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APPROVAL OF PROJECT SYNOPSIS

20012-2013(SEMESTER IV) 1. NAME 2. ROLL NO. 3. TITLE OF PROJECT Derivative Markets 4. SUBJECT AREA 5. NAME OF GUIDE 6. SIGNATURE OF STUDENT WITH DATE 7. SIGNATURE OF GUIDE WITH DATE : : Sachit Shyamsunder Gupta : 10 :Study of Option Strategies Used In

: Finance : Prof. :

For Office use only

Synopsis Approved Not Approved

Guide Approved Not Approved Signature Date.

Comments /Suggestions for reformulation of the Project.

PROJECT PROPOSAL PROJECT TITLE: 1. Study of Option Strategies Used In Derivative Markets

A. RATIONALE FOR THE STUDIES


Business, like life, is inherently risky. Firms convert inputs such as labor, raw materials, and machines, into goods and services. A firm is profitable if the cost of what it produces exceeds the cost of the inputs. Prices can change, however, and what appears to be a profitable activity today may not be profitable tomorrow. Many instruments are available which permit firms to hedge various risks, ranging from commodity prices to weather. A firm which actively uses derivatives and other techniques to alter its risk and protect its profitability is engaging in risk management. Derivatives and its various types are now traded on exchanges throughout the world. In addition, huge volumes in all types of underlying assets are being traded in the over-the-counter market. A growing understanding and acceptance among potential users suggests that growth will be sustained for the foreseeable future. Option strategies in derivatives are not only useful to manage risks that corporations have already taken. They enable firms to change what they do, to think of new profitable strategies. Options, futures, and swaps are examples of derivatives. A derivative is simply a financial instrument (or even more simply, an agreement between two people) which has a value determined by the price of something else. This project enables us to understand various types of Option Strategies.

B. Objective:
The broad objectives of the proposed study are as under,

1. To understand about derivatives market 2. To study how option strategies are used to hedge the risk 3. To know why derivatives is considered safer than cash market
4. To guide the investor who have underlying share as to how to hedge their risk by

using option strategies

C. Research Methodology
To carry out the research effectively the understated research methodology shall be adopted for the purpose. I. Preliminary Investigations

All literatures, tapes on the proposed study available from libraries/ Websites shall be examined to get acquainted with the topic of study.

The conceptual literature concerning the concepts and theories of derivatives and option strategies shall be used.

II.

Research Design and Hypothesis

The research shall be of empirical nature.

The hypothesis of the study shall be as under. Ho: Null Hypothesis Options strategies do not hedge the position of investors

III.

Period of Study The proposed study shall cover the period 1st September 2012 to 31st March 2013.

IV.

Sampling Universe

The options will be studied only in India which is available in Nifty.

V.

Sampling Technique

The sampling technique to be used for the proposed study shall be Descriptive Sampling, Judgment Sampling and Survey.

VI.

Sample Size

The size of sample shall be 30 investors who are holding underlying shares and designing option strategies for them to hedge their risk.

VII.

Type of Data

Primary Data shall be collected by interviewing investor who has underlying shares

Secondary data shall be used from the following sources VIII. Data Sources

The data for the proposed study shall be sourced from,

Business newspaper & Magazines such as Economic Times, Business Today, Business Standard, etc.

Reference Books from library

Financial Websites such as, www.nseindia.com ww.sebi.gv.in www.bseindia.com www.moneycontrol.com www.theeconomictimes.com www.rediffmoney.com

IX.

Data Collection

Secondary data about American style of option quotes shall be collected from the newspaper and websites mentioned above.

X.

Tools and Techniques of Analysis The following option strategies shall be used: 1. Covered Call Writing 2. Protective Put 3. Straddle 4. Strangle 5. Strips 6. Straps 7. Spreads

D. EXPECTED CONTRIBUTION FROM THE STUDY

1. For the individual investors the proposed study may help in designing their option strategies for hedging risk and protect them from the volatility of market.

2. The proposed study shall assist academicians and other research students in their research which, are similar to the proposed study.

E. SCOPE, LIMITATION, IF ANY, AND THE DIRECTION FOR FUTURE RESEARCH

The scope of proposed study

1. As derivatives are a very vast subject, the scope of research is limited to the financial derivatives viz. option. 2. Future and Forward has been kept out of the scope of this research. 3. Since options are widely used for hedging, only the option cases have been taken into the consideration in my research.

The limitations of proposed study As research requires detail information of portfolios of clients, which is very confidential for the client, a huge difficulty may be faced while getting data.

Direction for future research In future both European option and American option will be considered while designing option strategies.

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