PVS (Prashant V Shah)

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Archive for December, 2011

Change of Assessment Year for CFP Examination

Posted by Prashant Shah on December 24, 2011

As per the latest circular of FPSB the assessment year is changing to AY 2012-13 from 24th of Jan, 2012.

For the candidates of Tax planning and AFP this change is critical because this time the changes have taken place a week earlier.

As I said earlier, changes in smaller savings are also taking place on the same date.

See the circular: http://www.fpsb.co.in/Upload/Notifications/CHANGE%20OF%20ASSESSMENT%20YEAR%2012-13.pdf

Posted in CFP | Leave a Comment »

Derivatives for CFP – 2

Posted by Prashant Shah on December 15, 2011

Relevance of futures market:

  • Quick and low cost transactions
  • Price discovery function (fair idea of future demand and supply)
  • Advantage to informed individuals (Impart efficiency to the price)
  • Hedging advantage

 Futures trading

Advantages Disadvantages
1. Leverage : Smaller cash outlay i.e. Only margin amount 1. Risk : Trading loss more than initialinvestment
2. Ease of Short Selling: It is possible to sell futures without possessing the underlying 2. No stockholder privileges : No voting rights and no rights to dividends
3. Flexibility : Can use the instrument to speculate, hedge, spread or othersophisticated strategies 3. Required vigilance : Require investor to monitor their position because of marked to margin and margin call

Payoff for a buyer of Nifty futures:

The investor bought futures when the index was at 2220. If the index goes up, his futures position starts making profit. If the index falls, his futures position starts showing losses.

Example and Picture Source: NCFM Books, www.nseindia.com

Payoff for a seller of Nifty futures:

The investor sold futures when the index was at 2220. If the index goes down, his futures position starts making profit. If the index rises, his futures position starts showing losses.

Example and Picture Source: NCFM Books, www.nseindia.com

Options:

For Options terminology and strategies, I will recommend the following book of NSE:

Click to download: option trading strategies module

 I will publish the relevent questions for the CFP exams on derivatives soon.

Posted in CFP, Derivatives, Investment Planning | 2 Comments »