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Equity derivatives for beginners

If you are a beginner investing in stock markets, you should know about it to get high yields. But it is critical to know many facts to do it as the risks involved with it are high, and the returns are also high. It is by leveraging the derivatives and options offered by the stock exchanges to invest in more stocks than buying them paying full money. Instead of buying 100 shares or equities of a company, you can buy more by paying only part of its value, which is equity derivative investments.

So, if you are a beginner to stock trading, check out the crucial details regarding equity derivatives to make huge profits with less investment.

Why buy equity derivatives?

To buy 300 equities in Infosys, you must have Rs. 4,50,000. It is because the current price of Infosys equity is around Rs. 1,500. Though paying in cash and holding the shares in the DP or depository account is safe, shedding out such massive amounts is only possible for some people. It is one of the significant reasons that exchanges have introduced equity derivatives in the last two decades. You buy the market lot of 300 Infosys by paying only 10 to 40% of the total costs of its equities.

Though regulated by SEBI, the percentage payable for it differs from one stockbroker to another. Hence by buying equity derivatives, you can reap more returns with fewer investments.

What are equity derivatives?

Know Financial Instruments

Before buying equity derivatives to make more money, it is vital for you also to know what it is not to lose hard-earned money. Derivatives are one of the three primary financial instruments; the other is equity and debt like bonds, mortgages, etc.

Derivatives

Derivative in finance is a contract to derive its value from the performance of an underlying entity. It can be an index, equity, interest rate, asset, or others that can act as insurance policies for hedging price movements. It has many purposes, like exposure to price movements for speculation trading and access to high-value stocks.

Cost of the Equity Derivatives

If you buy one market lot of Infosys, which is 300 equity derivatives, its price movements change as per the rise or fall in its equity price. The cost of the equity derivatives could be more or less than equity that, depends on many factors like the settlement date, equity value, and others.

Forms of Equity Derivatives

Many equity derivatives include equity swaps, single stock futures, warrants, and others. The most noteworthy is the equity futures and most traded options in the exchanges.

Equity Futures

Equity futures are contracts you can buy or sell at specified times and prices. It is the anticipation of the underlying share performing well and rising in price. In NSE or national stock exchange, you can buy one market lot, which differs as per the equity price for the current month or the next few months.

Selling Equity Futures

You can sell equity futures expecting it to fall within the current or next month, as closing the contract by the end of the settlement is essential. For equity futures, the monthly settlement is the last Thursday of the month to sell the bought or sold contract.

Opportunity for Unlimited Profits

Equity options are far less than buying equity and equity futures and could lose the cost or get massive profits. It is one of the most traded in the exchanges as many speculators buy them to make unlimited profits or losses.

The above facts will help you buy and sell equity derivatives through the best brokers to safely make huge profits with limited investments.

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Equity investments

You are in the right place to know about equity investments to make your money multiply while you sleep. If you would have invested Rs. 10,000 buying Infosys during its listing in 1993 is worth over Rs. 2 crores now. Hard to believe? But facts confirm it as it is one of India’s blue-chip and most significant IT companies. Though buying all stocks, known as equity investments, does not give the same return, you can still have far better returns than depositing in a bank. But you must buy the right stock from the best broker to get high investment yields. Let us tell you how!

What are equity investments?

Everyone is not lucky to start a company, run it profitably, and list it on the stock exchange to grow rapidly and globally. But you can be a part of any company listed in the exchange by buying one share. Equity is a share, stock, or any other security that represents ownership of a company, and buying them is an equity investment. You will benefit from the price rise of buying the best stock and get dividends, rights, and bonus shares to multiply your investment. You can buy from one share to thousands of stocks depending on their price and financial capability. Once you buy specific company stock, you become one of its shareholders to attend its AGM or annual general meeting and others. It is apart from the many other benefits ofequity investments.

Ten benefits of equity investments

High Returns

With less than 10% annual bank interest for your deposits, investing in the right stocks can give high returns. Not only has Infosys given over 1600% return in the last two decades, but many shares like Reliance, Wipro, and others have given high returns.

Diverse Opportunities

Offers diverse opportunities to buy from a wide range of stocks, from software to oil companies and others.

High Profits

Stocks have risen steadily in India for the past two decades, and long-term equity investments in the right stocks yield high profits.

Additional ROI

Dividends and capital gains are additional ROI or return of investment for investing in equities.

Better Returns

Provides equity investment opportunities in mutual funds and others that give better returns than bank investments.

A Chance to Multiply Money

Offers high risk-high return, medium risk-medium return, and others which, done correctly, could multiply money quickly.

Bonus Shares

You can get bonus shares free of cost to even double or triple your investment as per ratios like 1:1, 2:1, 1:2, 1:3, and others.

Higher Returns in Future

Many companies offer rights shares to those invested in their equities at lower costs to buy them and sell at a premium or hold them for future high returns.

High Stock Liquidity

Equity investmentsare like buying gold to sell fast and efficiently as there is high liquidity of stocks in the exchanges but with higher returns.

Beats Inflation

It helps to beat inflation which is the spoiler to wealth creation and hence enables to increase in return on investment better than in others.

Transparent and Reliable

All the BSE and NSE members or stock brokers come under SEBI or the securities & exchange board of India, which regulates all share-buying activities to be transparent and reliable and offer the best platform to multiply money easily, quickly, and safely.