Derivatives Trading

In the stock market, you can buy and sell shares of companies. Based on these shares, derivatives instruments are also traded on the market. These instruments are an agreement to buy or sell the underlying shares in the future. This agreement is sold in the market. They are called contracts.

Derivative instruments are available for shares, indices, currencies as well as commodities. Their value is tied to the underlying security.

Types of Derivative Instruments:

There are two kinds of derivative instruments – futures  and options. Futures are contracts or an agreement between two parties to either buy or sell a fixed quantity of assets at a particular time in the future for a fixed price. An option is also a similar contract, except the parties are not obligated to fulfill the terms of the agreement. These contracts are then traded in the market. The minimum value of a contract is Rs 2 lakh. Know more.

For more details, go to Kotak Securities Academy.

What does Kotak Securities offer?

How to start trading?

To start trading in derivatives, all you need to do is open an online trading account and choose from our wide range of accounts to suit your needs.

What are the benefits?

There are many advantages of trading in futures and options.

Traders also use the secondary market for arbitrage – make more profits.

Why trade in derivatives?
  • Maximize profits
  • Earn from speculation
  • Minimize losses
Read on to know why you should invest

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  • Arbitrage:
    While dealing in the derivatives market, you are essentially betting on the future increase or decline in stock prices. As a result, many stock traders use the segment to enhance their profits. This is called arbitrage.
  • Hedging:
    The most common use of derivatives trading is hedging. As part of this, you buy in the cash segment and agree to sell in the derivatives market or vice versa. Thus, you are essentially safeguarding yourself from potential losses. Hedging is mainly used by importers and exporters in the currency derivatives segment.
  • Margin trade:
    While trading in the derivatives market, you only pay a margin. This is because the actual value of the contracts would be too large in lakhs and crores. However, when you make a profit, the percentage of growth is exponentially higher. This allows you to make more money.

+ Expand AllFrequently Asked Questions (FAQs)

  • Q How will you benefit from Currency Trading?


    The Currency Derivatives product is a bundle of opportunities for a number of players. It is a new asset class for diversification of investments for all Resident Indians.

    It gives hedging opportunities to:

    • Importers and exporters, who can hedge their future payables and receivables
    • Borrowers, who can hedge foreign currency (FCY) loans for interest and principal payments
    • Resident Indians, who can hedge their offshore investments
      • It gives arbitrage opportunities
      • It gives trading opportunities because of its volatility and multiplicity
      • It provides highly transparent rates to traders as it is exchange-traded