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Beginner In Trading In Derivatives Markets?

Posted on by Imarticus Learning

Beginner In Trading In Derivatives Markets?

What are derivatives?

Derivatives are financial assets that are linked to an underlying stock, bond, currency, exchange rate, commodities, or market indices. Their value is derived from the underlying asset to which they are linked. Before you start trading in derivatives, you must understand what they are, what the risks associated with them are, and the mechanics of trading in them.

Derivatives prices normally move in the direction of the underlying security or financial instrument to which it is linked. For instance, if it is an equity-linked instrument, then it will move in the direction of the equity share. Derivatives have gearing.

This means that their price movements will be multiplied exponentially in either direction. That is why we are required to trade derivatives cautiously. If you want to develop an investment banking career for yourself, doing an investment banking course that specializes in derivative markets with Imarticus learning Pvt Ltd. is the guaranteed path to success.

Types of derivative securities

The types of derivative securities are given below:

  • Futures

This is a contract between two parties to buy or sell a particular asset at a pre-determined price at a future date. This represents an obligation on the part of the two parties to settle the contract. The oldest form of a derivative contract is the futures contract. Future contracts are linked to stock indices, interest rates, and commodities including oil and gold. Futures contracts are settled either by delivery of the physical commodity or by the payment of the difference. 

  • Options

In contrast to a future, an option only gives a choice or opportunity to the buyer to settle or not settle the contract. If the buyer does not exercise the option, the option expires worthless. Options are either bullish bets or bearish bets on the price direction of the underlying commodity. When you buy a call option, you pay a small premium to obtain the right to get a large exposure to the underlying stock. 

As your capital outlay, when you purchase a relatively small call option, options are said to have leverage. Leverage or gearing in options means there is a high risk of volatility or violent fluctuations in prices. When you sell a put option, you protect your capital losses from price levels below the strike of the put option. Options have both time value and intrinsic value. As options approach maturity, the time value of the option expires.

  • Swaps and Forward contracts

These contracts exist in currency markets and are usually used to hedge currency risk, especially by import-export companies. They are also sometimes used for speculative purposes to profit from interest rate and exchange rate movements. Future contracts are over-the-counter contracts, and in swap contracts, one type of cash flow is swapped for another. Swap contracts are used to exchange currency exchange rate risk and also default risk on a cash flow or a loan or cash flows from business transactions.

  • Commodity futures

This is one of the largest futures markets and is linked to metals, oil, and agricultural commodities.

What are derivative contracts used for?

Hedging: Derivative contracts are used to protect from adverse movements in the security markets and commodity markets. You already hold positions in the underlying instrument. To hedge against the risk, you take opposite positions in the derivatives market. Violent fluctuations in the physical securities market are canceled out by opposite movements in the derivative market so that the portfolio impact is minimized.

If you have a large stock portfolio, this can be hedged by selling the underlying index futures or options in the derivatives market. Bear in mind that the stock portfolio should mirror the stock index components as much as possible. Only then this strategy would be useful.  

Speculation: When options and futures are traded without any exposure to the underlying physical instrument, it becomes a speculative trade. Due to the innate leverage present in options, the potential for violent fluctuations and large losses exists.

Leverage: To capitalize on the opportunity to leverage a small amount of capital to get a big payoff.

Advantages and disadvantages of derivatives

Derivatives can help to hedge portfolio risks, lock in prices of contracts and mitigate risks. On the flip side, derivatives have the potential to create large losses due to their gearing and are exposed to counterparty and interest rate risk.

Key takeaways 

If you are a beginner in derivatives trading, make sure that you trade derivatives cautiously after you develop a complete understanding of the instruments. You should prudently step into the derivative markets after you do an investment banking course. Understanding derivatives will also help you in having an investment banking career. The first step in this direction is completing the investment banking course.

Visit Imarticus Learning Pvt Ltd. to understand all about learning to use derivatives. Our Investment banking courses are structured to meet your learning requirements. Contact us through chat support, or drive to our training centers in Mumbai, Thane, Pune, Chennai, Bengaluru, Delhi, and Gurgaon.  

What to Know About Cryptocurrency?

Posted on by Imarticus Learning

With everything becoming dependent on technology, why not money? Monetary transactions have slowly gone digital too. With this form of digitalization, cryptocurrency was also developed which evolved into a medium of exchange.

Bitcoin became the first cryptocurrency that began back in 2009. Now, businesses are looking towards this exchange medium, with the likes of Elon Musk investing $1.5 billion in Bitcoin. Hence, it would be wise to know what cryptocurrency is and why it has already taken the world by storm.

What is cryptocurrency?

The meaning of cryptocurrency lies in its name itself. It is a kind of digital currency that is encrypted for security purposes. As it is encrypted, it becomes impossible to counterfeit like real money or even hack virtually. It comes in the form of digital coins and tokens that one can buy with real money.

Or, if someone has the expertise in technology, they can ‘mine’ it for themselves via a strong graphics processing unit (GPU).

CryptocurrencyMost of the cryptocurrencies use Blockchain technology, which is decentralized and records transactions among computers. Cryptocurrencies are mainly used for trade finance. People usually use it to buy goods and services for many beneficial reasons.

Different types of cryptocurrencies

Bitcoin is the most popular among all cryptocurrencies and currently, there are at least 18.5 million tokens being used. Besides Bitcoin, there are more than 6,700 kinds of cryptocurrencies being used in the market nowadays. And, some of them are:

Ethereum: Ethereum uses a token named Ether and it mainly promotes free access. But mostly, it is for developers to get rid of middlemen and control their apps.

Litecoin: Litecoin was created in the light of Bitcoin to improve upon it. It is basically the same as Bitcoin other than faster time for transactions and a few more benefits.

Stellar: Stellar’s currency is Lumen and its uniqueness lies in people being able to transact between different countries. Also, huge transactions can be made with little to no hassle.

How to buy cryptocurrencies?

If someone wants to buy some cryptocurrencies for themselves, they will need an app where they can hold the currency like a ‘wallet’. Then, they can create an account and transfer real money to buy cryptocurrencies. Some online brokers are also selling cryptocurrencies. Notably, the exchange rate for cryptocurrencies can fluctuate at any time due to its decentralized nature.

BitcoinFurther, cryptocurrencies are very much transparent. They have zero possibility of being stolen. The transactions can also be quicker and made with minimal transaction fees compared to banks or other financial organizations, which makes trade finance a much easier process.

By and large, cryptocurrencies are a little risky but as online transactions are increasing day by day, their importance is increasing too. One should only go along with purchasing cryptocurrencies with their advantages and risks all in mind.

Trade Finance Methods & Types Explained in Detail

Posted on by Imarticus Learning

Trade Finance Methods & Types Explained in Detail

Trading finance is basically the funding of financial assistance that is provided to businesses worldwide by the means of financial tools. International trade finance in itself is like an umbrella, under which a variety of financial products exist. All of them are structured to ease up how a business is executed for traders globally. As with all wings of business, trade finance has also gone through a series of upheavals because of the crisis faced by the world.

trade finance coursesThe end result is disruption of costs, increased rules and regulations on both exports and imports not just globally but also domestically. This is why a career in finance has always been sought after in this country.

The only way to do it is to get enrolled in banking courses in India after graduation. Imarticus Learning provides a solid solution for it in the form of their PG program.

Coming back to trade finance, managing supply chain and suppliers is one of the most important things to trade finance. The reason is most of the trading around the world happens as a result of a merging of both pre-export and post-export finance tools. There are a few types of trade finance that need to be addressed here. Such as:

Advance payment

It is basically a pre-export type of trade finance that requires full payment from the importer even before the items are delivered. It, unfortunately, runs the risk of undelivered items on the buyer’s side and credit risk on the supplier’s side.

 Business loans

Business loans or working capital loans are funded by banks or funding organizations. They are basically used to afford the upfront short-term costs of a business. From raw materials to labor costs, these things are funded through a business loan. They are short-term loans and company assets are kept as a warranty of repayment.

Letter of credit

It is easy to use and mostly available in current accounts of businesses. It permits a business to overdraw with terms and conditions applied by the funder. It is simple and flexible to use, however, credit lines do get extended because of it. The only thing to worry about is making sure that the company does not get charged with a peak interest rate.

 Factoring in invoice

 It is a post-export type of trade finance that depends on receivables. It is used to free up working capital by using invoices to optimize a balance sheet. It ensures about 80% immediate payment and depends on short-term receivables. The buyer pays the funder, the supplier receives. Then they receive the remaining balance provided by the funder after the discount is deducted.

 Forfaiting

 It is also based on receivables and the way to distinguish it from factoring is by the time period of the financing. Basically, a virtual deduction of risks takes place by the supplier after the buyer receives the items. The receivables are supported by the buyer’s funder, permitting the buyer to withdraw the exchange from the balance sheet. Which in turn, backs up the financial ratios.

 Conclusion

Trade financing can be used as a tool to lessen the risk factor that comes with a trading business. The only way to do it is with proper finance tools, which need a proper skillset. Enrolling in banking courses in India after graduation would be a good idea if you want to get into financing. A lot of institutes offer PG degrees in finance in India, such as Imarticus Learning’s PG program.

Understand the Capital Market in India and its Latest Trends!

Posted on by Imarticus Learning

India is one of the fastest-growing economies. With the Indian capital market being one of the largest in the world, it has led to an Investment banking career becoming one of the most lucrative and competitive professions in India today. Investment bankers are highly sought after for their skills and expertise in assessing investment opportunities and managing investment portfolios.

The role requires an in-depth understanding of the capital markets and how they relate to corporate activities. With this knowledge, investment bankers can help companies raise money on public stock exchanges or sell stocks to investors by buying them back at a higher price later on.

Capital Market Courses in IndiaIn addition, investment bankers may also advise clients about mergers and acquisitions that could benefit their company’s bottom line.

In this post, we’ll see what the capital market & its latest trends is and how you can start a career as an investment banker.

What is Capital Market?

The Indian capital market is the investment and financing hub for corporate entities, investors, and governments. It includes equity markets, debt markets, money markets, derivative products such as futures contracts on shares of stock (equity), bonds (debt) & currency pairs like Rupee vs. US Dollar, etc.

Latest Trends in Capital Market – What are investment bankers looking for?

The investment banking sector is undergoing a paradigm shift in companies’ investment strategies that are opting to stay private longer and new regulations and transparency imposed by regulators.

– Investment bankers may need different skills than they did before. For example, an investment banker who has been trained on debt financing will be required more now for equity investments because there is a lack of IPO opportunities from emerging markets firms since 2009. Increasingly, investment banks will offer advisory services to help clients raise funds through bonds or stocks offerings rather than traditional advice about which project should get financed with borrowed money.

– Investment banks rarely work alone anymore. They have to form alliances with other investment firms, private equity investors, hedge funds, or sovereign wealth fund managers to provide the different services necessary to handle a complex portfolio of deals. This is especially true for M&A activity where clients want not just advice on the investment but also the help of investment bankers to actually execute the transaction.

Best Investment Banking Courses with placement in India

– Investment Banking requires a lot more than just finance skills to get ahead. You need strong analytical abilities, too, so that you can provide clients with insights into their industry or sector, which might be different from what they’re used to hearing.

– Investment bankers are looking for candidates who can bring a lot more to the table than just investment banking skills. That’s why Investment banker courses focus not only on technical knowledge but also behavioral and soft skills such as communication, interpersonal relationships, presentation skills, and leadership abilities.

Start a Rewarding Investment Banker Career with Imarticus Learning

Imarticus Learning offers investment banking courses that will provide you the right expertise, knowledge, and skills to start a rewarding investment banker career. Investment banks are always looking for professionals who have an in-depth understanding of the global capital markets.

Therefore, if you want to be an investment banker, then this course is best suited for your need as the investment banker course by Imarticus Learning is designed to provide a thorough understanding of investment banking careers and how one can start their own highly rewarding investment banker career with this coveted degree qualification.

For more details on Investment banking career/courses, contact us through the Live Chat Support system or visit any of our training centers based in – Chennai, Mumbai, Thane, Pune, bangalore, Hyderabad, Delhi and Gurgaon.

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Corona Virus and Impact on Capital Markets!

Posted on by Imarticus Learning

The capital market involves investments for the long term in an entity’s capital constituents i.e., equity instruments and debt instruments. The entity uses these sources of funds to produce goods and services.

The COVID 19 disease, on the other hand, involves choking breaths, killing people, and adversely impacting investor confidence in capital market financial instruments. Consequently, COVID 19 has obstructed new investments and affected existing long-term investments. A system that cannot breathe cannot generate energy and in the absence of energy, all else fails.  Frozen sales activity due to increasing uncertainty is a boost for the savings driven economy, while consumption has reduced globally – from essential commodities like oil to trade of everyday requirements thereby reducing spending. Only time will tell if this is a working capital glitch which can be resolved or if there is much more to this than meets the eye.

Though the COVID 19 seems to be an Atlas that bears the brunt for everything wrong happening to the capital markets, the ever prevalent disconnect between entities that produce basic necessities like food, clothing, shelter, health and education and the financial system is just as much responsible for the ongoing misery. This disconnect has let COVID 19 seep through the openings and crumble supply chains due to social distancing, reduced activities, and the flow of data and information in our generally fast-paced era. On the other hand, consumption has reduced worldwide – from essential commodities like oil to trade of everyday requirements.

Inversion of yield curves is a primary indicator of a negative outlook to long term yields from investment in debt instruments. However, most other capital market representations, including the stock markets, in the current scenario are just as imperfect as the information available to them.

In light of the current scenario, cash, in line with the definition of financial assets (IFRS) remains the most preferred financial asset. The consequent liquidity crises in the investment circuit thus, due to a preference for cash, severe short-term losses, and uncertainty, have affected long term investments. New long-term investments have been blocked, and existing long-term investments are being sold off to recover for the losses incurred in short term trades.

The uncertainty due to the newness of the situation to the present market gurus leaves prediction of outcomes merely a fool’s errand. In the absence of reliability in the current investment system, hoping for homeostasis; while we prepare for a further cut in consumer spending to hoard cash seems to be the only certainty.

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