Derivatives Advisory Note

Dear Trader,

Derivative including Options are nonlinear complex products which may provide high returns but also has the potential of providing high losses.

We hope that you are trading in derivatives including options after adequate study and understanding of Derivatives and options in particular.

Like other securities including stocks, bonds and mutual funds, options carry no guarantees. Derivatives may provide high returns but be aware that it is possible to lose the entire principal invested, and sometimes more.

• The potential for losses can be unlimited in Options trading if the movement gets adverse.

• Buying cheap out-of-the-money (OTM) options may result in loss of entire premium paid.

• Read and understand the Risk Disclosure Documents carefully before trading.

• Do your research and take informed decisions.

• Trade only with SEBI registered intermediaries. (shorturl.at/koP07)

  For better understanding and education purpose, we have tried to explain the basics of Options Trading.

• Call holders: If you buy a call, you are buying the right to purchase the Index/Stock at a specific price. The upside potential is unlimited, and the downside potential is the premium that you spent

• Put holders: If you buy a put, you are buying the right to sell a Index/stock at a specific price. The upside potential is the difference between the share prices (suppose you buy the right to sell at Rs. 100 per share and it drops to Rs. 80 per share). The downside potential is the premium that you spent.

• Call writers*: The upside potential is the premium received for the option; the downside potential is unlimited.

• Put writers*: The upside potential is the premium received for the option, the downside potential is the amount the stock is worth.

  *Please note that in case your position results into delivery, you may incur further losses