What does "Future & Options" means in terms of Stock market?
Answers: In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price.
A futures contract gives the holder the obligation to buy or sell, which differs from an options contract, which gives the holder the right, but not the obligation. In other words, the owner of an options contract may exercise the contract. Both parties of a "futures contract" must fulfill the contract on the settlement date. The seller delivers the commodity to the buyer, or, if it is a cash-settled future, then cash is transferred from the futures trader who sustained a loss to the one who made a profit. To exit the commitment prior to the settlement date, the holder of a futures position has to offset their position by either selling a long position or buying back a short position, effectively closing out the futures position and its contract obligations.
OK options, traded options anyway, are instruments that gve you the right (but not obligation) to buy (or sell) stock a t a pre-determined date and at a pre-determined price (the strike) You can sell them at anytime within the period. There is obviously a lot more detail to know but that's the basic meaning.
Futures. I am not completely sure of this, but it is quite similar, but I think they are used for indices, comodities and currencies. i.e. if someone was due to pay you $100m dollars in 3 months time but your home currency was sterling. You could sell the $ future at a rate which will be fixed now, thereby hedging against any future (adverse) movement in the $.
I earn 15000 rs per month. how should i start investing. i have no investments as off now...thanks?
Answers: i presume that you are young.
1. begin your investment first taking for yourself and your wife , insurance covers.
2. next, if you have some money left, invest in the Post Office MIS every month. this is a good scheme. both Insurance and PO investments are risk-free.
now, these investments have also taken care of your income- tax payment angle.
3. perhaps, by now you have exhausted all your investible surplus. so , next year, you can think of investing in Mutual Funds for better returns.
but during this period you must study the stock market thoroughly, and begin investing in good stocks. remember, you should never invest in stock s unless you know thoroughly about stock market and stocks you want to invest in. every stock must be studied in detail before you take a call.
this is a very tedious but very rewarding experience.
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I take it you make $15,000.00/month or $180,000.00 pr year and you are under the age of 35.
My fatherly advice would be to start a Roth IRA and put 15% of what you make into a no load (No cost) good mutual fund. American funds is traditionally very steady and a good venue to start. Investing directly into stocks may be sticker shock for you to jump into with both feet.
You will learn to live off the difference, and will have a very nice nest egg in 30 yrs. Then as you asses your debt load , which hopefully is under control, and create other savings accounts for available cash. Maybe a good money market savings account. They pay higher interest and you can use that for bigger purchases, emergencies etc. They have different rules and regulations than traditional checking accounts. Check them out.
Live responsibly and keep your deblt load managable. With your income, you should not have much debt. Your lifestyle will dictate that.
My saying always has been "Invest for the futre and for when you cannot work, for what ever reason. Why save alot when you have debts to pay off. Use some of that extra to pay off debts and develop a peace of mind and comfort."
Hope this helps some. Good luck.
FYI: I am not a banker, nor an broker, just a Father of 5 that knows what is like to struggle with the financial ends of raising a family and manage for the future. I never made more than $85,000.00 per year, but yet have over $500,000 saved for my retirement.
Calculate your tax.Invest 40% of the money you are planning to invest to save tax in a PPF account(Better open a PPF account in a SBI branch than opening in a Post office, which is more more convenient for operation).Invest the remaining money for tax saving in a good ELSS fund like SBI magnum tax gain scheme, Principal tax gain scheme etc on a monthly basis like when market corrects.
60% of the remaining money you are planning to save can be invested in some good diversified equity funds like Magnum contra, sundaram select focus, birla sunlife equity,Reliance growth etc...in a phased manner like SIP or when market corrects.The remaining 40% can be used to buy some gold, or some land, and invest in Bank FD for urgent needs.
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