Risk Management Through Options Trading in Indian Market

Abstract

Every business, individual, portfolio investments and the by-products of underlying assets, contracts are exposed to risk of one or the other type i.e., uncertainty/deviation or less than expected returns. Every prudent investor and portfolio manager runs the investments by analyzing and assessing the quantum/volume of risk (particularly the Non-systematic risk) and by taking steps in the name of financial engineering or risk management. The present plethora of capital market terminologies and mechanics are widely used by the financial investment market players in various ways. However, every kind of effort made by the investment analyst to reduce down the risk propensity is known as risk managing activity. That is why interested participant in the field of capital market should make himself/ herself acquainted with the concept of risk very clearly, ab initia. In fact, the uncertainty associated with the outcome of an event that leads to loss or return less than expected is known as risk. From a mathematical perspective one could say that risk is the variation of outcomes from an expected return. The present paper will study and analyze the risk management through options trading in Indian Market.