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Stock Cash

The term cash equity refers to the liquid portion of an investment that can easily be converted into cash. In relation to investing, cash equity refers to the company issuing stocks to the public. It may also refer to institutional trading of these shares. In relation to real estate, the amount of property’s value that is not borrowed against a mortgage or line of credit.

How does cash equity trading work?
In the capital market, cash equity trading refers to the trading of equities or stocks done by large financial institutions on major stock exchanges. For example, the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). These companies trade in shares using the firm’s capital. Also, they place trades on their behalf and trade on behalf of retail investors or institutional clients.

For example, ABC broking firm buys 20 lakh shares of Reliance Industries because the firm’s analysts believe that the stock price is increasing over the next week. This, ABC Broking firm invests its own capital and uses computerized trading to place the trade instantly. Hence, the company hopes to generate short term profit and the profit to the firm’s capital. Similarly, ABC Broking company can place trades for large institutional clients like mutual funds. Also, if an individual investor wants 100 shares of Reliance Industries, the ABC Broking company places the trades immediately using the same computerized system.

In both instances, the broking firm must place customer trades before placing the trades for the from accounts. Therefore, to ensure fair trading executions for clients, this policy has been put in place. Furthermore, if the brokerage firm wishes to buy Reliance Industries using the firm capital, and already has customer orders to purchase the same stock, the broker must place the client’s orders first.

The following are the benefits of cash equity trading – 

Investors receive equity shares in the digital form in return for the cash invested in the company.
An investor or trader can hold equity shares for any duration.
The risk involved in cash equity trading is comparatively lesser than in derivatives. 
Investing in equity shares for a longer duration reduces the overall risk to the investor.

Stock Future

Stock Futures are financial contracts where the underlying asset is an individual stock. Stock Future contract is an agreement to buy or sell a specified quantity of underlying equity share for a future date at a price agreed upon between the buyer and seller. The contracts have standardized specifications like market lot, expiry day, unit of price quotation, tick size and method of settlement.

Stock Option

Investment bankers may purchase either of these two types of options individually or in conjunction with each other to apply certain trading techniques, such as a covered call. 

There are two types of stock options:

• A stock call option, which grants the purchaser the right but not the obligation to buy stock. A call option will increase in value when the underlying stock price rises.
• A stock put option, which grants the buyer the right to sell stock short. A put option will increase in value when the underlying stock price drops.

What is a Stock Option? 
A stock option is a contract between two parties that gives the buyer the right to buy or sell underlying stocks at a predetermined price and within a specified time period. 
A seller of the stock option is called an option writer, where the seller is paid a premium from the contract purchased by the buyer

Index Options

Just like a derivative future contract, options too are an derivative product where the buyer holds a right to execute option of either buying or selling of an underlying asset at a certain pre-determined price (also known as the strike price) during a pre-determined time period. 
An Index option is a type of option where the underlying is an Index i.e. a basket of various selected stocks. The other type of options defined based on the underlying are Stock options.

Index Options is a derivative instrument wherein the underlying asset is corresponding Index viz. Nifty 50 Index, NSE Bank Nifty Index or NSE Nifty Midcap 50 or NSE NIFTY IT Index and so on and so forth. Each of the indices has a defined set of stocks with a corresponding weight to each stock and the value of the index is calculated based on CMP of the stock and the weight attributed to it. All index options have their own lot sizes, multiple strike prices and different expiry periods. We've discussed some of these in detail below. Options too are a derivative like Futures contracts but unlike Futures contracts your profit or loss will non -linear depending on the up move/down move in corresponding Index. 
Traders in options need to pay only the premium. Traders need not pay the full notional value of the contract to buy the options lot. The premium/ option price is determined using options calculator and is usually nominal compared to actual Index contract value. 

Bank Nifty Options

Underlying - Bank Nifty Index 

Lot size - 25 

Expiry dates - Every week expiry on the last Thursday is a trading holiday declared by the nse, the expiry date is the previous working day.

Nifty Options

Underlying - Nifty 50 Index

Lot size - 50

Expiry dates - Every week  Expiry on the last Thursday is a trading holiday declared by the nse, the expiry date is the previous working day.

Commodities

The Multi Commodity Exchange of India Limited (MCX), India’s first listed exchange, is a state-of-the-art, commodity derivatives exchange that facilitates online trading of commodity derivatives transactions, thereby providing a platform for price discovery and risk management. The Exchange, which started operations in November 2003, operates under the regulatory framework of Securities and Exchange Board of India (SEBI). MCX offers trading in commodity derivative  contracts across varied segments including bullion, industrial metals, energy and agricultural commodities, as also on indices constituted from these contracts. It is India’s first Exchange to offer commodity options contracts, bullion index futures and base metals index futures contracts. The Exchange focuses on providing commodity value chain participants with neutral, secure and transparent trade mechanisms, and formulates quality parameters and trade regulations, in conformity with the regulatory framework. The Exchange has an extensive national reach, with 597 registered members and 49,999 Authorised Persons with its presence in around 1,103 cities and towns across India as on 31 December 2021. MCX is India’s leading commodity derivatives exchange with a market share of 92.9 per cent in terms of the value of commodity futures contracts traded in financial year 2021-22 (Apr-Dec).

The Exchange’s flagship index series, MCX iCOMDEX, is a series of real-time commodity futures price indices, which give information on market movements in key commodities/ segments traded on MCX. The MCX iCOMDEX series consists of a Composite index, apart from three sectoral indices: the Base Metal index, the Bullion index and the Energy index, and also nine single-commodity indices: Gold, Silver, Aluminium, Copper, Lead, Nickel, Zinc, Crude Oil and Natural Gas indices.

Multi Commodity Exchange Clearing Corporation Limited (MCXCCL), a wholly-owned subsidiary of MCX, is the first clearing corporation in the Indian commodity derivatives market. The clearing corporation provides collateral management and risk management services, along with clearing and settlement of trades executed on the Exchange. The European Securities and Markets Authority (ESMA) has granted recognition to MCXCCL as a third country CCP under European market infrastructure regulation. MCXCCL, having state of art risk management system, is the central counterparty for all trades executed on MCX’s trading platform. It also provides Electronic Commodity Accounting and Receipts Tracking System through a web based portal ‘Commodity Receipts Information Systems’ (COMRIS). Further, it provides settlement guarantee to all trades executed on MCX via its Settlement Guarantee Fund (SGF).

With an aim to seamlessly integrate with the global commodities ecosystem, MCX has forged strategic alliances with leading international exchanges such as CME Group and London Metal Exchange (LME). The Exchange has also signed Memoranda of Understanding (MoUs) with renowned global exchanges viz. Dalian Commodity Exchange (DCE), Taiwan Futures Exchange (TAIFEX), Zhengzhou Commodity Exchange (ZCE) and European Energy Exchange AG (EEX) to facilitate cooperation in areas of sharing knowledge and expertise, education & training, etc. The Exchange has also tied-up with various trade bodies, industry associations and educational institutions across the country. These partnerships enable the Exchange to improve trade practices, increase awareness, and facilitate overall growth and development of the commodity market.

MCX’s ability to use and apply technology efficiently is a key factor in the development of its business. The Exchange’s technology framework is designed to provide high availability for all critical components, which guarantees continuous availability of trading facilities. The robust technology infrastructure of the Exchange, along with its with rapid customisation and deployment capabilities, enables it to operate efficiently with fast order routing, immediate trade execution, trade reporting, real-time risk management, market surveillance and market data dissemination.

MCX has been continuously raising the bar through effective research and product development, intelligent use of information and technology, innovation, thought leadership and ethical business conduct. MCX has been certified with ISO standards, ISO 9001:2015 Quality Management System, ISO 14001:2015 Environment Management System, ISO 22301:2019 Business Continuity Management System and ISO/IEC 27001:2013 Information Security Management System

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