1.What is Stock Market?

The share market is a stock market besides stocks of companies; other tools are also traded. The share market is a source for companies to raise funds and for investors to buy and sell shares in companies or to purchase part-ownership in growing companies and grow their wealth.

Understand the shares

Share is referred to by different names like equity, financial security, and so forth. A person carrying a share of a company retains that part of possession in that company. Someone holding maximum stocks moves maximum ownership and designated like director, chairman, etc. To learn about how you can earn on the stock exchange has to understand how it works.

The stocks will be saved in Demat account in electronic format. Index at share market Index consists of a group of shares. Index denotes the management of the entire marketplace. Like when folks say the market is going up or down means Index is going up or down. The Index is made up of market capitalization and high liquidity shares.

Two basic approaches to stock market investing

Value Investing

Value investors typically invest in well-established businesses that have shown steady profitability on a lengthy period of time, which will offer regular investment income.

Growth Investing

Growth investors seek out companies with exceptionally large development possible, hoping to achieve the greatest appreciation in the share price.

2.Basics of investments

Goals

Investors should be aware of their financial goals, such as short, medium, and long-term objectives.

Risk

Investors should be aware of the risks associated with specific investments. Risk levels include low, moderate, and high. For example, if an investor is a high risk taker, he or she can consider investing in stocks.

Time Horizon

After establishing goals, one must consider time horizons. How long will it take to achieve a goal, such as three, five, or ten years?

Asset allocation

it entails investing with diversification. This means that one should invest in a variety of investment opportunities.

Things to know

Before investing in any asset class, investors should conduct preliminary research on it. For example, if a person wants to invest in mutual funds, what type of mutual funds should he or she chooseHow much is the maximum & minimum investment? And so on.

3.Why to invest?

Secure your family’s future as well as your own

for what reason; the future is unknown to anyone. As a result, all you can do is save money, which is extremely important.

Retirement savings

A retirement plan can assist you in making the best investments for your future, where you will never have to rely on your children to cover your expenses. Trust me when I say that relying on your children for basic necessities is a horrible feeling.

Passive Income

There are two ways for stocks to make money for their owners. Capital gains and dividends

Huge capital gains

Stock, Mutual Funds returns generally outpace inflation.

Long-term growth potential

Stocks have outperformed other investments in terms of long-term performance.

4.What are derivatives?

A derivative refers to a type of contract. Derivatives are essentially contracts whose value is derived from an underlying asset. The underlying asset can be a financial asset or a commodity. The value of the underlying asset keeps changing according to market conditions. In basic term, the value of the derivative product will fluctuate in response to changes in the underlying asset’s value Financial Derivatives: Derivatives derived from financial assets are known as financial derivatives. Financial assets include equity, interest rates, currencies, Index etc. For example, equity is a Derivative whose underlying asset is stock. In other words, it serves as a guarantee that you will buy the asset at some point in the future. The derivative contract specifies the exact date and price.

Futures

Futures are derivative financial contracts which provide the holder of the contract the right to buy and sell the underlying asset at future time at a price that is agreed upon at the time of entering into the contract. “Futures contract” and “futures” refer to the same thing. Future contract are negotiable, standardized and contract holder has the right to transfer the contract obligations to a third party before expiry date. For example, Investor A requires 1000 Kg of sugar on March 31st to meet production needs. On January 1st, investor A enters into a future contract in sugar, which we assume is designed to purchase 100kg of sugar. On January 1, Investor A will purchase 10 Sugar future contracts, and if the price is 5000, Mr. X will pay 50,000 to purchase 1000Kg of sugar. When the contract matures on March 31, Mr. x will pay INR 50K and the seller will deliver 1000 Kg of sugar.

Options

Options are a type of derivative, so the value of the underlying asset determines its value. You can use stocks, indexes, currencies, commodities, or other securities as underlying assets. Now that we have defined options, let’s take a look at option contracts. A financial contract that gives an investor the right to buy or sell an asset at a specified price by a specified date is called an option contract. However, it includes the right to purchase, but not the obligation to purchase.

The main difference between option contracts and futures contracts is that future holders must fulfill their contract obligations regardless of whether the holder’s position is contractual or not. However, option contract holders have the option of not having to fulfill their obligations if a position causes a loss.

There are two types of options: call and put.

CALL

Form buyer perspective, when an investor expecting up movement in the market.

PUT

Form buyer perspective, when an investor expecting fall in the market.

Options can also be categorized into American and European options based on exercise style.

American Options

These options are that can be exercised at any time until the expiration date. Some of the security options available from NSE are American style options.

European Options

These options can only be exercised on the maturity date. All index options traded on NSE are European options.

5.Derivative strategies

Covered call

A covered call refers to transactions in the financial market in which the investor selling call options owns the equivalent amount of underlying security. To execute an investor holds a long position in an asset then sells a call options on that same asset to generate an income stream.

Covered call is neutral strategy where an investor only expects minor fluctuation in market. The main motive is to earn premium and providing a measure of downside protection.

Maximum gain = Strike price – stock purchase price – premium received.

Maximum loss = stock buy price – premium received.

Married put strategy

The married put gets its name by combining two investment strategies: stocks and options. In this Strategy an investor, Holing a long position in stock, Purchase at the money put option on the same stock protect against depreciation in stock’s price.

Bull call spread

– It is type of vertical spread, it contains two calls with the same expiration but different strikes. The strike price of the short call is higher than the strike of the long call. Buying one call option and selling another at a higher strike price to help pay the cost

Maximum Gain = High strike – low strike – net premium paid.

Maximum loss= Premium paid.

Bear Put spread

It consist of buying one put option in hopes of profiting from decline in the underlying stock, and writing another put with same expiration , but a lower strike price , as a way to offset some of the cost. This spread generally profit if the stock price moves lower, the potential profit is limited but so is the risk if the stock unexpectedly rally.

Maximum gain = High strike – low strike – net premium paid

Maximum loss = net premium paid.

The protective collar

An investor writes a call option and buys a put option with the same expiration, as a means to hedge a long position in the underlying stock. The investor will select a call strike above and a long put strike below the starting stock price.In return for accepting a cap on the stock’s upside potential, the investor receives a minimum price where the stock can be sold during the life of the collar

Generally an investor take this position, when one is looking for a slight rise in the stock price, but is worried about a decline.

Maximum Gain = call strike – stock purchase price – net premium paid or call strike – stock purchase price + credit received.

Maximum loss= stock purchase price – put strike – net premium paid or stock purchase – put strike – net credit received.

The long/short strangle

Long strangle

This strategy typically involves buying an out of the money call option and an out of the money put option with same expiration date.

The investor is looking for sharp move in the underlying stock, either up or down, during the life of the options

Maximum gain = Unlimited

Maximum Loss = net premium paid.

Short Strangle

– It’s selling a call and put option with the same expiration date, but where the call strike price is above the put strike price. And both options are out of the money. The investor is looking for steady stock price during the life of the options and earn income from selling premiums.

Maximum gain = net premium received

Maximum loss = unlimited.

Iron condor

The iron condor is an options strategy that requires a combination of bullish views and bearish views to make a strategic position. An iron condor is essentially a four-legged trading technique the uses four types of call put options strategies to take maximum advantage of the low volatility of the financial markets. An iron condor is an options strategy consisting of two puts (one long and one short) and two calls (one long and one short), and four strike prices, all with the same expiration date.

Sell an out-of-the-money put

Buy a further out-of-the-money put

Buy a further out-of-the-money call

Iron butterfly

Iron butterfly strategy is about in which one invests in four options with three different strike prices. One purchases an out-of-the-money put option with a low strike price, then sells a call and a put option with the same at-the-money strike price, and finally purchases an out-of-the-money call option with the highest strike price. Over the life of the options, one profits from the price movement of the underlying asset. It is most advantageous when the underlying asset is expected to be volatile.

6. What is Stock Market Analysis?

What is Stock Analysis and it’s methods?

It is not for everyone to be able to understand the stock market and choose the best stock to invest in. And picking stocks based on tips or without doing any research is like firing an arrow in the dark: the shot will either reach the target or miss it. And the arrow has a higher possibility of missing the target.

This is where the “stock analysis” section begins. Simply say, stock analysis is the process of analyzing and evaluating historical and current data in order to get an advantage in the markets by making well informed decisions. For that three methods/techniques are commonly utilized to do a stock analysis:-

1. Fundamental analysis

2. Technical analysis

3. Sentimental analysis or blended approach

Fundamental analysis – It involves determining the company’s economic/intrinsic value from the bottom up, from examining the past data (financial statements) to visualize the future of the company. Fundamental analysts use valuation metrics and other information to determine whether the stock is undervalued or overvalued.

Technical analysis – It simply involves more about findings patterns in the stock prices that an investor or trader can exploit. Technical analysis has nothing to do with company’s financial statements; analyst directly studies the trend in the stock prices.

Sentimental analysis – This involves in simple words, is the overall consensus of the market such as the market conditions, stock related news, etc. Let example, during festive season: individuals buy things such as cars, consumer durables etc.. which leads to increase sales fo businesses and, as a result, may improve finacials

7.FAQ’s