What is the point of Futures contracts for retail traders?
I'm an options guy - hey, to each their own. Since I'm in the process of writing a series of posts on the route less travelled on options trading, I felt it would be best to get this first out of the way. When I first came across futures contracts on stocks, it didn't make any sense to me. Futures contracts behave in exactly the same way as the underlying asset with the added complication of having exposure to interest rates (typically, you can ignore this detail - this detail becomes relevant if you want to add options to the mix, especially so with currency derivatives). The one reason I heard of at that time (this was in 2004) - 'You get a lot of leverage with Futures!'. Sure, but this wasn't a big difference; I typically had to put down about 17% as upfront margin. IMO, this wasn't a good enough reason as this translated to a margin of 5.9x - heck, depending upon the stock, Sharekhan gave me a margin of up to 10x on even delivery trades (again, this was in 2004). If someone wanted to trade intraday, do it with stocks, why futures? It took me a while to get the point. When one wanted to profit off a rise in an asset's value - buy the stock, let it rise, sell - rinse and repeat. How do you profit off an asset's depreciation? You could short-sell the stock; but you had to close the position at the end of the day as there was no mechanism to borrow stocks in Indian markets. Any drop in the asset's value that happens overnight or over the weekend is beyond reach. Entre futures contracts. These things allow someone to keep the position open for an entire month. If you had inside information of the mess that was going on at Yes Bank, short-selling the stock was a horrible way of capitalising on it, opening a short position via futures contracts was the way to do it: you can squeeze the full extent of the drop, with leverage on top of it. Now, that little detail about exposure to interest rates being baked into the contracts, I'll get to that in the next post. When Bitcoin was at an all time high of around $20,000 per BTC, all the Wall St banks were in a rush to offer futures contracts on bitcoin. I told everyone who was willing to listen that this was the beginning of the fall. If Bitcoin was only going to rise, why would a bank offer a product to their customers on which the bank only stands to lose money. It only made sense for the banks to sell futures on BTC if it were to crash and burn, in which case the banks stand to make a killing on these contracts. And the banks made a killing when the crypto market crashed and burned. Nobody seemed to notice that the banks only sold BTC futures, none of them took on a short position on BTC if their customer wanted to short a BTC futures contract. If there were no derivatives on crypto, while everyone involved stood to gain from it rising, it was in no one's interest for the asset class to crash and burn. Now, people can profit off a drop in BTC valuation.
sharekhan broker did unauthorized trades from my portfolio - is it very illegal or just a little bit illegal?
i had a smallish portfolio of about 70k that had been lying with sharekhan for a long time. this broker called me one day and asked if i wanted to trade. i said ok. i did not authorized him to do any intraday trading or buying on margin. just told him to sell and buy for long term investment. after a week or so this trader started to do huge amounts of transactions as intraday trading - on my portfolio of 70K he would do purchase and sale of upto 46Lakhs in one day. I called him and told him to stop doing this. The next day he again did it, I again called him and told him to stop. Eventually the shorter version of the story is that within a period of one month he had reduced the value of the portfolio from 70k to 19k. yes, he eroded away 70% of the portfolio by just doing these trades. this was in jan-feb 2015. earlier this month i filed a complaint against him on the nse complaint portal. they arranged for a conference call with the rep from sharekhan. the sharekhan rep was absolutely unrepentant and said that since i had been informed of all the trades they were legal. i argued that i had not allowed the broker to do this type of trading in the first place, but she just refused to reason. i am thinking of filing a civil case against sharekhan. but first i would like to know "how(much) illegal" is it for a trader to do unauthorized trades on a portfolio? also if i take them to court, would sharekhan make good my losses. thanks.
Sharekhan Intraday Margin. For intraday trading, the margin is one of the crucial and important factors. It enables the traders to trade beyond what they have in their trading account and which is very important in intraday trading. The Sharekhan Intraday Margin is 32 times, which is one of the highest amongst the traditional brokers and way Sharekhan Equity Margin Calculator. When it comes to Equity trading, Sharekhan gives you a buy margin of as low as 25% in a few scrips and goes as high as 100% in others. There is a varied range in this segment when it comes to the margin one may get. Furthermore, there is a differentiation when it comes to delivery and intraday forms of trading. Disclaimer : Margin Trading facility is subject to provisions of SEBI Circular dated June 13, 2017 and T & Cs mentioned in rights and obligations statement issued by Sharekhan. Sharekhan, a Full-service broker, has superb investor training schemes.It also provides trading software and tools to its clients. In this blog, we will try to explain all about Sharekhan Trading. Sharekhan was established in Feb 2000 as a web-based trading portal. Sharekhan offers administrations like PMS, trade execution in Equities, Futures and Options, Commodities, and dissemination of Margin Funding allows you to take leveraged positions in capital markets with the help of amount borrowed from SFSL against securities or cash. Know more about Margin Funding at Sharekhan.
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