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An introduction to simple, low-risk strategies using long option positions

There is no more debate on the fact that volumes would dry up in the Indian stock markets come July 2, 2001, when the current futures style cash market will be replaced by a clearly segregated cash market and a parallel derivatives market (which will include index-based futures and options markets and options on a few consequential stocks).

Clearly, considering the casual approach of most Indian market participants towards the index futures market (which has been operational for over a year), it isn't any wonder that the markets aren't ready for this sudden transformation.

Nevertheless, the decision has been made, and as things stand, the only option left for the vast Indian speculative trading community is trading in options and futures. This decision of Sebi has received a lot of flak from most corners, but as things stand, derivatives perform all the functions heretofore done by the carry forward system.

Matter-of-factly, these products carry out the function of providing leverage more efficiently. Both futures and options provide an enormous amount of leverage

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