complex financial products called securities. Under the Securities Contracts (Regulation) Act [SC(R)A], 1956, securities include (i) Shares, bonds, scrips, stocks or other marketable securities of like nature in or of any incorporate company or body corporate, (ii) (iii) (iv) (v) Government securities, Derivatives of securities, Units of collective investment scheme, Interest and rights in securities, and security receipt or any other instruments so declared by the central government. Broadly, securities can be of three types - equities, debt securities and derivatives.

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Market Participants in India

Market Participants

Investors Individual Investors Corporate Investors Foreign Venture Capital Investors FIIs Depositories Stock Exchange With Equities Trading With Debt Market Trading With Derivative Trading With currency Trading Brokers Corporate Brokers Sub-brokers Portfolio Manager Custodians Registrars to an issue & Share Transfer Agents Primary Dealers Merchant Bankers Bankers to an Issue Debenture Trustees Underwriters Venture Capital Funds Mutual Funds Collective Investment Schemes
Source: www.nseindia.com

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List of major player in Surat city Karvy Stock Broking Ltd India Infoline Ltd Share khan Reliance Securities Limited Jainam Share Consultants Pvt Ltd Religare Finvest Limited J M Financial Service Pvt Ltd Monarch Project & Fin markets Ltd Market Hub Stock broking Pvt Ltd Arcadia Share & Stock Broker Pvt Ltd Kotak Securities Jainam Share Consultants Pvt Ltd Sushil Share Broker Pvt Ltd Angel Broking Ltd Motilal Osawal LKP Securities Ltd

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2.5

MAJOR OFFERINGS

Over a period, the Indian securities market has undergone remarkable changes and grown exponentially, particularly in terms of resource mobilization, intermediaries, the number of listed stocks, market capitalization, and turnover and investor population. The following paragraphs list the principal reform measures undertaken since 1992. Creation of Market Regulator Securities and Exchange Board of India (SEBI), the securities market regulator in India, was established under SEBI Act 1992, with the main objective and responsibility for (i) protecting the interests of investors in securities, (ii) promoting the development of the securities market, and (iii) regulating the securities market. Screen Based Trading Prior to setting up of NSE, the trading on stock exchanges in India was based on an open outcry system. The system was inefficient and time consuming because of its inability to provide immediate matching or recording of trades. In order to provide efficiency, liquidity and transparency, NSE introduced a nation-wide on-line fully automated screen based trading system (SBTS) on the CM segment on November 3, 1994. Reduction of Trading Cycle Earlier, the trading cycle for stocks, based on type of securities, used to vary between 14 days to 30 days and the settlement involved another fortnight. The Exchanges, however, continued to have different weekly trading cycles, which enabled shifting of positions from one Exchange to another. It was made mandatory for all Exchanges to follow a uniform weekly trading cycle in respect of scrips not under rolling settlement. In December 2001, all scrips were moved to rolling settlement and the settlement period was reduced progressively from T+5 to T+3 days. From April 2003 onwards, T+2 days
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settlement cycle is being followed. Equity Derivatives Trading In order to assist market participants in managing risks better through hedging, speculation and arbitrage, SC(R) A was amended in 1995 to lift the ban on options in securities. Trading in derivatives, however, took off in 2000 with index futures after suitable legal and regulatory framework was put in place. The market presently offers index futures, index options, single stock futures and single stock options. Demutualization Historically, stock exchanges were owned, controlled and managed by the brokers. In case of disputes, integrity of the stock exchange suffered. NSE, however, was set up with a pure demutualised governance structure, having ownership, management and trading with three different sets of people. Currently, all the stock exchanges in India have a demutualised set up. Dematerialization As discussed before, the old settlement system was inefficient due to (i) the time lag for settlement and (ii) the physical movement of paper-based securities. To obviate these problems, the Depositories Act, 1996 was passed to provide for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed and accuracy. There are two depositories in India, viz. NSDL and CDSL. They have been set up to provide instantaneous electronic transfer of securities. Demat

(Dematerialized) settlement has eliminated the bad deliveries and associated problems. Now, the public listed companies making IPO of any security for Rs.10 crore or more have to make the IPO only in dematerialized form. Clearing Corporation The anonymous electronic order book ushered in by the NSE did not permit members to assess credit risk of the counter-party and thus necessitated some innovation in this area.

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Investor Protection In order to protect the interest of the investors and promote awareness, the Central Government (Ministry of Corporate Affairs
1

) established the Investor

Education and Protection Fund (IEPF) in October 2001. With the similar objectives, the Exchanges and SEBI also maintain investor protection funds to take care of investor claims. SEBI and the stock exchanges have also set up investor grievance / service cells for redress of investor grievance. All these agencies and investor associations also organize investor education and awareness programmers. Globalization Indian companies have been permitted to raise resources overseas through issue of ADRs, GDRs, FCCBs and ECBs. Further, FIIs have been permitted to invest in all types of securities, including government securities and tap the domestic market. The investments by FIIs enjoy full capital account convertibility. They can invest in a company under portfolio investment route up to 24% of the paid up capital of the company. This can be increased up to the sectoral cap/statutory ceiling, as applicable to the Indian companies concerned, by passing a resolution of its Board of Directors followed by a special resolution to that effect by its general body. The Indian stock exchanges have been permitted to set up trading terminals abroad. The trading platform of Indian exchanges is now accessible through the Internet from anywhere in the world. RBI permitted two-way fungibility for ADRs / GDRs, which means that the

Investors (foreign institutional or domestic) who hold ADRs / GDRs can cancel them with the depository and sell the underlying shares in the market. Launch of India VIX 2: Volatility index is a measure of markets expectation of volatility over the near term. It measures the amount by which an underlying Index is expected to fluctuate in the near term, based on the order book of the underlying index options. Indias first volatility index, India VIX (based on the
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Nifty 50 Index Option prices) was launched by NSE in April 2008. Direct Market Access In April 2008, SEBI allowed the direct market access (DMA) facility to the institutional investors. DMA allows brokers to offer their respective clients, direct access to the Exchange trading system through the brokers infrastructure without manual intervention by the broker. Launch of Securities Lending & Borrowing Scheme In April 2008, the Securities Lending & Borrowing mechanism was allowed. It allows market participants to take short positions effectively with less cost. Launch of Currency Futures On August 29, 2008, NSE launched trading in currency future contracts in the USD-INR pair for the first time in India. Trading in other currency pairs like Euro INR, Pound Sterling INR and Japanese Yen was further made available for trading in March 2010. ASBA Application Supported by Blocked Amount (ASBA) is a major primary market reform. It enables investors to apply for IPOs / FPOs and rights issues without making a payment. Instead, the amount is blocked in investors own account and only an amount proportionate to the shares allotted goes out when allotment is finalized.

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3.1 Company Profile

LKP was started as one of Indias first securities brokerage houses in 1948 is today one of the countrys largest multi dimensional financial services group. LKP Finance Limited is a Non Banking Finance Company (NBFC) registered with Reserve Bank of India & a listed public limited company having a net worth of Rs.142 crores as on FY10. We are India's first financial group to be awarded the prestigious ISO 9002 certified KPMG Quality Registrar, USA, for certain businesses. Since 1948, LKP continues to provide clients with a single source capable of meeting all their needs be it Equities markets, Debt markets, Corporate Finance, Investment Banking, Merchant Banking, Wealth Management or Commodities. Business Focus The focus of the business is the Customer Customer service, Customer education, Customer support, Customer relations and last but not the least Customer acquisition. Trade execution transparency, timely settlements, risk monitoring and superior service shall have topmost priority, in the best interests of all concerned. Vision To come up with Innovative solutions for addressing the needs relating to quality of trading and provide an access to Trading for All Mission We intend to become a Benchmark-product and Service provider for the Equity and Derivative market in India. To provide suitable and Solution by identifying the Industrys Trading Needs and Problem, Each of our Leaders bring in diversified Board of directors Mr. M.V. Doshi Executive Chairman, Qualification :MBA (USA) Years of experience 32: Years Mr. Hari Padmanabham Mr. Pratik M. Doshi Director, Qualification :MBA (UK) Years of experience : 8 Years Mr. Milan S. Bhise

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Director, Qualification :MBA, IIM Years of experience : 32Years History

Director, Qualification :M.A. ,L.L.B, D.M.S Years of experience : 18 Years

What started as one of Indias first securities brokerage houses in 1948 is today one of the countrys largest multi dimensional financial services group. LKP Finance Limited is a Non Banking Finance Company (NBFC) registered with Reserve Bank of India & a listed public limited company having a net worth of Rs.142 billion as on FY10. Total broking turnover of ~Rs. 604 billion in FY12 and Rs. 435 billion in FY11. We are India's first financial group to be awarded the prestigious ISO 9002 certified KPMG Quality Registrar, USA, for certain businesses. Since 1948, LKP shares continues to provide clients with a single source capable of meeting all their needs be it Equities markets, Debt markets, Corporate Finance, Investment Banking, Merchant Banking, Wealth

Management or Commodities. LKP offers a wide spectrum of services that includes Equity Broking in Cash and Derivatives, Internet based trading, Demat services & Research services. When you deal with LKP you are dealing with a professional broker who has centralized risk management system in place at Mumbai. LKP follows a hub & spoke model of Branch management where in all the branches & franchise interact with the hub/regional office & in turn the regional/hub office talks to Head office. This company a great level of flexibility in managing the risk level of the clients, which in turn benefit the client. Today, LKP shares have emerged as one of the most respected Stock-Broking and Wealth Management Companies in India. With its unique retail-focused stock trading business model, LKP shares are committed to providing Real Value for Money to all its clients. LKP Securities Limited and its associates enjoy the following registrations & memberships: Category I Merchant Bankers with SEBI Membership of BSE & NSE (Capital & Debt Market) AMFI registered all India Mutual Fund Distributors Member of Commodity Exchanges MCX, NCDX and DGCX (Dubai)
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 Member of NSE for Interest Rate Futures Member of MCX SX and NSE Currency.

3.2 Organization structure

Board Sub Committee Mahendra Doshi, Sayanta Basu, Pratik Doshi

CEO - Equities

Head Corporate Affairs S.S. Gulati

President Fixed Income

Anish Unadkat

Sanjay Chitalia

Supported by team of 40 personnel Retail

Institutional
S.Ranganathan 22 Branches Equities & Research

IT

Distribution
Anand Agarwal & Deepak Singh

Sriram J

800 Sub brokers Team of more than 300 people

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3.3 SWOT ANALYSIS

Strength

Secured and sophisticated systems, operation processes and clear Risk management policies to handle high volumes business 850 + outlets across India covering 150 cities in the country, including 7 regional offices at Delhi, Kolkata, Pune, Ahmadabad, Bangalore, Chennai and Gujarat.

Research covers a wide spectrum from macroeconomics forecasts to penetrating analysis of companies and sectors; the research is highly rated for its accuracy, clarity and comprehensive coverage which include Fundamental Analysis, Technical Analysis & daily research reports. Research also covers Fixed Income Markets, Mutual Fund Schemes & Commodities Markets Our management has long time of experience in capital market, so our client can get the benefit of it. Flexible brokerage charges.

Weakness Low Brand Image in the market. Low Advertisements. It is a older brokerage house even though they have to face through cutting competition in the market.

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Opportunity Industry revenue pool from equity broking at ~Rs 13,000 cr for FY11 grew by only 13% as compared to the 46% growth in exchange trading volumes. The industry is likely to grow at a moderate pace unless there is a material pick up in cash volumes and increased activity from of retail investors. 15,000 brokers and 37,000 SEBI registered sub-brokers. Among these, there are over 1,200 active brokers on NSE and over 600 on BSE. The industry is witnessing challenging times with the top brokers losing market share with competition from foreign brokerage houses and declining volumes in the cash segment. Consolidation of the industry a matter of time

Threats
There are many competitors of stock market such as post office savings, public provident fund, company fixed deposits, fixed deposits with bank etc. which provides fixed and assured returns. Market crashes. Poor marketing activities. In LKP SHARES there is a no wide area of marketing hence people do not know more about them.

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3.4 Service & Highlight of company

Equity & Derivatives One of our important goals is to simplify investing for you and provide long term values to our customers, with suitable trading solutions. Online Trade Online research Real-time equity and F&O quotes Intraday & historical charts with technical tools Wealth tracker

Mutual Fund Advisory Services LKP Investment Advisory Service Offers tailor made wealth management services to Retail, High Net worth Individual and Corporate Clients. We strongly believe that Investment Planning is the stepping stone to achieve ones financial aspirations. Our in- house research provides unbiased and independent advice. The Investment Advisory Process can be summarized as follows Goal Setting Determine Financial objectives, time scale s and risk tolerance Asset allocation Decide an appropriate mix on various investment choices. Portfolio Construction Based on asset mix, we build a customized, portfolio of investment in insurance products. Review Regular portfolio Monitoring, to ensure necessary adjustments in line with set goal.

IPO Primary Market: As part of our Equity business, we have a vibrant Primary Market Division wherein we undertake syndication business in, Company fix deposit Capital gain bonds (u/s 54EC) 8.0% saving (taxable) bond floated by gol. Bonds floated by central & state government.

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Our success in IPOs has been a result of our vast experience in the Primary Market, a wide network of over 8000 Sub-brokers across India, strong distribution capabilities and a dedicated research team that provides clients with in-depth overviews of forthcoming IPOs as well as tailor-made investment recommendations. On the other hand LKPs retail & non- institutional procurement strength and strong rapport with all prominent merchant bankers, enables us to play a leading role in the issues handled by them.

Insurance Advisory Services

Life Insurance LKP Holdings in its innovative move to provide complete range of financial planning and investment solutions to its privilege customers has tied up with Bajaj Allianz for both Life and Non life insurance to provide simple & flexible life insurance products that not only provide security for family but also investment and long term wealth creation. Avail all these Insurance Services through our trained and certified professional consultants.

Non Life insurance

We offer wide range of Non life insurance Product (General Insurance), which is designed to protect policy holder from Loss or Damage caused by Specific Event.

Health insurance Motor insurance Travel insurance Asset insurance

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Commodities A sister concern of the renowned and trusted LKP group, Alpha Commodities offers a complete bouquet of client-friendly services in the burgeoning Commodity Futures market. Currency Derivatives Segment LKP Securities Limited introduces Currency Futures Trading on the NSE and MCX-SX. LKP undertakes Currency trading in four pairs: USD/INR, EUR/INR, GBP/INR & JPY/INR. We are also offering Currency Options in the USD/INR pair on the NSE. Trading in Currency Futures and Options is regulated by RBI and SEBI jointly. Depository LKPs Depository Services offer dematerialization services to individual and corporate investors as a Depository Participant with the Central Depository Services (India) Limited (CDSL). LKPs online depository service offers you a paperless and cost effective way to hold your investments, not to forget the elimination of handling physical documents.

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Our Esteemed Clients

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STRATEGY 1: LONG CALL

For aggressive investors who are very bullish about the prospects for a stock / index, buying calls can be an excellent way to capture the upside potential with limited downside risk.

When to Use: Investor is very bullish on the stock / index. Risk: Limited to the Premium.(Maximum loss if market expires at or below the option strike price). Reward: Unlimited Breakeven: Strike Price +Premium

STRATEGY 2: SHORT CALL

When you buy a Call you are hoping that the underlying stock / index would rise. When you expect the underlying stock / index to fall you do the opposite. When an investor is very bearish about a stock / index and expects the prices to fall, he can sell Call options. This position offers limited profit potential and the possibility of large losses on big advances in underlying prices. Although easy to execute it is a risky strategy since the seller of the Call is exposed to unlimited risk.

When to use: Investor is very aggressive and he is very Bearish about the stock / index. Risk: Unlimited Reward: Limited to the amount of premium Break-even Point: Strike Price+ Premium

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STRATEGY 3: LONG PUT

Buying a Put is the opposite of buying a Call. When you buy a Call you are bullish about the stock / index. When an investor is bearish, he can buy a Put option. A Put Option gives the buyer of the Put a right to sell the stock (to the Put seller) at a pre-specified price and thereby limit his risk. A long Put is a Bearish strategy. To take advantage of a falling market an investor can buy Put options.

When to use: Investor is bearish about the stock / index. Risk: Limited to the amount of Premium paid. (Maximum loss if stock / index expire at or above the option strike price). Reward: Unlimited Break-even Point: Stock Price Premium

STRATEGY 4: SHORT PUT

Selling a Put is opposite of buying a Put. An investor buys Put when he is bearish on a stock. An investor Sells Put when he is Bullish about the stock expects the stock price to rise or stay sideways at the minimum. When you sell a Put, you earn a Premium (from the buyer of the Put). You have sold someone the right to sell you the stock at the strike price. If the stock price increases beyond the strike price, the short put position will make a profit for the seller by the amount of the premium, since the buyer will not exercise the Put option and the Put seller can retain the Premium (which is his maximum profit). But, if the stock price decreases below the strike price, by more than the amount of the premium, the Put seller will lose money. The potential loss being unlimited (until the stock price fall to zero).

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When to Use: Investor is very Bullish on the stock / index. The main idea is to make a short term income. Risk: Put Strike Price Put Premium. Reward: Limited to the amount of Premium received. Breakeven: Put Strike Price Premium

STRATEGY 5: PROTECTIVE CALL / SYNTHETIC LONG PUT

This is a strategy wherein an investor has gone short on a stock and buys a call to hedge. This is an opposite of Synthetic Call (Strategy 3). An investor shorts a stock and buys an ATM or slightly OTM Call. The net effect of this is that the investor creates a pay-off like a Long Put, but instead of having a net debit (paying premium) for a Long Put, he creates a net credit (receives money on shorting the stock). In case the stock price falls the investor gains in the downward fall in the price. However, in case there is an unexpected rise in the price of the stock the loss is limited. The pay-off from the Long Call will increase thereby compensating for the loss in value of the short stock position. This strategy hedges the upside in the stock position while retaining downside profit potential.

When to Use: If the investor is of the view that the markets will go Down (bearish) but wants to protect against any unexpected rise in the price of the stock. Risk: Limited. Maximum Risk is Call Strike Price Stock Price + Premium Reward: Maximum is Stock Price Call Premium Breakeven: Stock Price Call Premium

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STRATEGY 6: LONG STRADDLE

A Straddle is a volatility strategy and is used when the stock price / index is expected to show large movements. This strategy involves buying a call as well as put on the same stock / index for the same maturity and strike price, to take advantage of a movement in either direction, a soaring or plummeting value of the stock / index. If the price of the stock / index increases, the call is exercised while the put expires worthless and if the price of the stock / index decreases, the put is exercised, the call expires worthless. Either way if the stock / index show volatility to cover the cost of the trade, profits are to be made. With Straddles, the investor is direction neutral. All that he is looking out for is the stock / index to break out exponentially in either direction.

When to Use: The investor thinks that the underlying stock / index will experience significant volatility in the near term. Risk: Limited to the initial premium paid. Reward: Unlimited Breakeven: Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid

STRATEGY 7: SHORT STRADDLE

A Short Straddle is the opposite of Long Straddle. It is a strategy to be adopted when the investor feels the market will not show much movement. He sells a Call and a Put on the same stock / index for the same maturity and strike price. It creates a net income for the investor. If the stock / index does not move much in either direction, the investor retains the Premium as neither the Call nor the Put will be exercised.
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However, incase the stock / index moves in either direction, up or down significantly, the investors losses can be significant. So this is a risky strategy and should be carefully adopted and only when the expected volatility in the market is limited. If the stock / index value stays close to the strike price on expiry of the contracts, maximum gain, which is the Premium received is made.

When to Use: The investor thinks that the underlying stock / index will experience very little volatility in the near term. Risk: Unlimited Reward: Limited to the premium received Breakeven: Upper Breakeven Point = Strike Price of Short Call + Net Premium Received Lower Breakeven Point = Strike Price of Short Put - Net Premium Received

STRATEGY 8: LONG STRANGLE

A Strangle is a slight modification to the Straddle to make it cheaper to execute. This strategy involves the simultaneous buying of a slightly out-ofthe-money (OTM) put and a slightly out-of-the-money (OTM) call of the same underlying stock / index and expiration date. Here again the investor is directional neutral but is looking for an increased volatility in the stock / index and the prices moving significantly in either direction. Since OTM options are purchased for both Calls and Puts it makes the cost of executing a Strangle cheaper as compared to a Straddle, where generally ATM strikes are purchased. However, for a Strangle to make money it would require greater movement on the upside or downside for the stock / index than it would for a Straddle. As with a Straddle, the strategy has a limited downside (i.e. the Call and the Put premium) and unlimited upside potential.

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When to Use: The investor thinks that the underlying stock / index will experience very high levels of volatility in the near term. Risk: Limited to the initial premium paid Reward: Unlimited Breakeven: Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid

STRATEGY 9: SHORT STRANGLE

A Short Strangle is a slight modification to the Short Straddle. It tries to improve the profitability of the trade for the Seller of the options by widening the breakeven points so that there is a much greater movement required in the underlying stock / index, for the Call and Put option to be worth exercising. This strategy involves the simultaneous selling of a slightly out-of-the-money (OTM) put and a slightly out-of-the-money (OTM) call of the same underlying stock and expiration date. This typically means that since OTM call and put are sold, the net credit received by the seller is less as compared to a Short Straddle, but the break even points are also widened. The underlying stock has to move significantly for the Call and the Put to be worth exercising. If the underlying stock does not show much of a movement, the seller of the Strangle gets to keep the Premium.

When to Use: This options trading strategy is taken when the options investor thinks that the underlying stock will experience little volatility in the near term. Risk: Unlimited Reward: Limited to the premium received Breakeven: Upper Breakeven Point = Strike Price of Short Call + Net Premium Received Lower Breakeven Point = Strike Price of Short Put - Net Premium Received

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STRATEGY 10. BULL CALL SPREAD STRATEGY: BUY CALL OPTION, SELL CALL OPTION
A bull call spread is constructed by buying an in-the-money (ITM) call option, and selling another out-of-the-money (OTM) call option. Often the call with the lower strike price will be in-the-money while the Call with the higher strike price is out-of-the-money. Both calls must have the same underlying security and expiration month. The net effect of the strategy is to bring down the cost and breakeven on a Buy Call (Long Call) Strategy. This strategy is exercised when investor is moderately bullish to bullish, because the investor will make a profit only when the stock price / index rises. If the stock price falls to the lower (bought) strike, the investor makes the maximum loss (cost of the trade) and if the stock price rises to the higher (sold) strike, the investor makes the maximum profit. Let us try and understand this with an example.

When to Use: Investor is moderately bullish. Risk: Limited to any initial premium paid in establishing the position. Maximum loss occurs where the underlying falls to the level of the lower strike or below. Reward: Limited to the difference between the two strikes minus net premium cost. Maximum profit occurs where the underlying rises to the level of the higher strike or above Break-Even-Point (BEP): Strike Price of Purchased call + Net Debit Paid

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STRATEGY 11. BULL PUT SPREAD STRATEGY: SELL PUT OPTION, BUY PUT OPTION A bull put spread can be profitable when the stock / index is either range bound or rising. The concept is to protect the downside of a Put sold by buying a lower strike Put, which acts as insurance for the Put sold. The lower strike Put purchased is further OTM than the higher strike Put sold ensuring that the investor receives a net credit, because the Put purchased (further OTM) is cheaper than the Put sold. This strategy is equivalent to the Bull Call Spread but is done to earn a net credit (premium) and collect an income. If the stock / index falls, then the investor are breakeven is the higher strike less the net credit received. Provided the stock remains above that level, the investor makes a profit. Otherwise he could make a loss. The maximum loss is the difference in strikes less the net credit received. This strategy should be adopted when the stock / index trend is upward or range bound. Let us understand this with an example.

When to Use: When the investor is moderately bullish. Risk: Limited. Maximum loss occurs where the underlying falls to the level of the lower strike or below Reward: Limited to the net premium credit. Maximum profit occurs where Underlying rises to the level of the higher strike or above. Breakeven: Strike Price of Short Put - Net Premium Received

STRATEGY 12: BEAR CALL SPREAD: SELL ITM CALL, BUY OTM CALL

The Bear Call Spread strategy can be adopted when the investor feels that the stock / index is either range bound or falling. The concept is to protect the downside of a Call Sold by buying a Call of a higher strike price to insure the Call sold. In this strategy the investor receives a net credit because the Call he buys is of a higher strike price than the Call sold. The strategy requires the investor to buy out-of-the-money (OTM) call options while simultaneously selling in-the-money (ITM) call options on the same
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underlying stock index. This strategy can also be done with both OTM calls with the Call purchased being higher OTM strike than the Call sold. If the stock / index fall both Calls will expire worthless and the investor can retain the net credit. If the stock / index rise then the breakeven is the lower strike plus the net credit. Provided the stock remains below that level, the investor makes a profit. Otherwise he could make a loss. The maximum loss is the difference in strikes less the net credit received. Let us understand this with an example.

When to use: When the investor is mildly Bearish on market. Risk: Limited to the difference between the two strikes minus the net premium. Reward: Limited to the net premium received for the position i.e., premium received for the short call minus the premium paid for the long call. Break Even Point: Lower Strike + Net credit

STRATEGY 13: BEAR PUT SPREAD STRATEGY: BUY PUT, SELL PUT

This strategy requires the investor to buy an in-the-money (higher) put option and sell an out-of-the-money (lower) put option on the same stock with the same expiration date. This strategy creates a net debit for the investor. The net effect of the strategy is to bring down the cost and raise the breakeven on buying a Put (Long Put). The strategy needs a Bearish outlook since the investor will make money only when the stock price / index fall. The bought Puts will have the effect of capping the investors downside. While the Puts sold will reduce the investors costs, risk and raise breakeven point (from Put exercise point of view). If the stock price closes below the out-ofthe-money (lower) put option strike price on the expiration date, then the investor reaches maximum profits. If the stock price increases above the inthe-money (higher) put option strike price at the expiration date, then the investor has a maximum loss potential of the net debit.
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When to use: When you are moderately bearish on market direction Risk: Limited to the net amount paid for the spread. i.e. the premium paid for long position less premium received for short position. Reward: Limited to the difference between the two strike prices minus the net Premium paid for the position. Break Even Point: Strike Price of Long Put Net Premium Paid

STRATEGY 14: LONG CALL BUTTERFLY: SELL 2 ATM CALL OPTIONS, BUY 1 ITM CALL OPTION AND BUY 1 OTM CALL OPTION. A Long Call Butterfly is to be adopted when the investor is expecting very little movement in the stock price / index. The investor is looking to gain from low volatility at a low cost. The strategy offers a good risk / reward ratio, together with low cost. A long butterfly is similar to a Short Straddle except your losses are limited. The strategy can be done by selling 2 ATM Calls, buying 1 ITM Call, and buying 1 OTM Call options (there should be equidistance between the strike prices). The result is positive incase the stock / index remains range bound. The maximum reward in this strategy is however restricted and takes place when the stock / index is at the middle strike at expiration. The maximum losses are also limited. Let us see an example to understand the strategy.

When to use: When the investor is neutral on market direction and bearish on volatility. Risk Net debit paid. Reward Difference between adjacent strikes minus net debit Break Even Point: Upper Breakeven Point = Strike Price of Higher Strike Long Call Net Premium Paid Lower Breakeven Point = Strike Price of Lower Strike Long Call + Net Premium Paid

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STRATEGY 15: SHORT CALL BUTTERFLY: BUY2 ATM CALL OPTIONS SELL 1 ITM CALL OPTION AND SELL 1 OTM CALL OPTION.

A Short Call Butterfly is a strategy for volatile markets. It is the opposite of Long Call Butterfly, which is a range bound strategy. The Short Call Butterfly can be constructed by Selling one lower striking in-the-money Call, buying two at-the-money Calls and selling another higher strike out-of-the-money Call, giving the investor a net credit (therefore it is an income strategy). There should be equal distance between each strike. The resulting position will be profitable in case there is a big move in the stock / index. The maximum risk occurs if the stock / index is at the middle strike at expiration. The maximum profit occurs if the stock finishes on either side of the upper and lower strike prices at expiration. However, this strategy offers very small returns when compared to straddles, strangles with only slightly less risk. Let us understand this with an example.

When to use: You are neutral on market direction and bullish on volatility. Neutral means that you expect the market to move in either direction - i.e. bullish and bearish. Risk Limited to the net difference between the adjacent strikes (Rs. 100 in this example) less the premium received for the position. Reward Limited to the net premium received for the = option spread. Break Even Point: Upper Breakeven Point = Strike Price of Highest Strike Short Call - Net Premium Received Lower Breakeven Point = Strike Price of Lowest Strike Short Call + Net Premium Received

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STRATEGY 16: LONG CALL CONDOR: BUY 1 ITM CALL OPTION (LOWER STRIKE), SELL 1 ITM CALL OPTION (LOWER MIDDLE), SELL 1 OTM CALL OPTION (HIGHER MIDDLE), BUY 1 OTM CALL OPTION (HIGHER STRIKE)

A Long Call Condor is very similar to a long butterfly strategy. The difference is that the two middle sold options have different strikes. The profitable area of the pay off profile is wider than that of the Long Butterfly (see pay-off diagram). The strategy is suitable in a range bound market. The Long Call Condor involves buying 1 ITM Call (lower strike), selling 1 ITM Call (lower middle) , selling 1 OTM call (higher middle) and buying 1 OTM Call (higher strike). The long options at the outside strikes ensure that the risk is capped on both the sides. The resulting position is profitable if the stock / index remains range bound and shows very little volatility. The maximum profits occur if the stock finishes between the middle strike prices at expiration. Let us understand this with an example.

When to Use: When an investor believes that the underlying market will trade in a range with low volatility until the options expire. Risk Limited to the minimum of the difference between the lower strike call spread less the higher call spread less the total premium paid for the condor. Reward Limited. The maximum profit of a long condor will be realized when the stock is trading between the two middle strike prices. Break Even Point: Upper Breakeven Point = Highest Strike Net Debit Lower Breakeven Point =Lowest Strike + Net Debit

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STRATEGY 17: SHORT CALL CONDOR: SHORT 1 ITM CALL OPTION (LOWER STRIKE), LONG 1 ITM CALL OPTION (LOWER MIDDLE), LONG 1 OTM CALL OPTION (HIGHER MIDDLE), SHORT 1 OTM CALL OPTION (HIGHER STRIKE).

A Short Call Condor is very similar to a short butterfly strategy. The difference is that the two middle bought options have different strikes. The strategy is suitable in a volatile market. The Short Call Condor involves selling 1 ITM Call (lower strike), buying 1 ITM Call (lower middle), buying 1 OTM call (higher middle) and selling 1 OTM Call (higher strike). The resulting position is profitable if the stock / index shows very high volatility and there is a big move in the stock / index. The maximum profits occur if the stock / index finishes on either side of the upper or lower strike prices at expiration. Let us understand this with an example.

When to Use: When an investor believes that the underlying market will break out of a trading range but is not sure in which direction. Risk Limited. The maximum loss of a short condor occurs at the center of the option spread. Reward Limited. The maximum profit of a short condor occurs when the underlying stock / index is trading past the upper or lower strike prices. Break Even Point: Upper Breakeven Point = Highest Strike Net Credit Lower Break Point = Lowest Strike + Net Credit

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This study aims to gain knowledge about the impact of option strategies in the risk of investment .The individuals may be equal in all aspects, may even be living next door, but their financial planning needs are very different.

Introduction The economic development of any country depends upon the existence of a well-developed financial system. It is the financial system which supplies the necessary financial inputs for the production of goods and services that in turn promote the well being and standard of living of the people of a country. The major assets traded on the financial system are money and monetary 23 assets. The responsibility of the financial system is to mobilize savings in the form of money and monetary assets and invest them in productive ventures. Review of Literature: Author Mohammad Osman Abdul has done research on the base of Use of derivatives in risk management in March14,2012.he was finding Due to the increased globalization among economies of the world, corporations use derivatives in order to minimize their exposure to the uncertainty caused by recent economic and financial crunch. Bose Suchismita has done research on the base of The option strategies in 2006.he was finding option strategies provide certain important economic benefits such as risk management or redistribution of risk away from riskaverse investors towards those more willing and able to bear risk. Strategies also help price discovery, i.e. the process of determining the price level for any asset based on supply and demand. Franklin R. Edwards (1988) studied the impact of introduction of Index futures on US stock market using S&P 500 as a proxy for US stock market. The study covered a data period ranging from 1972- 1987. Volatility has been calculated using variance of close to close daily price changes. The study did not find any evidence of the role of index futures in destabilizing the respective stock market volatility. However, the study reported evidence of short run volatility being induced by futures trading occurring during expiration
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days but this volatility has not been found to carry over to longer periods of time. Ma and Rao (1988) found that options trading do not have a uniform impact on the volatility of underlying stocks. According to their study stocks that have been 34 originally volatile, that is, traded primarily by uninformed traders, get stabilized by the introduction of options and stocks that have been more stable become destabilized by options trading. Harris & Lawrence (1989) studied the impact of derivative trading on US stock market taking S&P 500 as proxy for the US stock market. They used cross sectional analysis of covariance regression model. They found that volume in index futures and index options has increased dramatically since their introduction in 1982 and 1983 in the US market leading to speculative trading & hence led to increase in volatility. Jegadeesh and Subrahmanyam (1993) compared the spread in NYSE returns before and after the introduction of futures on S&P 500 index & found that average spread of returns has increased subsequent to the introduction of futures 35 trading. The study reported even higher spread in post future period after controlling for factors like price, return variance, and volume of trade. The overall results suggested that the introduction of index futures did not reduce the volatility.

Maurice peat and Michael Mc Corry (1997) studied the impact of introduction of derivatives on individual shares on the trading behavior of the underlying equity market. They have reported a significant increase in both the underlying market trading volume and volatility, with no discernable returns effect. He defined volatility as the average of squared returns over the previous 5 days. These results have been reported using Regression analysis and t- test.

Lee and Tong (1998) examined the effects of the trading of stock futures on the underlying stocks in Australia. They used non-parametric Wilcoxon rank sum tests and parametric t-tests to examine the volatility and volume of the underlying stocks. Their results have shown that in the post futures period,
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there is no significant increase in the volatility of the underlying stocks but the volume has increased significantly. They argued that stock futures trading in Australia provides substantial benefits to market participants. However, their findings have been limited to only seven stocks and hence not sufficient to draw rigorous conclusions.

Dennis A Steven and Sim Ah Boon (1999) examined changes in the volatility of the underlying shares in the cash market due to the individual share futures contracts traded on the Sydney Futures Exchange using an asymmetric exponential 36 ARCH model. The overall evidence has suggested that the introduction of futures trading has had very little impact on cash market volatility.

Darram (2000), using the FITSE Mid 250 contract of UK stock market argued that introduction of the futures market lead to more complete market, enhance the information flow. Futures market allow for new positions and expanded investment sets and enables to take positions at lower cost. Futures trading bring more information to the market and allows for quicker disseminations of the information. The transfer of the speculative activity from spot to futures market decreases the spot market volatility.

Gulen and Mayhew (2000), in a study of 25 countries, found different results in different countries. They reported that futures trading is associated with increased volatility in the US and Japan. In some countries, there has been no robust, significant effect, and in many others, volatility has been lower after futures have been introduced. Thus results varied from place to place.

Saurabh Kumar ,Gauri Mohan & Sriharsha Pappu (2002) investigated the effect of the introduction of futures trading in the National Stock Exchange, India (NSE) using option strategies. The study found that derivatives have increased the spot market volatility due to increased speculation. Increased spot market volatility has been a consequence of the more frequent arrival, and more rapid processing of information. they also found that these strategies are useful in reducing risk and earning unlimited profits.
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Thenmozhi (2002) examined whether there was any change in the volatility of the S&P CNX Nifty Index in India due to the introduction of Nifty futures and whether movements in futures prices provided predictive information regarding subsequent movements in index prices. The study shows that the inception of futures trading has reduced the volatility of spot index returns.

Shembagaraman (2003) explored the impact of the introduction of derivative trading on cash market volatility using data on stock index futures and options contracts traded on the Nifty Index. The results suggest that futures and options trading has not led to a change in the volatility of the underlying stock index, but the nature of volatility seems to have changed in the post-futures market. The study also examined whether greater futures trading activity in terms of volume and open interest was associated with greater spot market volatility. It found no evidence of any link between trading activity variables in the futures market and spot market volatility.

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6.1

PROBLEM STATEMENT

The first & the most important stage of the research process are to identify the research problem. In a very real sense problem, identification is the heart of the research process. So, researcher has identified the research problem as following. To study the effectiveness of option strategies in Nifty 50

6.2

OBJECTIVE OF STUDY

Primary objective: To study the effectiveness of option strategies.

Secondary objectives: To study if there is profit or loss by applying this strategies, To identify the relationship of risk and return involve in derivative market with help of option strategies. To explore the future analysis tool to estimated the fair value of a security. To know which strategy beneficial for trader.

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6.3

RESEARCH DESIGN:

Research design can be described as an outline of a research project working or a pattern. In a research design there are series of prior decision that together provide a master plan for completing a research project. Research design is proved to be a bridge between what has been established and what is to be done in conduct of the studies. Research design should be compressive and it should provide which method to be used and what work to be done.

6.3.1 Types of Research Design:

Descriptive Research Design Descriptive study is used to study the situation. This study helps to describe the situation. A detail descriptive about present situation can be found out by the descriptive study. In this involves the analysis of the situation using the secondary data. In this project the data use is secondary data. The type of research design applied here are DESCRIPTIVE as the objective is to check the effectiveness of option strategies in nifty 50. 6.3.2 Data collection method:

The data has collected in one ways. Secondary data

Secondary data -

The secondary data are those, which are already collected by someone for some purpose and are available for the present study. The researcher has got data from website of NSE and moneycontrol.com We have taken data of 10 companies listed in nifty. The data of the stock option prices as well as other derivatives market parameters taken are the closing data for each particular month of the study.
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6.3.3 Scope of study:

Derivatives since its introduction have gained a lot of importance from the all segment of the society. Since the very beginning of it, players started finding out relationship between the Cash Market and the Derivatives Market. So in this project we had tried to understand the effectiveness of various strategies apply in the option trading. This will help the company to understand which strategy is to be used in bullish and bearish period. This will help what is the impact of strategies on the earning of investors. This will help to reduce risk in option trading by applying strategies.

6.3.4 Tools of analysis

Here researcher has used basic excel for the analysis of data and Option calculator for the calculating premium and strike price in strategies.

6.3.5 Limitation of the Study

The limitations of the study are as follow: Time Limit The time duration given for the research is less Sample Size The limitation is Sample Size, which is of 10 only; it may be less for this Topic. The study is not based on international perspective derivatives markets.

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