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The Art Of Cutting Your Losses

By Author: sanjaysingh
Total Articles: 5

There are many investor who don't know what to do to protect themselves in the stock market. When you trade in stocks you need to understand and undertake some important decision on daily basis and these decision are going to decide your outcome of trading. A investor can choose different segment according to his Risk Capacity.What I observe in market that a person should have to divide his investment in equal ratio and then he can trade in best suitable segment like Equity,Future, Option etc. People used to convert intraday position in positional work but that is not a great idea. Intraday market moments are highly influenced by fundamental & short term news but at other hand positional trade are more about technical analysis of any particular script and industry. Always be double sure about your trade pattern. Your decision should have proper consideration of your current financial situation and future plans too.

future and options are the types of Derivative contract , derivative are the contract whose value is derived from underlying asset. obviously prices of future and option depend upon the underlying asset but not the prices of underlying asset decided buy the option pricing. in share market underlying asset is the prices of scrip or share listed in NSE Equity Market, that is a base market on the basis of which movement in future and option pricing occur. There are approxly 172 share or scrip are presence in derivative, means an individual can work in its future and option contract. To understand the concept of Option Just take an Example, like you want to purchase a property whose current market price is 1 lac, and your exception is that after 1or 2 month its prices can increase upto 1.5Lac that would be a profitable , but may be you have fear that its prices can decrease upto 50k that would be a loss condition, In that manner you can create a contract buying paying a minimum amt. like 10,000 that on fixed future date i will buy this property at fixed rate of 1lac, here the price of underlying is 1 lac.
if the prices of underlying asset increase(property 1 lac) prices of contract will also increase.
Option is the contract that gives you a right but not obligation to buy and sell an underlying asset at fixed price on or before a fixed future date (i.e. is expiry date of the contract)
Call option gives you a right to buy underlying asset
Put Option : gives you a right to sell a underlying asset.
suppose there is stock of ABC ltd. whose current market price in equity is 120/- share and you want to invest in its option contract with the expectation of bullish trend.If you buy a call option of strike price 120. at particular premium. mean you are making a contract that on future date or before that will buy this share at the rate of 120.
here you don’t have obligation to buy this share you just have right to buy , if you want to execute this right you can purchase fixed quantity of share (a lot size).here the underlying asset is the share price in equity market. if the prices increase in equity market of that share definitely premium amount of 120 call option will also increase.
suppose the 120 call option you have purchased at that rate of INR 5/- and its lot size is 1000 then your total investment would be (5*1000= 5000) and if in future the premium of option contract increase at that rate you can exit by selling that contract.
like a future contract option are also 1 month expiry contract if you could not execute your right or could not square off your position then broker will ultimately square off this position at current market price and that may be a loss.
Definitely each person want to generate an secondary sources of income or may be expecting some profit for future benefit. like if an individual invest in Fixed deposit he also expecting that after fixed tenure will get some interest or return on his/her investment.
it doesn't’ mean that a non-commerce person can not invest in the stock or in any kind of financial securities , He can investment but the most important thing is a proper knowledge about the stock market and about the other securities that how an individual can invest in this.


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