Authors: Dr K. Mahender Reddy
Abstract: Today's derivatives are based on a wide range of transactions and have a lot more applications. Even derivatives based on weather information, such how much rain fell or how many days had sunshine, exist. Derivatives come in a wide variety of forms that can be applied to risk management, speculation, and position leverage. With products that may accommodate almost every requirement or risk tolerance, the derivatives market is one that is still expanding. Derivative items fall into two categories: "lock" and "option." Lock products (such as futures, forwards, or swaps) obligate the parties to the terms of the contract from the beginning. On the other hand, option products (such as stock options) give the holder the right but not the responsibility to acquire or sell the underlying asset or security at a particular price on or before the option's expiration date. Futures, forwards, swaps, and options are the four most popular types of derivatives Advantages and disadvantages of investing in Index Derivative Market. Derivatives are new segment of secondary market operation in India; investors need to understand trade process and to make profit in derivatives market. Importance of investor has become increasing order because of Technological advancements in trading system, rapid growth of derivative market and new economic policy of 1991. Behaviour of investors tends to moves from savings to investment.
