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Future And Options
Long and short positions
Learning Outcome
5
Evaluate their role in hedging and price discovery.
4
Analyze risk and return.
3
Explain their use in market expectations.
2
Compare profit and loss outcomes.
1
Define long and short positions.
Long Position
A long position means you have bought an asset — or entered into a contract where you benefit when the price of that asset rises. You are the buyer. You profit when the price goes up and lose when the price goes down.
Cricket Analogy — The Batsman at the Crease
Detailed Example
Objectives of Hedging
The core objectives of hedging revolve around certainty, protection, and financial stability:
1. Price Risk Elimination
Lock in future prices to avoid adverse price movements. An oil marketing company like BPCL hedges crude oil imports using futures to ensure stable costs.
2. Cash Flow Certainty
Stabilise revenues and costs for better financial planning. Exporters hedge forex receipts so ₹ earnings are predictable.
3. Balance Sheet Protection
Prevent large unrealised losses from disturbing net worth, crucial for MNC subsidiaries.
4. Regulatory / Compliance Hedging
RBI mandates hedging of external commercial borrowings (ECBs). SEBI permits index hedging for institutional investors.
Transition from Analogy to Technical Concept(Slide 5)
Core Concepts (Slide 6)
Core Concepts (Slide 7)
Core Concepts (.....Slide N-3)
Summary
5
Build strong branding
4
Use different marketing channels
3
Target the right audience
2
Create and communicate value
1
Understand customer needs
Choose cool, soft colors instead of vibrant colors
Max 5 Points for Summary & Min 2
Quiz
Which platform is mainly used for professional networking and B2B marketing ?
A. Facebook
B. Instagram
C. LinkedIn
D. Snapchat
Quiz-Answer
Which platform is mainly used for professional networking and B2B marketing ?
A. Facebook
B. Instagram
C. LinkedIn
D. Snapchat
Corporate Hedging & Derivatives Strategy - Long and short positions
By Content ITV
