FUTURES AND OPTIONS AVAILABLE IN THE MARKET (The Futures Exchange (In…
FUTURES AND OPTIONS AVAILABLE IN THE MARKET
General Understanding of Derivatives
Derivatives are financial instruments whose value is based on the market value of an underlying asset such as shares, bonds or a commodity. Examples of derivatives are forward, futures and options, swaps and warrants.
b) Futures Contracts
c) Reasons for Buying Futures Contracts
a) Forward Contracts
d) Reasons for Selling Futures Contracts
Types of Options in Derivatives
a) KLCI Options
This is a share-index option launched in early December 2000. The underlying securities are the KLCI and its contracts code specified by the Exchange is "OKLI".
b) Individual Share Options
Based on share listed on the Bursa Malaysia. The approach will be the American style options with a physical delivery at settlement.
c) Convertibles and Warrants
Convertibles: A convertibles security may be a preferred share or loan issue that can be converted into ordinary shares at a predetermined ratio and/or at predetermined price.
Warrants is an option to allow the owner the right to purchase a fixed number of ordinary shares at predetermined price during a specified period of time.
The Futures Exchange
A futures exchange is a centralized and organized market place for for trading futures. It is made up of members, committees and staff.
In Malaysia, it is the Bursa Derivatives Clearing House Bhd. Bursa Derivatives provides the opportunity to trade in the following futures that SAC allowed:
a) Crude Palm Oil Futures
b) Crude Palm Oil Kernel Oil Futures
c) single stock profile which the underlying stocks are Shari'ah compliant
A market-weight index, where higher capitalized share will have a greater impact on the level of the CI than the lower capitalized.
The main users of the market are plantations, millers, refiners, dealers and brokers.