marketing strategies of a stock broking firm

7/31/2019 marketing strategies of a stock broking firm

1/148

MARKETING STRATEGIES AT SSJ FINANCE

METAS OF SEVENTH DAY ADVENTIST COLLEGE

REF NO:

DATE: .

COMPLETION LETTER

TO,

THE ADVENTIST COLLEGE,

ATHWALINES

SURAT.

TO WHOM EVER IT MAY CONCERN

SUB-COMPLETION OF TRAINING

WE, hereby confirm that Ms. PRATIKSHA BAID has undergone the

training and has gained all the required knowledge and information needed

for this project at ssj finance for 210 hours, that is from 15-4-2012 to 30-5-

2012. Therefore we certify her as a member of our company.

HEREBY, STATING THE CONFIRMATION

THANKING YOU

SSJ FINANCE

BRANCH HEAD.

C-402, EMPIRE STATE BUILDING NEAR UDHNA DARWAZA RING ROAD, SURAT -

395002

PHONE-9979915208 E-MAIL- [email protected]

A


2/148



Summer Project

On

MARKETING STRATEGIES OF STOCK BROKER

At

SSJ FINANCE AND SECURITIES PVT. LTD.

SUBMITTED IN PRACTICAL FULFILLMENT FOR THE

REQUIREMENT OF THE MASTERS DEGREE OF BUSINESSADMINISTRATION

Prepared By

PRATIKSHA BAID

F.Y.M.B.A

I.D NO: GB-047

[MARKETING]

Under the guidance of

MR. RITESH KHATWANI SIR

MR. ZACHARIAH SAMUEL SIR

Submitted To

METAS OF SEVENTHDAYADVENTISTCOLLEGE

Athwalines

Surat

2011-2012


3/148



PREFACE

Indian Capital Market is seeing a bullish trend since few quarters. It had touched the level

which it had never reached earlier. In a very short duration of time sensex touched 20000

points . Still people are very bullish for the market and expecting sensex to reached

25000 points.

Current scenario is that market is over performing than then it actual potential and where

major investors are just attracted by the high short term returns and ignoring the actual

facts and figures of the company. In such condition it became very necessary that

investor dont work on greater fool theory rather invest in the company whose

fundamentals are strong by doing proper analysis and invest keeping long term

perspective.

This project involves fundamental analysis of SSJ Finance and Securities Pvt. Ltd.

The project is done for the partial requirement of fulfillment of degree of MASTERS of

Business Administration (M.B.A). This project is done under SSJ finance and securities

Pvt. Ltd., Surat.

Sincere efforts have been made to make this project live up to the expectation to

Department of MARKETING where this project is to be submitted.


4/148



DECLARATION

I undersigned, PRATIKSHA BAID declare that this project is the result of my own

training work carried out during May, 2012 and has not being previously submitted

to any university/institutions for any other purpose by any other person.

I will not use this project report in future as submission to any other

university/institution without written permission of my guide.

I also promise not to allow any person to copy any part/full material of this report inany form.

Yours faithfully,

Pratikisha Baid


5/148



ACKNOWLEDGEMENT

I take this opportunity to thank all those who have contributed their support in

preparing this project. Firstly I would like to express my deep sense of gratitude

towards METAS OF ADVENTIST COLLEGE, SURAT for providing me this

opportunity to study STOCK MARKET in depth as a part of course curriculum.

Secondly I would like to thank president of my college MR.JEREMIAH SIR for

allowing me to do my project on this topic. I would also like to take an opportunity

to thank my mentor MR.MOHAN RAO SIR for guiding me throughout my projectwork.

Working on such a project where information is quite enormous and unacquainted

to me required guidance at each and every stage. I am highly thankful to MR.AMIT

DWIVEDI, the business development manager of SSJ FINANCE & SECURITIES

PVT LTD. for his continuous direction and guidance while preparing this project

and also for sharing his rich experience for the content of this project.

Last but not the least; I am also grateful to my parents, colleagues and friends

whose continuous support has always boosted my moral towards working on this

report.

Thank you


6/148



INDEX

SR. No TOPIC PAGE NO

1 INDUSTRY PROFILE

INTRODUCTION OF SSJ FINANCE AND SECURITIESPVT

LTD.

RANKING OF INDUSTRY.

COMPETITORS OF SSJ FINANCE AND SECURITIES

BOMBAY STOCK EXCHANGE

NATIONAL STOCK EXCHANGE

ECONOMIC UPS AND DOWNS

WHAT DO SHARE MARKETS DO?

INDIAN STOCK MARKET

5 YEAR PLANS OF INDIA

MARKET VOLUME

MARKET WATCH(GLOBAL MARKET)

5-27

2 COMPANY PROFILE

PAST,PRESENT AND FUTURE OF SSJ

STRENGTH OF COMPANY

TRAINING AND DEVELOPMENT

REASONS FOR SUCCESS

COMPANYS VISION

BUSINESS PHILOSOPHY

COMPANYS VALUE

MANAGEMENT TEAM

CORE BUSINESS

MEMBERSHIP

QUALITY ASSURANCE POLICY

CRM POLICY

LEADERSHIP MODEL

CODE OF ETHICS

DISTRIBUTION MODEL

INFRASTRUCTURE

REGIONAL OFFICES

28-79


7/148



FUTURE PLANS

COMPANY NOW

HR INFORMATION IN DETAIL

FINANCIAL INFORMATION IN DETAIL

DEALINGS OF COMPANY

3 RESEARCH METHODOLOGY

SAMPLE DESIGN

TYPES OF DATA

DATA COLLECTION TOOLS

SURVEY METHODS

RESEARCH INITIATIVES

WHEN &WHY RESEARCH?

ANGEL RESEARCH STRENGTH

RESEARCH AND INVESTMENT ADVISORY

RESEARCH PRODUCTS

RESEARCH PROCESS

TECHNICAL RESEARCH CALLS

80-88

4 ANALYSIS OF DATA 89-104

5 FINDINGS 105

6 CONCLUSION 106

7 SUGGESSIONS 107

8 GLOSSARY 108-109

9 BIBLOGRAPHY 110

10 ANNEXURE 111-117


8/148



INDUSTRY PROFILE

INTRODUCTION TO THE INDUSTRY

INDIAN EQUITY MARKET:-

The Indian Equity Market is also known as Indian share market or Indian stock market.

The Indian market of equities is transacted on the basis of two major stock indices,

National Stock Exchange of India Ltd. (NSE) and The Bombay Stock Exchange (BSE).

Indian Equity Market at present is a lucrative field for the investors and investing in

Indian stocks are profitable for not only the long and medium-term investors, but also the

position traders, short-term swing traders and for intra-day traders. In terms of market

capitalization, there are over 5000 companies in the BSE chart list. Generally the bigger

companies are listed with the NSE and the BSE, but there is the OTCEI or the Over the

Counter Exchange of India, which lists the medium and small sized companies. There is

the SEBI or the Securities and Exchange Board of India which supervises the functioning

of the stock markets in India.

The growing financial capital markets of India being encouraged by domestic and foreign

investments is becoming a profitable business more with each day. If all the economic

parameters are unchanged Indian Equity Market will be conducive for the growth of

private equities and this will lead to an overall improvement in the Indian economy.


9/148



THE INDIAN CAPITAL MARKET:-

The function of the financial market is to facilitate the transfer of funds from

surplus sectors (lenders) to deficit sectors (borrowers). Normally, households haveinvestible funds or savings, which they lend to borrowers in the corporate and public

sectors whose requirement of funds far exceeds their savings. A financial market consists

of investors or buyers of securities, borrowers or sellers of securities, intermediaries and

regulatory bodies. Financial market does not refer to a physical location. Formal trading

rules, relationships and communication networks for originating and trading financial

securities link the participants in the market.

PRIMARY MARKET

Primary market refers to the long term flow of funds from the surplus sector to the

government and corporate sector (through primary issue) and to banks and non bank

financial intermediaries (through secondary issues).Primary issues of the corporate sector

lead to capital formation (creation of net fix asset and incremental change in inventories)

thus primary market is again sub divided into:

Public issue

Right issue

Private placement

Professional allotment

SECONDARY MARKET

Secondary market is a market for outstanding securities. An equity instrument, being an

eternal fund, provides an all-time market while a debt instrument with a defined maturity

period, is traded at the secondary market till maturity. Unlike primary issues in the

primary market which result in capital formation, the secondary market facilities only

liquidity


10/148



and marketability of outstanding debt and equity instruments. The secondary market

contributes to economic growth by channelising funds into the most efficient channel

through the process of disinvestment to reinvestment. The secondary market also provide

instant valuation of securities made possible by changes in the internal environment, thatis , through companywide and industry wide factors. Such a valuation facilities the

measurement of the cost of capital and rate of return of economic entities at the micro

level.

For trading in issue of corporate and financial intermediaries, there are:

Recognized stock exchanges,

National stock exchange of India limited (NSE)

ORGANIZED MONEY MARKET

Indian financial system consists of money market and capital market. The money

market has two components - the organized and the unorganized. The organized market is

dominated by commercial banks. The other major participants are the Reserve Bank of

India, Life Insurance Corporation, General Insurance Corporation, Unit Trust of India,

Securities Trading Corporation of India Ltd. and Discount and Finance House of India,

other primary dealers, commercial banks and mutual funds. The core of the money

market is the inter-bank call money market whereby short-term money borrowing/lending

is affected to manage temporary liquidity mismatches.

UN- ORGANIZED MONEY MARKET

Despite rapid expansion of the organized money market through a large network

of banking institutions that have extended their reach even to the rural areas, there is still

an active unorganized market. It consists of indigenous bankers and moneylenders. In the

unorganized market, there is no clear demarcation between short-term and long-term

finance and even between the purposes of finance.


11/148



SECURITIES AND EXCHANGE BOARD OF INDIA

With the objectives of improving market efficiency, enhancing transparency,

checking unfair trade practices and bringing the Indian market up to international

standards, a package of reforms consisting of measures to liberalize, regulate and develop

the securities market was introduced during the 1990s. This has changed corporate

securities market beyond recognition in this decade. The practice of allocation of

resources among different competing entities as well as its terms by a central authority

was discontinued. The secondary market overcame the geographical barriers by moving

to screen-based trading. Trades enjoy counter party guarantee. Physical security

certificates have almost disappeared. The settlement period has shortened to three days.

The following paragraphs discuss the principal reform measures undertaken since 1992.

A major step in the liberalization process was the repeal of the Capital Issues (Control)

Act, 1947 in May 1992. With this, Government's control over issue of capital, pricing of

the issues, fixing of premium and rates of interest, on debentures, etc., ceased. The office,

which administered the Act, was abolished and the market was allowed to allocate

resources to competing uses and users. Indian companies were allowed access to

international capital market through issue of ADRs and GDRs. However, to ensure

effective regulation of the market, SEBI Act, 1992 was enacted to empower SEBI with

statutory powers for (a) protecting the interests of investors in securities, (b) promoting

the development of the securities market, and (c) regulating the securities market. Its

regulatory jurisdiction extends over corporates in the issuance of capital and transfer of

securities, in addition to all intermediaries and persons associated with securities market.

SEBI can specify the matters to be disclosed and the standards of disclosure required for

the protection of investors in respect of issues.


12/148



MAJOR STOCK PLAYERS

Eighteen Stock Exchanges in the World: Market Capitalization & Year-to-date Total

Turnover at the end of May 2010

Region Stock Exchange

Market Value

(millions

USD)

Total Share

Turnover

(millions USD)

Africa Johannesburg Securities Exchange 605,040.2 117,424.7

Americas NASDAQ 2,773,684.3 12,256,704.3

Americas So Paulo Stock Exchange 920,263.9 191,926.1

Americas Toronto Stock Exchange 1,347,674.0 490,912.4

Americas New York Stock Exchange 9,574,066.6 7,986,835.8

Asia-Pacific Australian Securities Exchange 839,062.7 273,205.9

Asia-Pacific Bombay Stock Exchange 1,032,589.6 83,906.6

Asia-Pacific Hong Kong Stock Exchange 1,773,002.2 519,465.7

Asia-Pacific Korea Exchange 640,357.6 618,607.8

Asia-Pacific National Stock Exchange of India 968,815.1 242,641.7

Asia-Pacific Shanghai Stock Exchange 2,069,937.1 1,685,862.2

Asia-Pacific Shenzhen Stock Exchange 563,103.3 880,744.6

Asia-Pacific Tokyo Stock Exchange 3,102,492.9 1,561,888.8

Europe Euronext 2,262,751.6 742,885.6


13/148



Region Stock Exchange

Market Value

(millions

USD)

Total Share

Turnover

(millions USD)

EuropeFrankfurt Stock Exchange (Deutsche

Brse1,132,126.2 1,101,064.6

Europe London Stock Exchange 2,204,320.0 1,483,263.3

EuropeMadrid Stock Exchange (Bolsas y

Mercados Espaoles1,084,606.4 591,217.3

Europe Milan Stock Exchange 554,613.9 341,421.1

Opportunity in Future in India Will the Indian Stock Market

still going on and on i.e. BOOM period in Indian Stock Market still

alive?

India just keeps getting better and better. The economy is growing rapidly surpassing

some of Asias biggest economies. India is now becoming the third largest country in

Asia economically. It has grown so much and is expected to continue to grow like this for

a long time. The Indian Government is doing everything it can do to propel the growth

rates in the Indian Industry, primarily in: India Stock Market, Indian Companies, Indias

manufacturing index, India Business Sector, Indias Company sector and other India

investment industries.

The yearly salaries are rising and the command to buy is under the command to spend.

The Investment GDP ratio is at a high. It is now over 30 percent and between the years

1990 and 2004 the average was only 25 percent. It has been said that, once it reaches 30

percent, it is going to take off rapidly. So India is expected to move rapidly.


14/148



The down side to Indias big movement is that there is a limit to how high it can go. India

has grown so much, making the costs of everything go up so frequently. It can turn into

the most expensive country in the world. The companies are now working above their

finest ability.A lot of professionals say that this is a problem, but that people over-exaggerate while

talking about it. Their main worry about India is that the roads are so bad in India and the

amount of terrible roads may increase, but the government is addressing this issue. The

prices of cement, used to make good roads, have also gone up a lot with the prices of

everything else. There are so many road related projects that need to be done soon.

A lot of people try to People undervalue Indias accomplishment in growth. The growth

rates are very good and it wouldnt be wrong for people to overvalue it. India has created

the best growth story that happen over a long time. Although India is growing, there can

still be corrections in the market. No matter how well a country is doing, there is always

something that can be fixed. Some say that they would like to wait until the market is

fixed to invest.


15/148



INTRODUCTION OF INDUSTRY INDIA LEVEL


16/148


17/148



BSE

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as

"The Native Share and Stock Brokers Association". It is the oldest one in Asia, even

older than the Tokyo StockExchange, which was established in 1878. It is a voluntary

non-profit making Association of Persons (AOP) and is currently engaged in the process

of converting itself into demutualized and corporate entity. It has evolved over the years

into its present status as the premier Stock Exchange in the country. It is the first Stock

Exchange in the Country to have obtained permanent recognition in 1956 from the Govt.

of India under the Securities Contracts(Regulation) Act, 1956


18/148



NSE

NSE was incorporated in 1992 and was given recognition as a stock exchange in April

1993. It started operations in June 1994, with trading on the Wholesale Debt Market

Segment. Subsequently it launched the Capital Market Segment in November 1994 as a

trading platform for equities and the Futures and Options Segment in June 2000 for

various derivative instruments.


19/148



REGIONAL STOCK EXCHANGE


20/148



Comparative Assessment of different companies

SHCIL (STOCK HOLDING CORPORATION OF INDIA LIMITED)

Stock Holding Corporation of India Limited (SHCIL) was promoted by public financial

institutions and insurance majors like IDBI, UTI, ICICI, LIC, GIC and its subsidiaries,

IFCI and IIBI.

SHCIL was incorporated as a public limited company on July 28, 1986.

SHCIL provides depository, post trading, custodial services, securities lending to

institutional investors and retail investors.

Other auxiliary services provided by SHCIL include derivatives clearing,

PF fund accounting, SGL constituent account services, mutual funds and other

capital market instruments distribution.


21/148



ICICI direct

ICICI Bank is India's second-largest bank with total assets of about

Rs.1,67,659 crores at March 31, 2005 and profit after tax of Rs. 2,005 crores for

the year ended March 31, 2005 (Rs. 1,637 crores in fiscal 2004). ICICI Bank has

a network of about 560 branches and extension counters and over 1,900 ATMs.

ICICI Bank offers a wide range of banking products and financial services to

corporate and retail customers through a variety of delivery channels and through

its specialized subsidiaries and affiliates in the areas of investment banking, life

and non-life insurance, venture capital and asset management.

ICICI Bank set up its international banking group in fiscal 2002 to cater to

the cross border needs of clients and leverage on its domestic banking strengths

to offer products internationally. ICICI Bank currently has subsidiaries in the

United Kingdom, Canada and Russia, branches in Singapore and Bahrain and

representative offices in the United States, China, United Arab Emirates,

Bangladesh and South Africa.


22/148



SHAREKHAN

Sharekhan is an equities focused organization tracing its lineage to SSKI, a veteran

equities solutions company with over 8 decades of experience in the Indian stock

markets.

In the stock markets. Sharekhan does not claim expertise in too many things. Sharekhan's

expertise lies in stocks and that's what he talks about with authority. So when he says that

investing in stocks should not be confused with trading in stocks or a portfolio-based

strategy is better than betting on a single horse, it is something that is spoken with years

of focused learning and experience

Sharekhan brings a user- friendly online trading facility, coupled with a wealth of content

that will help investors stalk the right shares.


23/148



UTI SECURITIES

UTI Bank is a registered member (Depository Participant) of NSDL. Indias first

depository. We can avail all of the depository-related services by just opening an account

with NSDL through UTI Bank.

UTI Bank provides services like dematerialization of shares, rematerilialization, pledge-

Hypothecation, freezing/ locking Of Accounts, transfer of shares and settlements, receipt

of corporate benefits, holdings & transaction statements on email, tele depository

services.


24/148



MARWADI SHARES AND FINANCE PRIVATE LIMITED

Marwadi Shares And Finance Pvt. Ltd. Was incorporated in 1992.Marwadi Group

servicing more than 75000 clients, more than 554 pin codes. The company ranked among

top 50 broking houses. It has 250 franchisee / subbrokers and authorized persons

network.


25/148



HDFC SECURITIES

HDFC Securities, a trusted financial service provider promoted by HDFC

Bank and JP Morgan Partners and their associates, is a leading stock broking

company in the country, serving a diverse customer base of institutional and

retail investors.

HDFCsec.com provides investors a robust platform to trade in Equities in

NSE and BSE , and derivatives in NSE. Our website will support you with the

highest standards of service, convenience and hassle-free trading tools.

Our research team tracks the economy, industries and companies to

provide you the latest information and analysis. Our content offers financial

information, analysis, investment guidance, news & views, and is designed to

meet the requirements of everyone from a beginner to a savvy and well-informed

trader.


26/148



KOTAK SECURITIES

Kotak Securities, an affiliate of Kotak Mahindra Bank, is the stock-broking

and distribution arm of the Kotak Mahindra Group. The institutional business

division, which brings you AKSESS, primarily covers secondary market broking.

It caters to the needs of foreign and Indian institutional investors in Indian

equities (both local shares and GDRs, Global Depository Receipts). The division

also has a comprehensive research cell with sectorial analysts covering all the

major areas of the Indian economy.

The group a net worth of over Rs.1, 550 crores and employs over 3,000

employees in its various businesses. With a presence in 59 cities in India and

offices in New York, London, Dubai and Mauritius, it services a customer base of

over 5, 00,000

Kotak Mahindra has partnerships with Goldman Sachs (one of the world's

largest investment banks and brokerage firms), Ford Credit (one of the world's

largest dedicated automobile financiers) and Old Mutual (a large insurance,

banking and asset management conglomerate).


27/148



KARVY STOCKBROKING LIMITED

Karvy offers a full range of financial services and products ranging from Equities

to Research to enhance your wealth and hence achieve your financial goals.

Equities & Derivatives

Comprehensive services for independent investors, active traders & Non-

Resident Indians.

Karvy Research

Premium research on all most all companies updated daily.

Depository Services

Value added services for seamless delivery.


28/148



RELIANCE MONEY

Reliance Money is an endeavour to change the way India trades in financial markets and

avails of various financial services. Reliance Money ensures maximum security with a

unique security token to keep your online account safe.

ANAGRAM SECURITIES

Anagram Securities is the part of the Rs. 2000 crores Lalbhai Group. It was found in

1993 and is a member of the National Stock Exchange. Last year their trading crossed Rs.

17000 crores with around 5000 people making.

They are dealing only in Stock Market and nothing else. Though they are doing good

research work regarding companies and market which will be the beneficial to the

investors.

Gujarat state is one of the most important fields of their business. And they have about 30

branches throughout Gujarat.


29/148



COMPANY PROFILE

About SSJ

SSJ FINANCE is a well-diversified financial services entity offering clients advice

on structuring a complete investment portfolio. We have written for ourselves the

mandate to be a single-point, unbiased financial advisor to our clients. Our vision is

to be the preferred financial services entity through a nation-wide network of

Branches, Financial Advisors and Business Associates.

We listen, analyze, advice and act - focused solely on our clients financial interest.

With services in equities, derivatives, commodities and depository, we seek to giveclients a well balanced exposure into the myriad financial products available, taking

into consideration their risk profile and investment outlook.

The SSJ Finance Group is a clearing cum trading member of various Equity and

Commodity Exchanges and market segments through these entities:

SSJ Finance & Securities (P) Ltd.

Member: The National Stock Exchange (NSE);

Member: Bombay Stock Exchange Ltd. (BSE);

Cash & Derivatives SegmentsMember: Calcutta Stock Exchange Association (CSE)

Depository Participant: Central Depository Service (I) Ltd. (CDSL)

SSJ Commodities (P) Ltd.

Member: Multi-Commodity Exchange (MCX)

Member: National Commodity & Derivatives Exchange (NCDEX)

Member: National Multi-Commodity Exchange of India Limited (NMCE)

M/s Sureshchand S. Jain

Member: The National Stock Exchange (NSE);

Cash & Derivatives Segments


30/148



Promoter Group and Intellectual Capital

The SSJ Finance team comprises a diverse group of talented and experienced

individuals whose expertise and guidance will enable you to meet your investment

objectives. We owe our success to the combined efforts of our Promoters and

executives, both at the senior and junior management level.

Mr. Sureshchand Jain - Founder-Promoter and Chairman

Mr. Saurabh Jain - Managing Director

Our Intellectual Capital

Mr. Sureshchand Jain

Mr. Sureshchand S. Jain, the founder-promoter and Chairman of the Group, hasover 35 years of experience in the Equity and Commodity markets. He has seen

the financial markets through various economic cycles over these years. His

experience, vision and far-sightedness have been a great source of wisdom for all

at SSJ Finance. He spent the initial 15 years of his career in the Bullion markets as

member of The Bombay Bullion Association and The Bombay Commodity

Exchange Ltd. (the erstwhile Bombay Oilseeds & Oils Exchange Ltd.) and has

acquired domain expertise in gold and silver.

His acquaintance with the Indian Equity bourses began in 1987 as member of

Bombay Stock Exchange (BSE); which eventually gave shape to the present SSJ

Finance Group. The SSJ Finance Group subsequently acquired memberships of all

the major Equity & Commodity Exchanges in the country. Mr. Sureshchand Jain

has been a pioneer in the development of arbitrage trading strategies in the Indian

equity & commodity markets and leads the entire trading / arbitrage activities at

SSJ Finance including the proprietary book of the Group.

Mr. Saurabh Jain

Overall management and strategic planning of the Group vest with senior

executives including Mr. Saurabh Jain, Managing Director of the Group.

Saurabh, a Chartered Accountant and an MBA by qualification, has more than 5

years of exposure to the Financial Services Industry with experience in Audit &

Consulting, Investment Banking, Equity Sales & Trading, Asset Management and

Investment Research.


31/148



Our Intellectual Capital

The senior management of the Group comprises of professional executives having

broking, investment, trading & specialized research experience of over 10 years.

They have prior experience in structuring Indices, carrying out Risk-freeArbitrage, Index Arbitrage as well as Risk Arbitrage strategies, executing Private

Equity Placement, Project Finance, Currency Swap transactions, Fixed Income

and Equity research and portfolio structuring. SSJ Finances broking & researchteam has the experience of trading, hedging and developing strategies in Equities,

Derivatives & Commodities. Members of the team analyze alternative investment

avenues and prepare Special Situation Reports.

SSJ Finances network of branches across the country is headed by seniorprofessionals with exhaustive experience and knowledge of the Capital Markets.

The Group is supported in its daily operations by senior executives who have been

with the Group for several years now with extensive training and experience in

their respective areas. Not only has this given them an excellent grasp over daily

operations combined with knowledge of compliance requirements, it has also

resulted in huge loyalty to the firm, the value of which is indeterminable. The

heads of each department are easily approachable at all points of time.


32/148



SSJ Finance Broking ActivitiesOur History

SSJ Finance Group provides Equity & Commodity Broking services on

the NSE, BSE, MCX and NCDEX through the following entities:

M/s. Sureshchand S. Jain (NSE)

SSJ Finance & Securities (P) Ltd. (BSE, NSE, CSE, and CDSL)

SSJ Commodities (P) Ltd. (MCX, NCDEX)

M/s. Sureshchand S. Jain (NSE)

M/s. Sureshchand S. Jain is a proprietary concern, which acquired membership of

NSE as a Clearing-cum-Trading Member at the time of the Exchanges inceptionin 1994. Membership of the Derivatives segment was acquired in the year 2001 at

the time of its introduction to the Indian capital markets.

SSJ Finance & Securities (P) Ltd. (BSE, NSE, CSE, and CDSL)

The Company was incorporated in December 1996 and acquired membership of

the Bombay Stock Exchange (BSE) in April 1997. It subsequently became a

composite member (dual membership) of BSE in the year 2000. In the same year,

the Company also acquired membership of the Calcutta Stock Exchange (CSE) as

well as became a Depository Participant (DP) with Central Depository Services

(India) Ltd. (CDSL).

With a surge in volumes and the Groups intentions of expanding its clientelebusiness, a corporate membership of NSE was acquired under the name of SSJ

Holdings (P) Ltd. in the year 2000 for Cash Market segment and in the year 2001

for the Derivatives segment. SSJ Holdings (P) Ltd. has been amalgamated with

SSJ Finance & Securities (P) Ltd.

SSJ Commodities (P) Ltd. (MCX, NCDEX)

The SSJ Finance Group ventured into the commodities arena to leverage upon the

rich experience of the promoters in the bullion market. It acquired membership of

the Multi Commodity Exchange (MCX) and the National Commodity &

Derivatives Exchange of India (NCDEX) in the year 2003 and National Multi-

Commodity Exchange (NMCE) in the year 2007.


33/148



OUR VISION

Our vision is to be a leading wealth management service provider acting solely in the

financial interest of our clients through a nationwide network of qualified professionals

and business associates.

Our Philosophy Our business is built upon three important cornerstones our Client,Business Associates and Employees. Our philosophy is unique and clearly defined.

Towards our Client

Towards our Business Associates

Towards our Employees

Towards our ClientThe Client is the driving force behind what we do. Our goal is to

provide the highest quality of products and services, along with value-added advice and

guidance based on the clients needs. We look to develop long-term relationships withour clients built on strong ethics and trust.

Towards our Business AssociatesThe power of partnership engenders involvement,

respect and mutual support. This is precisely the relationship that we foster with our

Business Associates and Financial Advisors. We provide a complete platform built upon

the best infrastructure and technology to enable our Business Associates and Financial

Advisors to efficiently service the financial needs of our investing clients.

Towards our EmployeesOur employees are what set us apart. Were all here for one

reason - to serve our clients best interests. It is through leadership and accountabilityacross our organization that we establish a common direction, encourage creative

collaboration and provide an inspiring environment for our people.


34/148



Our Values

Upholding these values is the primary responsibility of leaders at every level within

SSJ.

Respect for the Individual:We respect the dignity of each individual, whether an

employee, shareholder, client or member of the general public.

Partnership: Relationships among our staff members as well as our clients are

driven by the power of partnership. The power of partnership engenders

involvement, respect, contribution and mutual support. We encourage free exchangeof ideas and demand teamwork.

Striving for excellence: While serving our clients we constantly strive forexcellence to ensure that they derive complete satisfaction in their dealings with us.

Client focus:We aim to provide the highest quality of products and services to best

serve the changing needs of clients.

Teamwork: We strive for seamless integration of services through cooperation and

collaboration within and across workgroups and teams.

Meritocracy:We invest in our employees development and actively strive to be thebest at attracting and retaining talented people. Our success calls for entrepreneurial

spirit and initiative from each individual.

Integrity:At SSJ, our goal is to act in ways that help us to exemplify the highest

standards of personal and professional ethics in all aspects of our business.


35/148



Our SSJ Logo

The SSJ alphabets in an ascending chain formation signify the strong link that we

strive to build between the company, our clients and employees. We work in the best

interest of our clients, always!

The upward direction of the SSJ chain signifies growth as the prime focus of the

company.

Extension of the SSJ chain beyond the Logo borders symbolizes unbounded

prosperity for all its constituents as per Vaastu philosophy.

The Green Colourdepicts wealth and an ethical work environment.

Why SSJ

At SSJ, we believe that investing is not a one size fits all proposition. Individualinvestors are real people, each with his or her own personal long-term financial goals. We

offer financial solutions tailored specially to your individual needs.

So if you are interested in high quality investments, we invite you to explore this site and

learn more about the unique services we have to offer to help you reach your financial

goals.


36/148



Locate Us

Contact our Investment Centre closest to you to help you get started with SSJ Finance.

Alternatively, you may also e-mail us based on your nature of query:

Online Trading: [email protected] [email protected]

Business Associate / Franchisee: [email protected]

Corporate Office: Registered Office:

1st Floor,Merchant Chamber 1st Floor, Surya Mahal

41,New Marine Lines.Opposite Patkar Hall 5, Burjorji Bharucha Marg, Fort,

Mumbai - 400 020 Mumbai 400 001

Maharashtra Maharashtra

India India

T: +91-22-4300 8800 T: +91-22-4347 2271

F: +91-22-4300 8899 F: +91-22-2264 4090

Regional Offices

SrNo State City Address Telephone Fax

1 Maharashtra Mumbai116 Linkway Estate, Link Road,

Malad (W), Mumbai - 400 064

+91-22-

67415130-36

+91-22-

28769409

Regional Offices


1 Maharashtra Nashik G-10/11, Suyojit Trade Centre,

Sharanpur Road, Nashik422 002+91-0253-

3018541 / 42 / 43


37/148



SrNo State City Address Telephone

1 Gujarat SuratNo. 216, Empire State Building, Near Udhna

Darwaja, Ring Road, Surat - 395 002

0261-

3024309/312(B)

0261-3024308(D)

Maharashtra India

Regional Offices


1 Maharashtra Pune

303, 3rd Floor, Karan Selene Building, Above

Yes Bank, Bhandarkar Institute Road, Shivaji

Nagar, Pune-411004

020-

30261111-13

Regional Offices


1 Maharashtra Thane

101-104, 124-126, O. P. Commerce

Centre Jesal Park, Bhayendar (E), Mumbai

- 401 105 Maharashtra India

+91-22-

28162402 / 03 /

07

Regional Offices


1 Gujarat Rajkot

201, Star Chambers, Hari Har Chowk,

Dr. Rajendra Prasad Road, Rajkot - 360

001 Gujarat India

+91-0281-

3048652

+91-0281-

3045649

Regional Offices


1 Madhya Pradesh Indore406-407, D M Tower, Race Course

Road, Indore- 452001

0731-3024783-

92

Regional Offices


38/148



Regional Offices


1 Gujarat Ahmedabad

303, Iscon Avenue, Opposite Choice

Restaurant, C.G. Road, Ahmedabad

- 380 009 Gujarat India

+91-79-

30073800

+91-79-

30007675

2 Gujarat Ahmedabad

M-12, Ghadiali Complex, Jawahar

Chowk, Maninagar, Ahmedabad -

380 008 Gujarat

079-

30480284-92

Regional Offices


1 West Bengal Kolkata (AJC BOSE ROAD)

FMC Fortuna,

Suit No. A-14,

4th Floor,

234/3-A, AJC

Bose Road,

Kolkata - 700

+91-33-

30588996 /

97 / 98 / 99

+91-33-

30588995


39/148



Regional Offices


1 West Bengal Kolkata (Camac Street)

Shanti Niketan,

Room No. 9, 10th

Floor, 8, Camac

Street, Kolkata -

700 017 West

Bengal India

+91-033-

22825425 /

033-32992260

+91-033-

40061241

Regional Offices


1 Gujarat GandhinagarG-32/33, Megh Malhar Complex, Sector -

11, Gandhinagar382 011 Gujarat India+91-07930580301

Regional Offices


1 Jharkhand Ranchi

2nd Floor, Baldeo House, Shradhanand

Road, Upper Bazaar, Ranchi834 001Jharkhand, India

+91-651-

6455109

+91-651-

6455110

Regional Offices


1 New Delhi New DelhiUGF-4, Kanchanjunga Building, 18,Barakhamba Road, Connaught Place,

New Delhi - 110001

+91-11-

30238906

Regional Offices



40/148



1 Rajasthan Jaipur

Off No.302 , Luhadia Tower, K-11, Ashok

Marg ,Near Ahinsa Circle, C Scheme

,JAIPUR

9314451122

,0141-3928700

egional Offices


1 Uttar Pradesh Kanpur

114-117, Kan Chambers, 14/113 Civil

Lines, Adjacent To UP Stock Exchange,

Kanpur-208001

0512-3067880

to 87


41/148



Benefits of Equity Investing with SSJ...

As an investor, you would want quality services from a full-service brokerage firm

whose function goes far beyond mere execution of buy-and-sell transactions.

Congratulations! Your search has just come to an end.

At SSJ Finance, we assure you that you will have a rewarding investing experience.

We help you assimilate the massive amount of information trends in the economy,the markets, specific industries and individual companies that may affect your

particular investments or investment decisions. The role of SSJ Finance is to helpyou, the investor, make deliberate, thoughtful decisions that match your personal

needs with suitable investment alternatives.

We particularly enhance your investing experience with:

Excellent trade execution capabilities on BSE, NSE, MCX and NCDEX

Futures & Options / Derivatives trading for those with a higher risk appetite

Online Trading Facility with integrated Depository and Bank Gateway

Arbitrage trading strategies

Daily Market Analysis, Advisory reports & Special Situation Research

Reports Online real-time back office, available 24/7

Online Depository Services with Auto Pay-in facility

Seamless transaction flow.

We have made investing and trading much simpler for you. By opening an

account with SSJ Finance, you can enjoy the freedom to trade in any of the

following 3 ways:

Trade Onlineon your desktop through different trading platforms

Call-n-Trade (for online trading clients) Contact or visit your nearest SSJ Finance branch office to place your orders.

To start trading in Equities, Derivatives and / or Commodities, using any of the 3

methods mentioned above, all you need to do is open an account with us

or Contact us for any related queries.


42/148



Equtiy Basics

What is Share/ Stock/ Equity?

A share is one of a finite number of equal portions in the capital of a company, mutual

fund or limited partnership, entitling the owner to a proportion of distributed, non-

reinvested profits known as dividends and to a portion of the value of the company in case

of liquidation. Dividends are not guaranteed. They may be increased if the company

performs well, but they may also be reduced or eliminated if the company performs

poorly.

So when you purchase shares, you become part owner of a company. As an owner, you

are usually entitled to voting rights on the board of directors and corporate policy.

Modes of Stock Purchase

Stocks can be purchased individually (meaning you purchase shares of stock in one

particular company) or as part of a pool investments, such as mutual funds.

Mutual funds are baskets of stocks that are available for the fraction of the price you

would need to buy the same stocks individually. That's because a large number of

investors pool their money together and invest in the entire portfolio of stocks.

Professional money managers direct the investments within mutual funds, choosing each

of the individual investments based on the mutual fund's investment goals. For example,

some equity mutual funds invest in well-established companies that pay regular

dividends. Others invest in younger, more growth-oriented firms or companies that have

been operating below expectations for several years.

Note: As with the purchase of individual stocks, your investment return and principal

value of an investment in mutual funds will fluctuate. Your shares may be worth more or

less than your original investment when redeemed.


43/148



What are the different kinds of risks one should consider while investing?

Risk in investments can be of the following types:

Market Risk or Volatility: This refers to the fluctuation in the value ofinvestments due to changes in the price of the stocks included in an investorsportfolio which could be caused by a variety of factors such as performance of the

company, policy announcements, political factors etc. Even a portfolio of well-

diversified assets cannot escape all risk.

Inflationary risk: Also known as purchasing power risk, this is the decline in the

purchasing power of money over time, so that even the "safest" investments can

leave investors with substantially less purchasing power. For example, assumingan inflation rate of 4% for the next 10 years, if you have Rs.100 today, 10 years

from now inflation will have eroded that Rs.100 so that it is worth only Rs.68.

Investment or credit risk: This is the possibility that a company in which an

investor is invested in may not be sufficiently profitable to remain in business.

Another manner of classifying risk in securities is as follows:

Unsystematic Risk: Unsystematic risk affects a very specific group of securities

or an individual security. Internal risks such as strikes, management policies, etc.are to a large extent controllable and are examples of non-systematic risks. An

investor can easily manage such non-systematic risks by having a well-diversified

portfolio spread across the companies, industries and groups so that a loss in onemay easily be compensated with a gain in other.

Systematic Risk: The risk inherent to the entire market or entire market segment

is called Systematic Risk. It is also known as "un-diversifiable risk". Such risks

are external and beyond the control of the company. Examples of such risks areeconomic, political and sociological changes. Their impact is on prices of all

individual stocks and they move together in the same manner. Therefore quite

often the stock prices may be falling despite good company performance and vice

versa.

Since higher returns are associated with higher risks, you, as an investor, need to

understand your risk tolerance level and certain principles of investing which can helpyou diversify and mitigate this risk. Before venturing into the world of stock investments,

consider:

Are you conservative, aggressive or speculative in your approach to investing?

Are you comfortable owning aggressive stocks?

Are you looking for a steady stream of income, long-term returns from growth or


44/148



very high returns from risky short-term trading?

Factors affecting Investment Decisions

Before you begin investing, it's helpful to understand some of the factors that will affectyour investment decisions, such as:

Risk

Liquidity

Time Horizon

Total Return

Diversification

Tax Consequences

Rupee Cost Averaging

Risk: Risk in investments can take various forms. For details click here.

Liquidity: A "liquid" investment is one that can be readily turned into

cash if you need the funds on short notice. Investments can vary greatly intheir degree of liquidity. Shares can be traded on any business day at their

current market value, which may be more than, equal to or less than the

amount initially invested.

Time Horizon:Different investors have different time frames in which toachieve their investment objectives. Generally, young investors with long

time horizons should be able to assume greater risks because they havemore time to offset any losses with the higher return potential of

investments with greater risk. Older investors, however, often choose to

reduce risk because they have less time to recoup losses.

Total Return: All investments provide one or a combination of two

different types of returns to investors - income or growth. Income is thedividend earned from stocks. Growth is the price appreciation of thesecurity. The total return of an investment is the combination of income

and growth realized over a given time period. In selecting investments

based upon their expected total return, you should understand which

portion is generated from income and which from growth. Usually, thegreater the reliance on income, the lower the market risk but the greater the


45/148



long-term purchasing power (or inflationary) risk.

Diversification: Building a diversified portfolio with securities spreadacross different investment classes can help you avoid the risk of having

all of your eggs in one basket. By mixing industries and types of assets,

you spread your risk. A particular market condition may have less impactif your portfolio consists of a wide assortment of securities than if you

purchase only one type of security.

Most beginning investors don't have sufficient capital to properly diversifytheir portfolio by purchasing individual securities. Investing in mutual

funds allows you to buy a professionally managed, diversified portfolio

with relatively small rupee amounts. In addition, many mutual funds allowyou to take advantage of rupee cost averaging by investing at regular

intervals.

Note: Mutual fund investing involves risk. Your principal and investmentreturn in a mutual fund will fluctuate in value. Your investment, when

redeemed, may be worth more or less than the original cost.

Tax Consequences: Not all investment returns are subject to the same

taxation. Short term and long term returns are taxed at different capital

gains rates or even taxed as business income. The taxation policy should

be kept in mind while deciding which investments to make.

Rupee Cost Averaging: Rupee cost averaging, the practice of committinga fixed amount of money to an investment program on a regular basis, is a

popular practice with many long-term investors. By investing a set amountregularly (usually monthly or quarterly), investors are able to avoid the

pitfalls of trying to time market peaks and valleys. Also, because the

amount of the investments is set, investors who practice rupee cost

averaging buy more shares of a stock or mutual fund when they are lesscostly and fewer shares when they are more expensive.

Like any investment strategy, rupee cost averaging doesn't guarantee a

profit or protect against loss in a declining market. Because rupee cost

averaging requires continuous investment regardless of fluctuating prices,

you should consider your financial and emotional ability to continue the


46/148



program through both rising and declining markets.

What are the different kinds of risks one should consider while investing?

Risk in investments can be of the following types:

Market Risk or Volatility: This refers to the fluctuation in the value of

investments due to changes in the price of the stocks included in an investorsportfolio which could be caused by a variety of factors such as performance of thecompany, policy announcements, political factors etc. Even a portfolio of well-

diversified assets cannot escape all risk.

Inflationary risk: Also known as purchasing power risk, this is the decline in thepurchasing power of money over time, so that even the "safest" investments can

leave investors with substantially less purchasing power. For example, assuming

an inflation rate of 4% for the next 10 years, if you have Rs.100 today, 10 years

from now inflation will have eroded that Rs.100 so that it is worth only Rs.68.

Investment or credit risk: This is the possibility that a company in which an

investor is invested in may not be sufficiently profitable to remain in business.

Another manner of classifying risk in securities is as follows:

Unsystematic Risk: Unsystematic risk affects a very specific group of securities

or an individual security. Internal risks such as strikes, management policies, etc.

are to a large extent controllable and are examples of non-systematic risks. An

investor can easily manage such non-systematic risks by having a well-diversifiedportfolio spread across the companies, industries and groups so that a loss in one

may easily be compensated with a gain in other.

Systematic Risk: The risk inherent to the entire market or entire market segmentis called Systematic Risk. It is also known as "un-diversifiable risk". Such risks

are external and beyond the control of the company. Examples of such risks are

economic, political and sociological changes. Their impact is on prices of all

individual stocks and they move together in the same manner. Therefore quiteoften the stock prices may be falling despite good company performance and vice

versa.

Since higher returns are associated with higher risks, you, as an investor, need to

understand your risk tolerance level and certain principles of investing which can help

you diversify and mitigate this risk. Before venturing into the world of stock investments,

consider:

Are you conservative, aggressive or speculative in your approach to investing?

Are you comfortable owning aggressive stocks?


47/148



Are you looking for a steady stream of income, long-term returns from growth or

very high returns from risky short-term trading?

Benefits of Derivatives trading with SSJ

Derivatives are a key part of the financial system, with the various derived contracts

accounting for a significant share of all capital market transactions in the domestic

and global markets. In India, derivative contracts are heavily traded on the National

Stock Exchange (NSE). Derivate contracts are increasingly being traded on the

Bombay Stock Exchange (BSE) as well. With our membership of the Derivatives

Segment on both these exchanges, we, at SSJ Finance, encourage you to avail of the

several benefits of derivatives trading, including, researched trading ideas, hedging

and arbitrage strategies, strong risk management of leveraged positions, lower cost

of trading and many more.

The SSJ Derivative Market segment has a composite understanding of the equity and

derivatives market reflected in our unique Trading / Hedging /Arbitrage strategies.

We offer the latest technological infrastructure for hassle-free trading, live market

reports, in-depth analysis and tracking services to enable you to adopt appropriate

derivative strategies (Bull Spread, Bear Spread, Cover call writing, hedging

strategies etc.) specific to your individual portfolio.

We have made investing and trading much simpler for you.By opening anaccount with SSJ Finance, you can enjoy the freedom to trade in any of the

following 3 ways:

Trade Onlineon your desktop through different trading platforms Call-n-Trade (for online trading clients)

Contact or visit your nearest SSJ Finance branch office to place your orders.

To start trading in Equities, Derivatives and / or Commodities, using any of the 3

methods mentioned above, all you need to do is open an account with us

or Contact us for any related queries.

Come and enhance your investing experience with us!


48/148



Derivatives

Derivatives are financial contracts between two or more parties whose values are derived

from the value of an underlying primary financial instrument, commodity or index, such

as interest rates, exchange rates, commodities, bonds and equities. Derivatives include a

wide assortment of financial contracts, including forwards, futures, swaps and options.

Most derivatives are characterized by high leverage.

Since derivatives are mere contracts, just about anything can be used as an underlying

asset. There are even derivatives based on weather data, such as the amount of rain or the

number of sunny days in a particular region.

Derivatives are generally used to hedge risk, but can also be used for speculative and

arbitrage purposes.

History of Derivatives in India

In India, derivative contracts are heavily traded on both the national exchanges, NSE and

BSE. History of Derivatives in India can be outlined as follows:

Date Event

9th June 2000First exchange traded Index Derivative ProductSensex Futureswas launched by BSE

12th June 2000 NSE commenced Trading in Index Futures

1st June 2001 BSE commenced Trading in Index Options

4th June 2001 NSE introduced Trading in Index Options

2nd July 2001 NSE commenced Trading in Options on Individual Securities

9th July 2001 BSE commenced Trading in Stock Options

November 2001 NSE commenced Trading in Futures on Individual Securities

9th November 2002 BSE commenced Trading in Futures on Individual Securities


49/148



June 2007 NSE launched derivatives on Nifty Junior & CNX 100

Why consider Derivative Contracts?

With the present volatile market conditions and the continuous national and international

developments making it risky to have overnight positions, clients need a way to safeguard

their profits and at the same time minimize their losses. Derivative contracts are ideal for

this purpose.

Futures investors have long recognized that they have the potential to profit from both

upward and downward movement of investments. Derivatives help to improve market

efficiency because risks can be isolated and sold to those who are willing to accept takingthese risks at the least cost. 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.

Speculators can take advantage of highly leveraged exposures in both financial and non-

financial markets. That means they can buy futures contracts by depositing just a small

percentage of the overall contract price. Their goal is to profit from changes in the price

of the futures contract.

Hedgers, those who hold a specific asset or have a specific exposure in the cash market,often take a position in the derivatives market opposite to that in the cash market to help

reduce the risk of rising or falling prices.

FuturesTrading Strategies

For a market to succeed it must have all kinds of participantshedgers, speculatorsand arbitragers. The confluence of these participants ensures liquidity and efficientprice discovery on the market. We, at SSJ Finance can help you choose the right

trading strategy that suits your profile and requirement.

The main trading strategies that can be formulated using futures are listed below:


50/148



Hedging

Speculation

Arbitrage

Hedging

Hedging is the act of taking a position in the futures market that is exactly

opposite to ones position in other segments of the market such as the equity

segment, commodity physical market etc., with a view of offsetting losses in one

segment (say ,in equities/commodities spot market) with a gain in the other (say

,futures segment). Hedging does not necessarily improve financial outcome or

result in increased profit. This strategy helps in reducing or limiting riskassociated with unpredictable changes in prices, in other words, it increases the

certainty of the outcome. Hedging strategy can be adopted in the following two

ways:

Buying Hedge or Long HedgeIn the equities market, if you are short in thecash segment, you can buy futures contracts and hedge your cash position. Based

on the rationale that both cash and futures segment move in tandem, in case

prices rise, you will make a profit in the futures contract which will offset your

loss in the cash segment. If prices fall, you will make a profit in the cash segment

and a loss in the futures segment. In case of commodities market, this strategy is

quite useful for exporters / traders who have made commitments to deliver the

specified amount of raw materials / processed products / manufactured goods at a

later date at a price currently agreed upon, but do not have the stock of raw

materials to fulfill their commitments for forward deliveries.

Selling Hedge or Short HedgeThis means selling futures contracts to hedgelong position in cash market. For example, in the commodities market,

manufacturers and dealers who have bought raw materials or are maintaining

inventory for future sale, can protect the prices of their future sales by sellingfutures contracts.

Speculation


51/148



Under the hedging strategy, profit is minimal since profit generated in one

segment is eaten up by loss in the other segment. If risk minimization is not your

motive, and you are interested in making maximum gains from your investment,

you can become a speculator. Under the speculation strategy, when an investor

thinks that the market is bullish, he buys the Index futures contract. Similarly, ifhe is bearish about the market, he sells the Index futures contract. The same

strategy can be applied to individual stock futures as well.

The advantage of this strategy is that without any existing position in the cash

market, and even without having the physical resources to take delivery of the

underlying asset or the desire to take delivery of the underlying asset, a

speculator can make use of price movements to make a profit, based on his

expectations. Another advantage to the market as a whole is that speculators

provide liquidity to the market, since they accept the risk which hedgers wish to

transfer. Without them, the hedging function would have proved to be a very

expensive option.

Note: Futures market provides you with the advantage of leverage, since you

can trade large volumes with only a small investment in the form of margin

money. While profits can be huge, ones losses can also be large. Hence, you

must step into the futures market with great caution, only after

understanding the risks involved.

Arbitrage

Arbitrage involves the simultaneous purchase and sale of an asset in order to

profit from a temporary price differential, usually taking place on different

exchanges or marketplaces. When used by academics, an arbitrage is a

transaction that involves no negative cash flow at any probabilistic or temporal

state and a positive cash flow in at least one state; in simple terms, a risk-freeprofit. Ifyou want to replace the returns from your idle funds in fixed depositswith higher yielding returns, arbitrage is a good risk free investment option for

you.

A person who engages in arbitrage is called an arbitrageur. The term is mainly

applied to trading in financial instruments, such as bonds, stocks, derivatives,

commodities and currencies.


52/148



OptionsStrategy Guide

With various option strategies such as long call/put, short call/put, straddle, strangle,

butterfly, spread etc. possible, it is very easy to get confused as to which strategy one

should adopt to fulfill ones objective of maximizing gains or hedging. If you have a

view on market trend (bullish / bearish / neutral / volatile), you can make optimum

use of the strategy guide given below. Click on the appropriate link to get details of

the strategy that you should adopt in the given scenario.

BULLISH STRATEGY

Very Bullish Buy Call

Moderately Bullish + Certain that the market will not fall Sell Put

Moderately Bullish + Fairly certain that the market will not fall Bull Spread

Bearish in immediate near-term (weeks) + bullish in long term(months)

DiagonalSpread

BEARISH

Very Bearish Buy Put

Certain that the market will not rise Sell Call

Moderately bearish + Fairly certain that the market will not rise Bear Spread

Flat/mod. bullish in near-term(weeks) + bearish in longer term(months)

DiagonalSpread

Hold stock and bearish Put Hedge

NEUTRAL


53/148



Expect prices to fluctuate in very narrow range Sell Straddle

Expect prices to fluctuate in a broader range Sell Strangle

Moderately certain that prices will not fluctuate much Long Butterfly

Expect short-term weakness but longer-term rally Calendar Spread

Hold stock but expect no movement Covered Call

VOLATILE

Expect prices to be very volatile Buy Straddle

Expect prices to be volatile Buy Strangle

Moderately expect prices to be volatile Short Butterfly

BULLISH

Very BullishBUY CALL

Strategy View You think that the market will rise significantly in the short-term.

Strategy

Implementation

Buy Call option with a strike price x. The more bullish you are,the higher the strike price should be, i.e. the more out-of-the-

money the option you buy. (However, the more out-of-the-money the option is, the less likely that it will make money)

Upside Potential Profit potential is unlimited and rises as the market rises.

Breakeven Point

at ExpiryStrike Price + Premium

Downside RiskLimited to the premium paid for the option and is incurred if the

market at expiry is at, or below, the strike x.

Margin Not Required

CommentOnce you have bought the option, the strike price is fixed. Other

things remaining constant, the value of the option decays as time

passes. This is why some people say, a call is a wasting asset.


54/148



If price goes up or volatility increases, the erosion slows. If price

drops or volatility decreases, the erosion speeds up.

Moderately Bullish + Certain that the market will not fallSELL PUT

Strategy ViewYou are certain that the market will not go down, but unsure /

unconcerned about whether it will rise.

Strategy

Implementation

Sell Put option with a strike price x. If you are very bullishand aggressive, then sell in-the-money puts. If conservative,

sell out-of-the-money puts.

Upside Potential

Profit potential is limited to the premium received. The more

the option is in-the-money, the greater will be the premium you

will receive.

Breakeven Point at

ExpiryStrike PricePremium

Downside Risk

Loss is almost unlimited (almost as the underlying pricecannot fall below Zero!). [ If the strategy appeals, but not the

downside risk, investors may prefer a Bull Spread]

Margin Always Required

CommentIf the market does little, and time passes, this helps as the short

position gains when the time value erodes.

Moderately Bullish + Fairly certain that the market will not fallBULL

SPREAD

Strategy View

You are bullish but unsure. You think that the market will not

fall, but want to cap the risk. Conservative strategy for one who

thinks that the market is more likely to rise than fall.

Strategy

ImplementationUSING CALLS USING PUTS

Long a Call with strike price xand Short another Call with a

higher strike price y,

Long a Put at a strike price xand Short another Put with a

higher strike price y,


55/148



producing a net initial debit. producing a net initial credit.

Upside Potential

Limited to Difference between

Strikes minus Initial Debit.Limited to Net Initial Credit

Maximum Profit if market at expiry is above the higher strike

price.

Downside Risk

Limited to Net Initial DebitLimited to Difference between

Strikes minus Initial Credit.

Maximum Loss if market at expiry is below the lower strike

price.

Margin Possibility for Margin Requirements to be off-set.

Comment

Time value erosion not too significant due to balanced position.

The benefit of buying a spread is that it requires a smaller

investment than buying a single call / put. The cost is that it

makes less money (limited) than the call (unlimited) should the

stock rise sharply.

Bearish in immediate near-term (weeks) + bullish in long term (months)

DIAGONAL SPREAD

Strategy ViewYou think that the market will be weak in the short term, but

then rally later.

Strategy

Implementation

A near-dated call option is sold, and a longer dated, further out-

of-the-money call option is bought.

Upside Potential

Unlimited, if the bought option is held after the short option

expires (the position then becomes a straight-forward buy call).

If the position is closed at expiry of the near option, maximum

profit will accrue if the market is at the level of the sold strike.

Downside RiskLimited to the difference in strikes plus / minus the initial debit /

credit when establishing the spread.

Margin Yes, but off-set may apply


56/148



CommentThere is a risk of the sold options being called (i.e. being

exercised).

BEARISH

Very BearishBUY PUT

Strategy ViewYou think that the market will fall significantly in the short-

term.

Strategy

Implementation

Buy Put option with a strike price x. The more bearish you are,the lower the strike price should be, i.e. the more out-of-the-

money the option you buy. (However, the more out-of-the-

money the option is, the less likely that it will make money)

Upside PotentialProfit potential is unlimited (well, not really unlimited of course,

as the market cannot fall below Zero!)

Breakeven Point

at ExpiryStrike PricePremium paid

Downside RiskLimited to the premium paid for the option and is incurred if the

market at expiry is at, or above the strike x

Margin Not Required

CommentIf the market does little, and time passes, the value of the

position will decrease as the option time value erodes.

Certain that the market will not riseSELL CALL

Strategy ViewYou are certain that the market will not rise, but unsure /

unconcerned whether it will fall.

Strategy

Implementation

Sell Call option with a strike price x. If conservative, sell out-of-the-money calls. If you are not so conservative and believe

the stock is stagnant, sell at-the-money options. If you are

aggressive and confident that the market is going down, sell in-

the-money call options.


57/148



Upside Potential

Profit potential is limited to the premium received. The more the

option is in-the-money, the greater will be the premium you will

receive.

Breakeven Pointat Expiry

Strike Price + Premium

Downside Risk

Downside risk is unlimited. Losses on the position will increase

as the market rises. [ If the strategy appeals, but not the

downside risk, investors may prefer a Bear Spread]


CommentIf the market does little, and time passes, this helps as the short

position gains when the time value erodes.

Moderately bearish + Fairly certain that the market will not riseBEAR

SPREAD

Strategy View

You are bearish but unsure. You think that the market will not

rise, but want to cap the risk. Conservative strategy for one who

thinks that the market is more likely to fall than rise.

Strategy

Implementation

USING CALLS USING PUTS

Sell a Call with strike price xand Buy another Call with a

higher strike price y,producing a net initial credit.

Sell a Put at a strike price xand Buy another Put with a

higher strike price y,producing a net initial debit.

Upside Potential

Limited to Net Initial CreditLimited to Difference between

Strikes minus Initial Debit.

Maximum Profit if market at expiry is below the lower strikeprice.

Downside Risk

Limited to Difference between

Strikes minus Initial Credit.tLimited to Net Initial Debit

Maximum Loss if market at expiry is above the higher strike


58/148



price.

Margin Possibility for Margin Requirements to be off-set.

Comment

Time value erosion not too significant due to balanced position.The benefit of a bear spread is that it requires a smaller

investment. The cost is that it makes less money than a pure long

put position should the stock fall sharply.

Flat / moderately bullish in near-term(weeks) + bearish in longer term (months)

DIAGONAL SPREAD

Strategy ViewYou think that the market will be flat or rise only slightly in the

short term, but then fall later.

Strategy

Implementation

A near-dated put option is sold, and a longer dated, further out-

of-the-money put option is bought.

Upside Potential

Large, if the bought option is held after the short option expires

(the position then becomes a straight-forward buy put). If the

position is closed at expiry of the near option, maximum profit

will accrue if the market is at the level of the sold strike.

Downside RiskLimited to the difference in strikes plus / minus the initial debit /

credit when establishing the spread.

Margin Yes, but limited

CommentThere is a risk of the sold options being called (i.e. being

exercised).

Hold stock and bearishPUT HEDGE

Strategy View

You hold stock and are worried about a market fall. You can

buy Put Options to protect the value of the stock position, whileallowing the position to benefit in the event of a market rise.

Strategy

Implementation

Buy Put Options with a strike price x. The number of putoptions bought will depend on your bearishness and the size of

your stock holding.


59/148



Upside PotentialProfit potential is unlimited, being the ordinary return on the

stock minus the fixed premium paid for the put options.

Downside Risk

Potentially limited (depending on the hedge-ration initially

applied). The gains on the put options as the market falls, willoff-set the loss in the value of the stock.

Margin Not Required

Comment Strategy characteristics are similar to a Buy Call.

NEUTRAL

Expect prices to fluctuate in very narrow rangeSELL STRADDLE

Strategy View You are certain that the market will not be very volatile, but willstagnate (neither go up or down very much).

Strategy

ImplementationShort a Call and a Put option at the same strike price x

Upside PotentialLimited to the 2 premiums received. This will be realized if market at

expiry is exactly at the level of the strike price.

Breakeven Point

at Expiry

The lower point a will be the strike minus the value of the 2premiums received. The upper point b will be the strike plus the 2premiums received. (If you would like to broaden this band, a Sell

Strangle might appeal to you)

Downside Risk Unlimited, should the market rise or fall greatly.


CommentIf the market does little, and time passes, then the value of the position

will benefit as the short positions gain when the time value erodes.

Expect prices to fluctuate in a broader rangeSELL STRANGLE

Strategy View You expect the market to stagnate within a broadish band.

Strategy

Implementation

Sell Put option with a strike price x and Sell Call option with ahigher strike price y


60/148



Upside Potential Limited to the 2 premiums received.

Breakeven Point at

Expiry

Lower point a will be the lower strike x minus the value of the 2premiums received. The upper point b will be the higher strike yplus the 2 premiums received.

Downside Risk

Unlimited, should the market rise or fall greatly. (If you like this

strategy, but not the downside risk, a Long Butterfly might be

interesting)


CommentIf the market does little, and time passes, then the value of the position

will benefit as the short positions gain when the time value erodes.

Moderately certain that prices will not fluctuate muchLONG BUTTERFLY

Strategy ViewYou expect that prices will not fluctuate much, but want to cap the

downside risk.

Strategy

Implementation

Buy Call option with low strike a, Sell 2 Call options with mediumstrike x(x > a) and Buy Call option with high strike b (b > x > a)

Upside Potential

Limited to the difference between the lower and the middle strikes

minus the net debit of establishing the spread. This is obtained if the

stock ends up at the middle point (x) on the expiration day

Downside RiskLimited to the initial debit of establishing the spread. This occurs if the

stock is on the wing.

Comment Can be difficult to execute such strategies quickly.

Expect short-term weakness but longer-term rallyCALENDAR SPREAD

Strategy ViewYou think that the market will be weak in the short-term, but rally in the

longer term.

Strategy

Implementation

You Sell a near-dated Call option and Buy a longer-dated Call option,

both options having the same strike price. (If you have the opposite

view, then a comparable strategy can be constructed using puts)

Upside Potential Large, if the bought option is held after the short option expires (the

position then becomes a straightforward Buy Call). If the position is


61/148



closed at expiry of the near option, maximum profit will accrue if the

market is at the level of the sold strike.

Breakeven Point

at ExpiryStrike Price + Premium

Downside Risk Limited to the Initial Debit incurred for establishing the spread.

Margin Off-set maybe available

CommentThere is a risk of the sold options being called (i.e. being exercised).

Sometimes, this strategy is also called Horizontal or Time spread.

Hold stock but expect no movementCOVERED CALL

Strategy ViewYou hold stock but do not think that the stock will rise in the shortterm, or that the stock will be neutral. Income can be earned by selling

call options against the stock holding.

Strategy

Implementation

Sell Call options. The number of call options that you sell will be

determined by your market view and the size of the stock holding.

Upside PotentialLimited. By selling calls, you are writing off the potential profit of the

stock position.

Downside Risk

Large. Similar to that incurred with ordinary stock ownership, only

offset pa

marketing strategies of a stock broking firm

Documents