Page 124 - DCOM507_STOCK_MARKET_OPERATIONS

Mahesh Kumar Sarva, Lovely Professional University
Unit 6: Trading Strategies

Unit 6: Trading Strategies Notes

CONTENTS
Objectives

Introduction
6.1 Objectives of Hedging
6.2 Importance of Hedging
6.3 Risk Management Strategies
6.4 Hedge Fund Strategies

6.5 Forward Contract
6.5.1 Problems in Forward Contracting
6.6 Futures Contract

6.6.1 Types of Futures Contract
6.6.2 Standardised Items in Futures
6.6.3 Important Features of Futures Contract
6.6.4 Uses of Forward and Futures Contracting
6.6.5 Forward Contract vs. Future Contract

6.6.6 Participants in Futures Market
6.7 Trading Strategies in Futures Contracts
6.7.1 Daily Settlement/Marking to Market

6.7.2 Closing Out of Futures Contract
6.7.3 Simple Strategies in Futures Market
6.8 Summary
6.9 Keywords
6.10 Review questions

6.11 Further Readings

Objectives

After studying this unit, you will be able to:
 Explain the objectives of hedging
 Discuss the hedge fund strategies
 Elaborate the forward contracts and future contracts
 Discuss the trading strategies in futures contracts

Introduction

Corporations in which individual investors place their money have exposure to fluctuations in
all kinds of financial prices, as a natural by-product of their operations. Financial prices include

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