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Continuing with the tradition of a one-stop investment shop, PL is now offering trading in equity derivatives. PL is a corporate member of the Derivatives Segment at both the BSE and NSE.

What are Derivatives?
Derivatives are sophisticated but easy to use tools that help protect your investments as well as in transferring risk. Derivatives can be used for Hedging, Arbitrage or Speculation.

Hedging is a mechanism to reduce price risk inherent in open positions. Its purpose is to reduce the volatility of a portfolio, by reducing the risk. Hedging does not maximize profits, it only protects against downside risk.

Example: Say you have bought 1000 shares of XYZ Company but in the short term you expect that the market would go down due to some news. Then, to minimize your downside risk you could hedge your position by buying a Put Option. This will hedge your downside risk in the market and your loss of value in XYZ will be set off by the purchase of the Put Option.

Arbitrage is the concept of simultaneous buying of securities in one market where the price is low and selling in another market where the price is higher. Arbitrageurs thrive on market imperfections.

Example: Say the spot price of ABC Stock is quoting at Rs.100 and the futures price of the stock is quoting at Rs.103. You could buy the stock in spot market and at the same time sell it in the futures market. This will lock in your return of Rs.3.

Speculation is the concept used by traders who take a view on the market and take positions based on this view. They profit from price movements and like volatility

Derivatives at PL

At PL, we have set up a professionally managed Derivatives Desk to take care of your specific needs and help you to maximize your returns by applying strategies devised by our expert team