DERIVATIVES

Advantage of Derivatives

1. Derivatives help toimprove market efficiency because risks can be isolated and sold to those who are willing to accept taking these risks at the least cost.
2. The use of derivatives breaks risk into pieces, which can be managed independently. Thus, from the market prospective, derivatives offer the free trading of financial risks.
3. The Stock exchange, Mumbai lauched its first Exchange traded financial derivative product in Sensex Futures on June 9,2000. NSE commenced trading in Index Futures on June 12, 2000.
4. It was one more important step forward in the Capital Market Reforms when Securities & Exchange Board of India (SEBI) allowed trading in equities-based derivatives on the Stock Exchange s in the country in June 2000.
5. In view of Positive market & investors interest in derivatives, NSE introduced trading in index options on June 4, 2001 while options on individual securities was launched on July 2, 2001.