Session 5- Unraveling Equity Derivatives: Insights from the Fifth Development Session
The Fifth Development Session was held remotely on 2025, discussing Equity Derivative-related topics such as Options, Futures, Forwards, Arbitrage and Hedging. The session was designed to offer in-depth knowledge of the financial instruments, as well as their application.
We went deep into the subject of Equity Derivatives and their role in the financial markets. We started with an introduction to derivative instruments and their categorization into Exchange-Traded and Over-the-Counter (OTC) derivatives. We learned how derivatives get their value from an underlying asset, mostly stocks in the case of equity derivatives.
We elaborated on Options in depth, defining the two main types: Call Options and Put Options. The session touched on important concepts such as Option Premium, Strike Price, Expiry Date, and the determinants of an option’s price. The learners were introduced to the Black-Scholes model and how volatility affects option prices.
Then there are Futures and Forwards, for which we defined their similarities and dissimilarities. We delineated how margin trading and clearing houses function in futures contracts. As a contrast, we stated how forward contracts are tailored arrangements between parties and hence less liquid but more adaptable.
The topic then proceeded to Arbitrage opportunities in derivatives trading. We discussed how price differences across markets can be used to earn risk-free returns. Different arbitrage techniques such as Cash-and-Carry arbitrage and Reverse Cash-and-Carry arbitrage were discussed with real-life examples.
We also investigated Hedging as an instrument of risk management, showing investors and institutions utilize derivatives to offset risks connected to price volatility. Portfolio diversification and the role derivatives play in limiting exposure to market volatility were highlighted.
To increase engagement, the Junior members were introduced to Opstra App, which is an options analytics app consisting of several tools that help to find, analyse and track options trading opportunities. We learnt about the basics of it and how we could use it for applying our option strategies.
Overall, and by way of conclusion, it was a knowledgeable session with plenty of interactive discussions among finance buffs. The session gave an in-depth understanding of the importance of derivatives in today’s financial markets. Looking forward to more engaging as well as thought-provoking discussions in the future sessions.
Session by-
Ria Makhija
Vice President
Written By-
Kabir Kashyap
Member
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