Derivatives FAQs

What's a call option?

Options can be financial contracts that are drawn on an underlying asset. This could be stocks, commodities or currencies. Call options are a right to purchase without an obligation. You can execute an option contract only when it is profitable. …

WHAT IS THE COST OF CARRY RESULTING IN BULLISHNESS / BEARISHNESS

Open interest and change in CoC are indicators of wider sentiment about the stock or index. Open interest refers to the number of open positions within a contract. An increase in CoC is indicative of bullish accumulation, while a fall …

Is it possible to reduce the cost of shipping?

Yes. This happens when the stock is expected pay a dividend or when traders aggressively execute a "reverse arbitrage", which involves selling futures and buying spot. Bearish sentiment is influenced by negative cost of carry.

How it works?

CoC is often used by traders to gauge market sentiment. Analysts see a significant drop inCoC as a sign of upcoming falls in the underlying. The CoC of Nifty futures' benchmark index fell by almost half a week ago and …

How to interpret this?

CoC is an indicator of market sentiment. A low CoC indicates a decline in the value or vice versa.

How to calculate CoC

Theoretically, Future price fair value=Spot Price+Cost of Carry-Dividend Payout Cost of Carry = Difference between the futures and spot price at any time CoC is calculated as an annual rate and expressed in percentage values. The real-time CoC values are …

What does Cost of Carry mean?

The cost of carrying or CoC, is the expense incurred by an investor to hold certain positions in the market until the futures contract expires. This cost includes the risk-free interest rate. The CoC does not include dividend payouts from …

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