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Options and Derivatives Trading on NSE
Rank: New-farer Joined: 5/20/2010 Posts: 69
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SOOOO,
I was thinking, is it viable to trade in options and derivatives on this here NSE. My understanding is that the Johannesburg Stock exchange does so, albeit its 400+ listings compared to the NSE's about 50, however I think the market here is speculative enough to engage in this....
what do you all think??
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Rank: Elder Joined: 4/22/2010 Posts: 11,522 Location: Nairobi
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sl8r wrote:SOOOO,
I was thinking, is it viable to trade in options and derivatives on this here NSE. My understanding is that the Johannesburg Stock exchange does so, albeit its 400+ listings compared to the NSE's about 50, however I think the market here is speculative enough to engage in this....
what do you all think?? ...bado we still havent got the right structures to implement options and derivatives trading...trading in equities and fixed income is still a mess we need to sort that out first. possunt quia posse videntur
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Rank: New-farer Joined: 5/20/2010 Posts: 69
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so you suggest a change in framework perhaps in order have this kind of trading in place. What structures need to be changed??
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Rank: New-farer Joined: 1/29/2013 Posts: 45 Location: South Africa
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The perfect way to lose your money - options & derivatives Greed is fear.
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Rank: Elder Joined: 2/23/2009 Posts: 1,626
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Pick n Pay wrote:The perfect way to lose your money - options & derivatives Why do you think so? Uncertainty is certain.Let go
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Rank: New-farer Joined: 1/29/2013 Posts: 45 Location: South Africa
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Because no one understands these products. This is what caused the financial crisis in the US that spread around the world. Greed is fear.
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Rank: Elder Joined: 2/23/2009 Posts: 1,626
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Pick n Pay wrote:Because no one understands these products. This is what caused the financial crisis in the US that spread around the world. Some people do because there were some who kept saying the bubble was going to burst.But I like that they are complicated,means if you are knowledgeable you can reap profits easily. Uncertainty is certain.Let go
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Rank: New-farer Joined: 1/29/2013 Posts: 45 Location: South Africa
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ChessMaster wrote:Pick n Pay wrote:Because no one understands these products. This is what caused the financial crisis in the US that spread around the world. Some people do because there were some who kept saying the bubble was going to burst.But I like that they are complicated,means if you are knowledgeable you can reap profits easily. When l clock a billion ie when l can be able to take a financial hit, l will try this. Even Merrill Lynch (the creators of this products) only made money by hyping these complex products to their clients and then betting they would fail, and fail they did. Bankers made money. Investors lost. Greed is fear.
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Rank: Elder Joined: 2/23/2009 Posts: 1,626
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Pick n Pay wrote:ChessMaster wrote:Pick n Pay wrote:Because no one understands these products. This is what caused the financial crisis in the US that spread around the world. Some people do because there were some who kept saying the bubble was going to burst.But I like that they are complicated,means if you are knowledgeable you can reap profits easily. When l clock a billion ie when l can be able to take a financial hit, l will try this. Even Merrill Lynch (the creators of this products) only made money by hyping these complex products to their clients and then betting they would fail, and fail they did. Bankers made money. Investors lost. It was all in the the formula they used to structure their products.Any investor who could do some fundamental analysis could see its faulty. But that's another thing why would you buy something that the bankers/sellers are betting against. Uncertainty is certain.Let go
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Rank: New-farer Joined: 1/29/2013 Posts: 45 Location: South Africa
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ChessMaster wrote:Pick n Pay wrote:ChessMaster wrote:Pick n Pay wrote:Because no one understands these products. This is what caused the financial crisis in the US that spread around the world. Some people do because there were some who kept saying the bubble was going to burst.But I like that they are complicated,means if you are knowledgeable you can reap profits easily. When l clock a billion ie when l can be able to take a financial hit, l will try this. Even Merrill Lynch (the creators of this products) only made money by hyping these complex products to their clients and then betting they would fail, and fail they did. Bankers made money. Investors lost. It was all in the the formula they used to structure their products.Any investor who could do some fundamental analysis could see its faulty. But that's another thing why would you buy something that the bankers/sellers are betting against. Bankers bet against their clients secretly. When the party was over, they dumped the product. Unfortunately, that is the time some banks around the world, especially in Germany, were stocking up these products in their books. However, if you feel you can handle the heat, by all means, go right ahead. Greed is fear.
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Rank: Elder Joined: 6/27/2008 Posts: 4,114
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So, Jack has a million SCOM shares which he promises to sell to John at 7 bob each On 1st June. As a sign of commitment, John pays Jack 10 cents each....100k in total.... SCOM declares 30bn profit and demand shoots to 10 bob.....shares are short supply....but Jane wants some, so she goes to Jack and he tells her that he had promised to sell to John....so she goes to John and offers him 50cents for the right to buy from Jack....he pockets the 500k and transfers the rights to Jane Jane rushes to Jack, buys the 1m shares at 7m and then sells them in the open market and makes 2.5m All so fine....until Jane decides to sell the rights to Joe at one bob each instead of executing them [making 500k], and Joe sells them over to Jill at 1.50 [also making 500k] and Jill sells to Jim at 2 bob [another 500k] ...and so on......eventually we have a market for these rights which in reality don't have any hard value...they are just a promise to do something! Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Rank: New-farer Joined: 5/20/2010 Posts: 69
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I think its all a matter of greed. There are some who pulled out of the bubble just before it burst and are now sitting pretty. A lot of the banks do indeed bet against their clients however, if an investor set certain thresholds and stuck to them, things may be a little different...granted its a complicated product but, if it is well understood, you'll be loaded...
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Rank: Member Joined: 3/10/2008 Posts: 301 Location: Abu Dhabi
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Options / derivatives can be compared to a sword - U can put it into various uses, which may be detrimental or beneficial.
That said, for derivatives to work, liquidity and depth is paramount. JSE capitalization is close to $1 Trillion, compared to NSE's $ 16Bn
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Rank: Elder Joined: 2/23/2009 Posts: 1,626
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@mukiha - That's the problem will CMA/NSE effectively implement those contracts or it becomes just scandals over scandals. Uncertainty is certain.Let go
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Rank: Elder Joined: 6/27/2008 Posts: 4,114
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mukiha wrote:So, Jack has a million SCOM shares which he promises to sell to John at 7 bob each On 1st June. As a sign of commitment, John pays Jack 10 cents each....100k in total....
SCOM declares 30bn profit and demand shoots to 10 bob.....shares are short supply....but Jane wants some, so she goes to Jack and he tells her that he had promised to sell to John....so she goes to John and offers him 50cents for the right to buy from Jack....he pockets the 500k and transfers the rights to Jane
Jane rushes to Jack, buys the 1m shares at 7m and then sells them in the open market and makes 2.5m
All so fine....until Jane decides to sell the rights to Joe at one bob each instead of executing them [making 500k], and Joe sells them over to Jill at 1.50 [also making 500k] and Jill sells to Jim at 2 bob [another 500k] ...and so on......eventually we have a market for these rights which in reality don't have any hard value...they are just a promise to do something!
... and I could also go to Jim and promise him that I will buy his rights at 2.50 on May 31....thereby making a promise to buy a promise to buy SCOM shares.... the whole thing loses meaning and because the distance from reality (SCOM shares) has increased greatly, the propensity to break the promise increases as well.... it is psychologically easier to shoot a person with a gun from 10m away that it is to hack him with a panga from 1m away! Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Rank: Member Joined: 2/18/2011 Posts: 448
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mukiha wrote:mukiha wrote:So, Jack has a million SCOM shares which he promises to sell to John at 7 bob each On 1st June. As a sign of commitment, John pays Jack 10 cents each....100k in total....
SCOM declares 30bn profit and demand shoots to 10 bob.....shares are short supply....but Jane wants some, so she goes to Jack and he tells her that he had promised to sell to John....so she goes to John and offers him 50cents for the right to buy from Jack....he pockets the 500k and transfers the rights to Jane
Jane rushes to Jack, buys the 1m shares at 7m and then sells them in the open market and makes 2.5m
All so fine....until Jane decides to sell the rights to Joe at one bob each instead of executing them [making 500k], and Joe sells them over to Jill at 1.50 [also making 500k] and Jill sells to Jim at 2 bob [another 500k] ...and so on......eventually we have a market for these rights which in reality don't have any hard value...they are just a promise to do something!
... and I could also go to Jim and promise him that I will buy his rights at 2.50 on May 31....thereby making a promise to buy a promise to buy SCOM shares.... the whole thing loses meaning and because the distance from reality (SCOM shares) has increased greatly, the propensity to break the promise increases as well.... it is psychologically easier to shoot a person with a gun from 10m away that it is to hack him with a panga from 1m away! thanks for the simple explanation.Alwayys wondered what derivatives and options involved and i can see its all about playing smart with imaginary holdings.We definately are not ready for such,in fact market can easily crush
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Rank: Elder Joined: 2/23/2009 Posts: 1,626
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mibbz wrote:mukiha wrote:mukiha wrote:So, Jack has a million SCOM shares which he promises to sell to John at 7 bob each On 1st June. As a sign of commitment, John pays Jack 10 cents each....100k in total....
SCOM declares 30bn profit and demand shoots to 10 bob.....shares are short supply....but Jane wants some, so she goes to Jack and he tells her that he had promised to sell to John....so she goes to John and offers him 50cents for the right to buy from Jack....he pockets the 500k and transfers the rights to Jane
Jane rushes to Jack, buys the 1m shares at 7m and then sells them in the open market and makes 2.5m
All so fine....until Jane decides to sell the rights to Joe at one bob each instead of executing them [making 500k], and Joe sells them over to Jill at 1.50 [also making 500k] and Jill sells to Jim at 2 bob [another 500k] ...and so on......eventually we have a market for these rights which in reality don't have any hard value...they are just a promise to do something!
... and I could also go to Jim and promise him that I will buy his rights at 2.50 on May 31....thereby making a promise to buy a promise to buy SCOM shares.... the whole thing loses meaning and because the distance from reality (SCOM shares) has increased greatly, the propensity to break the promise increases as well.... it is psychologically easier to shoot a person with a gun from 10m away that it is to hack him with a panga from 1m away! thanks for the simple explanation.Alwayys wondered what derivatives and options involved and i can see its all about playing smart with imaginary holdings.We definately are not ready for such,in fact market can easily crush It can get even worse than he has described. Uncertainty is certain.Let go
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Rank: Member Joined: 2/18/2011 Posts: 448
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thanks for the info guys.perhaps can start a tutorial for beginners and those with knowledge deficits like myself.perhaps let me ask,how does one trade in gold or silver yet he doesnt have it physically.as in where is this gold that people trade in or its imaginary as in the derivatives?
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Rank: Chief Joined: 5/31/2011 Posts: 5,121
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Futures Exchanges Licensing Regulations in Kenya  read more here >>> http://www.cma.or.ke/index.php?...nd-events&Itemid=171
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Rank: Member Joined: 8/16/2012 Posts: 660
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mukiha wrote:mukiha wrote:So, Jack has a million SCOM shares which he promises to sell to John at 7 bob each On 1st June. As a sign of commitment, John pays Jack 10 cents each....100k in total....
SCOM declares 30bn profit and demand shoots to 10 bob.....shares are short supply....but Jane wants some, so she goes to Jack and he tells her that he had promised to sell to John....so she goes to John and offers him 50cents for the right to buy from Jack....he pockets the 500k and transfers the rights to Jane
Jane rushes to Jack, buys the 1m shares at 7m and then sells them in the open market and makes 2.5m
All so fine....until Jane decides to sell the rights to Joe at one bob each instead of executing them [making 500k], and Joe sells them over to Jill at 1.50 [also making 500k] and Jill sells to Jim at 2 bob [another 500k] ...and so on......eventually we have a market for these rights which in reality don't have any hard value...they are just a promise to do something!
... and I could also go to Jim and promise him that I will buy his rights at 2.50 on May 31....thereby making a promise to buy a promise to buy SCOM shares.... the whole thing loses meaning and because the distance from reality (SCOM shares) has increased greatly, the propensity to break the promise increases as well.... it is psychologically easier to shoot a person with a gun from 10m away that it is to hack him with a panga from 1m away! What are the 'penalties' put forward if one cannot fulfil the promise as agreed upon at the agreed time ? Does one lose the paid up fee & the securities holder has the discretion now to sell at the 'open market' at the market rate, or the rights holder has the authority to choose who can buy the securities? Live and learn; and don’t forget, nothing ventured, nothing gained.
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