An ETF is a collection of securities that are traded on the stock exchange. These securities could be stocks, commodities, bonds or currencies. As they are listed on an exchange, ETFs trade like stocks and experience price changes as and when they are bought and sold. Assume a fund that has all the Sensex 30 stocks. Let’s call it the Sensex Fund. This fund, with its basket of 30 stocks, gives you the advantage of risk diversification. Trading in an ETF is just like buying or selling the Sensex Fund or any other Index Fund listed on the stock exchange. Since the Sensex Fund trades like a stock, its price fluctuates during market hours.

As per the SEBI circular, starting October 2019, it is mandatory for all Stock Futures and Options to be physically settled. Index Futures and Options will be cash-settled. Physical settlements will be applicable only for Stock Futures and In-The-Money Stock Options. If a trader has an open position in Stock Future or In-The-Money Stock Option that has not been squared off on the expiry date, the contract will be physically settled.

Initial margin is defined as a percentage of your open position and is set for different positions by the exchange or clearing house. The factors that decide the amount of initial margin are the average volatility of the stock in concern over a specified period of time and the interest cost. Initial margin amounts fluctuate daily depending on the market value of your open positions. Mark-to-Market margin covers the difference between the cost of the contract and its closing price on the day the contract is purchased. Post purchase, MTM margin covers the daily differences in closing prices.

Options can be bought for an underlying asset at a fraction of the actual price of the asset in the spot market by paying an upfront premium. The amount paid as a premium to the seller is the price of entering an options contract.

There is no upfront cost when entering into a futures contract. But the buyer is bound to pay the agreed-upon price for the asset eventually. The buyer in an options contract has to pay a premium. The payment of this premium grants the options buyer the privilege to not buy the asset on a future date if it becomes less attractive. Should the options contract holder choose not to buy the asset, the premium paid is the amount he stands to lose. In both cases, you may have to pay certain commissions.

To start trading in Futures and Options(F&O), all you need to do is open an online trading account. When you buy in the cash segment, you have to pay the entire value of the shares purchased – this is unless you are a day trader utilizing margin trading. You have to pay this amount upfront to the exchange or the clearing house. This upfront payment is called ‘Margin Money’. It helps reduce the risk that the exchange undertakes and helps in maintaining the integrity of the market. Once you have these requisites, you can buy a Futures and Options(F&O) contract. Simply place an order with your broker, specifying the details of the contract like the Scrip, expiry month, contract size, and so on. Once you do this, hand over the margin money to the broker, who will then get in touch with the exchange. The exchange will find you a seller (if you are a buyer) or a buyer (if you are seller).

There are many advantages of trading in futures and options. Futures and Options(F&O) contracts have hedging, arbitrage and leverage benefits. Arbitrage: Arbitrage implies taking advantage of price differences in the same or similar financial instruments. Hedging: The most common use of derivatives trading is hedging. It’s possible to use Futures and Options(F&O) contracts to set up a trading strategy in which a loss for one investment is mitigated or offset by a gain in a comparable derivative. Margin trade: While trading in the derivatives market, you only pay a margin. This is because the actual value of the contracts would be too large in lakhs and crores. However, when you make a profit, the percentage of growth is exponentially higher. This allows you to make more money.

Futures are contracts or an agreement between two parties to either buy or sell a fixed quantity of assets at a particular time in the future for a fixed price. An option is also a similar contract, except the parties are not obligated to fulfill the terms of the agreement. These contracts are then traded in the market. The minimum value of a contract is Rs 2 lakh. Futures and Options(F&O) contracts can be of various types including shares, indices, currencies as well as commodities.

Fundamental and technical analysis both have their respective benefits and drawbacks. While the former helps you identify stocks that could be multi-baggers in the future, the latter helps you gauge a stock’s future price movement and the right time to buy or sell a stock. Through fundamental analysis, you can find out about companies with high growth potential while technical analysis tells you when you should invest in them.

Technical analysis involves analysing technical charts and tools to determine a stock’s future price movement. You can find out potential entry and exit points through technical analysis. Here’s how it works: Plotting historical data to create chart patterns Identifying different chart patterns Using technical indicators to gain insights into price movements Implementing volume analysis to confirm the validity of price movements

Fundamental analysis entails analysing a company’s key fundamentals, such as assets, liabilities, revenues, management quality, etc. It helps you determine a stock’s intrinsic value by understanding its growth and future earning potential. Fundamental analysis lets you determine if a stock is overvalued or undervalued. Here’s how it works: Identifying the company’s business model Analysing the firm’s key financial statements like balance sheet, cash flow statement, income statement, etc. Evaluating the company’s management and its position with respect to competitors Calculating the company’s intrinsic value through price-to-earnings (P/E) ratio, discounted cash flow analysis (DCF), etc.

You cannot trade after market hours, i.e., after 3.30 pm Monday to Friday. However, you can place orders after market hours, which is referred to as aftermarket orders.

You can find stocks of good companies using many tools, such as the best stock screeners, as they allow you to filter the stocks based on various parameters like market cap or valuation etc.

You can find stocks of good companies using many tools, such as the best stock screeners, as they allow you to filter the stocks based on various parameters like market cap or valuation etc.

There are 11 different sectors in the equity market as classified by GICS (Global Industry Classification Standard) based on NSE classification. This categorisation helps the investor build a diversified stock portfolio.

Yes. It is mandatory to have a Demat account to apply for an IPO in India. The IPO allotted shares are transferred to the investors’ Demat account.

To trade in the stock market, you need to open a demat account and a trading account with a broker or a sub-broker registered with SEBI.

A trading account is a bridge between your Demat and bank account. It is opened with a stock broker. When an investor buys a certain number of shares, the first step is to transfer the amount from the bank account to the trading account. After the money is credited, the transaction is initiated. Similarly, when an investor sells a certain number of shares, the amount of the transaction is credited to the trading account.

The Demat account is where your securities will be held digitally. You will need to furnish the following documents to open a new Demat account: PAN, ID Proof, Address Proof, Photo & Nominee Details (Optional).

The KYC, or Know Your Client, application form is an agreement between you and the broker. You have to provide them with the necessary information, which they will validate. Some important regulations that are applied to the KYC form that you must consider are: Common KYC form for all investment types registered at the stock exchange. Similar set of documents for KYC of all kinds of investment types. There are two different forms for individual and non-individual investors. Complete the KYC form in all respects and strike-off the blank fields. Do not sign an empty form. Cross out any page that you leave blank. Know the documents required to be submitted to your broker.