The call option is.
Capital Protection Fund Definition: Capital protection-oriented fund is a class of closed-end hybrid fund.
The capital protection, however, is not guaranteed in India. Description: Capital protection-oriented funds are closed-end mutual fund schemes with a portfolio that is skewed towards debt.
Because it is closed-end, fresh units of the scheme will be available for subscription only during the new fund offer NFO period. Subsequent purchase and sale of units is possible only on the exchange platform, where the fund is listed.
However, this is easier said than done, as secondary market transaction can often become a Herculean task in the absence of sufficient liquidity. The portfolio comprises of a mix of equity and debt, typically of the nature of a hybrid fund.
However, it is heavily oriented towards debt especially zero coupon debt and only novotek trading official website small part of the portfolio is invested in equity.
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The maturity of the debt portfolio is aligned with the lock-in period of the fund, thereby insulating it from the gyrations of interest rate movements. As debt instruments are held till maturity, the probability of marked-to-market losses due to interest rate fluctuations is mitigated.
The capital protection orientation of the fund means that the debt component will be managed in such a manner that the returns from it increase to the level of initial capital invested. At the same time, the equity portion of the portfolio is managed with the aim to provide a fillip to the overall portfolio value.
- The distinction between American and European options has nothing to do with geography, only with early exercise.
- Use of options in the assessment of risk debt
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For instance, if the minimum debt exposure is fixed at 80 per cent, then this is managed to generate per cent of the principal invested. The remaining 20 per cent comprising equity is managed to generate an upside to the portfolio.
The portfolio is normally invested in highest grade debt instruments. These funds provide superior downside risk protection during a market downturn but offer limited upside during market upturns.
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They are suitable for conservative investors with a low risk appetite. These funds provide even the most conservative investors an opportunity to invest a small part of their portfolio in equity, thereby giving them the scope to participate in equity market upturns.
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The buyer of the call option earns a right it is not an obligation to exercise his option to buy a particular asset from the call option seller for a stipulated period of time. Description: Once the buyer exercises his option before the expiration datethe seller has no other choice than to sell the asset at the strike price at which it was originally agreed.
The buyer expects the price to increase and thus earns capital profits. Butterfly Spread Option Definition: Butterfly Spread Option, also called butterfly option, is a neutral option strategy that has limited risk.
The option strategy involves a combination of various bull spreads and bear spreads. A holder combines four option the call option is having the same expiry date at three strike price points, which can create a perfect range of prices and make some profit for the holder. A trader buys two option contracts — one at a higher strike price and one at a lower strike price and sells two option contracts at a strike price in between, wherein the difference between the high and low strike prices is equal to the middle strike price.
Both Calls and Puts can be used for a butterfly spread. That allows the trader to earn a certain amount of profit with limited risk.
Definition of 'Call Option'
In this the call option is, either you go for Calls or Puts or a combination of both. In the same way, you either go long or short on options or a combination of longs and shorts depending on what you are foreseeing in future and what is your payoff strategy. Example: Suppose, a trader is expecting some bullishness in Reliance Industries, when it trades at Rs 1, Now, a trader enters a long butterfly bull spread option by buying one lot each of December expiry Call options at strike prices Rs and Rs 1, at values of The cost to the trader at this point would be 3.
If the strategy fails, this will be the maximum possible loss for the trader.
If the Reliance Industries stock trades at the same level i. Rs 1, on the expiry date in December end, the Call option at the higher strike price will expire worthless as out-of-the-money strike price is more than the trading pricewhile the Call option at the lower strike price will be in-the-money strike price is less than trading price and the two at-the-money Call options that had been sold expired worthless.
Now subtracting the initial cost of Rs 3.