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What is a derivatives trading account?
Derivative (Futures & Options) trading involves buying or selling derivative products. The idea is to hedge portfolio risks and make substantial gains from price volatility by paying nominal margins. They are called derivatives because they derive their value from underlying assets like equity, bonds, currency or commodities. To trade in derivatives, you will need an options or futures trading account.
Why do you need a derivative (Futures & Options) trading account?
- You cannot directly trade in derivatives without opening a derivatives account with a listed brokerage. Seasoned brokerage houses like Angel Broking, are trading and clearing members of NSE f&o segment, and BSE derivatives segment. These members provide a gateway to the exciting world of derivative market. Currently, your equity trading account doubles up as a futures (and options) trading account.
- When there is significant exposure in the underlying asset class, you need this type of account to hedge against market volatility.
- Given that the margins are nominal, you can afford to take calculated risks in futures trading with the help of a derivative trading account.
- Trading in derivatives allows one to hold the position for longer (as long as three months).
- A derivative trading account with Angel Broking comes with these benefits:
- Pan India Presence: You can trade from anywhere; geography is not a barrier anymore to open an options and futures trading account.
- Easy Access: You can access your account online as well as offline.
- Regular Updates: You can get alerts like new schemes and offers. Angel Broking also sends curated tips based on your trading pattern.
- In-Depth Research: Not just executing the trades, but the brokerage also provides the right tools to pick the right product. These tools are based on your financial requirement, along with related in-depth market research and analyst inputs.
- 24/7 Customer Support: There is dedicated customer help desk along with a web-enabled 24/7 back end to help you navigate the world of derivatives trading.
- Seamless Processes: An options and futures trading account with Angel Broking takes very little time to open. Moreover, with the help of online access and smart technology, investors need not maintain paper receipts for trade transactions.
How to open a derivative trading account?
To begin an f&o account, you’ll have to submit a ‘Client Registration Form’ along with other SEBI mandated documents. As you may already know, SEBI is the regulator for the securities market in India. Documents include an account opening form and relevant Know Your Client (KYC) verification proofs. Here’s a list for reference:
- Financial proof: Apart from a bank statement, you can provide any of the following:
- Copy of ITR Acknowledgement (for last financial year)
- Copy of Annual Accounts (for the previous fiscal year)
- Copy of Form 16 in case of salary income (for last financial year)
- Net worth certificate (the latest one, or at the end of the previous financial year)
- Salary Slip (current)
- Copy of Demat account Holding statement (not more than three months old)
Your verification process will take place through a phone call or an in-house visit. After this, your options and futures trading account is set up, and you’ll receive your account details.
How can one check the account opening status?
You can check your account opening status by logging into Angel Broking website. Follow these steps:
- Go to: https://www.angelbroking.com
- Go to the Home Page
- Click on Track A/C Opening Status
- Enter the pan card details in the given column and click on the ‘Submit’ tab to get the status.
How to trade after opening a derivative trading account?
You can trade using our online or mobile platform. You can even transact offline by calling our tele-broking services.
What is an options and futures contract?
Though both futures and options are derivatives of underlying asset classes, they’re different. The primary one being, an option is a right (and NOT an obligation) to buy or sell an underlying asset, at pre-determined prices. A futures contract, on the other hand, is an obligation on the part of buyers and sellers to execute the trade at pre-decided prices on the date mutually agreed.
Example of futures trading
For instance, you buy one-month equity contracts of ABC Company with your futures account at Rs.400 per share. On the contract expiry date, if the share price goes up to Rs. 450, you end up making a decent profit.