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Derivatives

Exposure Margin

As we continue our exploration of the fascinating world of finance, let's delve deeper into the concept of exposure margin in the F&O segment. This margin serves as an additional layer of protection for our positions, complementing the Initial/SPAN® margin. When it comes to index futures and index option sell positions, the exposure margin is set at 3% of the notional value. However, for individual securities, the margin is higher at 5% or 1.5 standard deviations of the logarithmic returns of the stock over the last six months in the underlying cash market. Keep in mind, this margin is applied to the notional value of a position.

Long Hedge (Futures)

A long hedge refers to a strategy where an investor takes a long position on a futures contract. This is commonly utilized by hedgers who plan to purchase an asset in the fu...

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Out-of-the-money

An option that would result in a loss upon immediate exercise is known as an out-of-the-money option. Specifically, a Call option is considered out-of-the-money when the cur...

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Extrinsic Value

The intrinsic value is the inherent value of an option determined by its underlying asset's current price. This means that the extrinsic value is influenced by factors such a...

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Deep Discount Bonds

Deep Discount Bonds, also referred to as zero-coupon bonds, are financial instruments that are acquired at a fixed face value, and the full amount of the investment is paid ...

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