NAME OF THE STUDENT:
COLLEGE: SCHOOL OF MANAGEMENT STUDIES, JNTUH
“A Study on Derivatives Market with special reference to Futures & Options
in the Banking Sector”
The emergence of the market for derivatives products, most notably forwards, futures and
options, can be traced back to the willingness of risk-averse economic agents to guard themselves
against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial
markets are marked by a very high degree of volatility. Through the use of derivative products, it
is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of
risk managements, these generally do not influence the fluctuations in the underlying asset
prices. However, by locking-in asset prices, derivative product minimizes the impact of
fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors.
Derivatives are risk management instruments, which derive their value from an underlying asset.
The underlying asset can be bullion, index, share, bonds, currency, interest, etc.. Banks,
Securities firms, companies and investors to hedge risks, to gain access to cheaper money and to
make profit, use derivatives. Derivatives are likely to grow even at a faster rate in future.
Derivative is a product whose value is derived from the value of an underlying asset in a
contractual manner. The underlying asset can be equity, commodity or any other asset.
Securities Contracts (Regulation) Act, 1956 (SCR Act) defines “derivative” to secured or
unsecured, risk instrument or contract for differences or any other form of security.
A contract which derives its value from the prices, or index of prices, of underlying
2) NEED OF THE STUDY:
The study aim at knowing about the Futures & options with reference to banking sector. Many
people are trading in Derivatives like Index Futures, Stock Futures, Index Options, Stock
Options, Commodity futures, Currency Futures & Options without having proper knowledge.
Actually Options emerged as a Hedging product, but all retail clients trading Options for
Speculation purpose. Trading in Options without proper skills is like going to war without Gun.
So everybody needs to know the purpose of Derivative options and how to minimize losses and
how to maximize profits.
3) OBJECTIVES OF THE STUDY:
1. To study the derivatives market in India.
2. To analyze the operations of futures and options using Pay-off tables.
3. To study about risk management with the help of derivatives.
4. To evaluate the profitability of futures. Buyer and seller and also the option
Writer and option holder.
5. To compare cash market and Futures & option market of the selected script.
4) RESEARCH METHODOLOGY
Method of data collection
Secondary data have been collected from the respective unit through manuals annual reports and
online sources of the Companies under study.
Nature of Data
The study will be based on secondary data. 2 Months data will be taken for the study i.e Jan and
The sample scripts will be taken for analyses are ICICI Bank, SBI and Axis Bank. So thus the
sample size is three scripts for the study.
TOOLS USED FOR ANALYSIS
Appropriate tools will be used such as Tables, charts, Premium, pay off etc.
5) LIMITATIONS OF THE STUDY:
1. LIMITED TIME:
The time available to conduct the study will be only 2 months (August –Sept 2015). It’s being
a wide topic had a limited time.
2. LIMITED RESOURCES:
The Derivatives –Very difficult to understand practical scenarios. Limited resources are
available to collect the information about the Options trading.
Share market is so much volatile and it is difficult to forecast anything about it whether you
trade through online or offline.
4. ASPECTS COVERAGE:
Some of the aspects may not be covered in my study. So thus only few selected stocks like
ICICI BANK, STATE BANK OF INDIA AND AXIS BANK are considered for analysis.
SCOPE FOR FURTHER RESEARCH:
The project covers the derivatives market and its instruments. For better understanding various
strategies with different situations and actions have been given. It will include the data collected
in the recent years and also the market in the derivatives in the recent years. This study extends to
the trading of derivatives done in the National Stock Markets. The study will be limited to
Derivatives with special reference to futures and option in the Indian context. The study is a
humble attempt at evaluation derivatives market only in India context. Thus the study has a scope
for further research in the area of cash market, F & O segment traded in National stock exchange.
Chapter 1: Introduction
Chapter 2: Review of Literature
Chapter 3: Industry & Company Profile
Chapter 4: Data Analysis & Interpretation
Chapter 5: Findings, Suggestions and Conclusion