Certificates doesn’t guarantee knowledge, skill and performance in any field let alone trading. We shouldn’t kill innovative spirit, ingenuity and individual liberty with certificates, net worth requirements and other barriers.
Profitable trading is no speculation. Its a math play between probability, bet size and risk - reward. Quantum computers were once considered speculative. They are not any more. Not knowing doesn’t translate anything to speculation. If we look around there is a play of probability. E.g :- probability of finding an electron at a point, probability that it may rain at place, probability that a polio vaccine may cause polio, probability that a meteor may hit and annihilate everything on earth, probability that market may go up or down and so on.
They actually wanted to ban all derivatives after 2008 in US itself after the crash followed by great recession. There were plans to include it in Dodd- Frank act. But as usual the bankers mafia have crazy influence to never stop them. They should really ban the big irrelevant financial institutions than retail investors because why ? They have capital & influence more than enough to do price manipulation and crash the market.
Derivatives are instruments for a purpose. Take future,Imagine you are selling silver to a semi conductor industry. Due to banker price manipulation in market you are unsure of price. So you enter a contract with semi conductor industry that in a future date you would sell your silver at this specific price. So basically futures contracts is valuable both buyer and seller here. It’s what we call value chain participants. But people like you & me, all those big financial institutions and bankers , we are here only for cash which were it is not okay because whales can move price, they are not value chain members. Besides the biggest benefit people get every time you buy or sell future is you are basically taking risk , kinda giving them insurance. It also benefits people like me who wants to buy or sell stock at a specific date irrespective of market state and gives people peace of mind. So they are not trading but really like some of insurance bussiness.
Same is for options, you might be holding future or stock and you want to have an insurance for which you pay premium.
The 90% of people that trade this really don’t understand this. When you approach trading as competition rather than understanding the market & trends , there is major chance you will lose Only. A lot f&o are like insurance bussiness only where you are holding risk and getting paid for that. The 90% people that lose money is called dumb money. Frankly there is no competition unlike people think , there is plenty of opportunities for everyone just like so many insurance companies out there.
Strawman argument is strawman argument and virute signalling is virtue signalling.
If NSE is the biggest derivatives exchange, then it’s something to be proud of. That means the exchange has been able to establish a well functioning and efficient platform that gives not only a bright opportunity for the people to make a career in but it also benefits other intermediaries as they too experience ample earning opportunities and that includes the so called government too, in the form of taxes.
Secondly, with regards to retailers losing money on a stastical basis. The same static applies to any other field. 90% of aspiring actors who come to Mumbai eventually return home with nothing.
Thirdly, with regards to derivatives being only a tool for speculation. There’s absolutely no way of knowing whether someone is speculating or not. Derivatives are only a product for conducting trades and so is equity. You can make smart trades in derivatives as well and make risky speculative trades in equity as well. The product doesn’t imply anything.
Fourthly, stock markets are good for a developing country. Few individuals at hand will go on to make fortunes while at the same the government will receive massive amounts of taxes from the daily operations of the market.
Fifthly, stock market is an industry like any other industry. Your perception of value is distorted when you say that there’s no meaningful consumer value being generated in the process and is merely an exchange of money among different hands. I would say value is subjective. When it comes to equity, you receive ownership in a company which real positive value. In derivatives, the value being derived is more nuanced cause but it is there in the form of liquidity generation which further provides ease of hedging to equity investors. Not mention circulation of money by itself is of big value. You can’t have an economy without circulation of money. Also, products such as alcohol, cigarettes, sugary and fatty products are actually bad for consumers and generates negative value if we actually think about. Imagine receiving bad health in exchange of money compared to the stock market which provides an earning opportunity in exchange of money.
Sixthly, just any barrier should not be welcome by SEBI. It has to be sound and reasonable which won’t be the case if financial status is established as the eligibility criteria. You wouldn’t ask for someone’s health certificate before they eat fast food would you? Or would you ask for someone’s affluence before they choose to eat in a 5 star hotel? And so on and so forth. It is only the intellect and knowledge that should be a qualifying factor if at all.
Rest is irrelevant.
Agree, if something is introduced hope its done after thorough stakeholder engagement and is reasonable…
After the tightening of margin norms it seemed this would be enough… The margins now are enough of a barrier in terms of protection from highly leveraged positions…
Is there anyway to mitigate this in advance?Apart from being an individual trading through a broker, is there anything further we can do or prepare to make sure we are possible above the cut off… maybe NISM certification… or maybe trading as a company (this would also need NBFC license I guess) ? other options like Alpha membership seem difficult reach in terms of costs etc.
Unlike other businesses which conduct their business for charity. They like to receive compliments and blessings instead of cash.
Seriously, I am tired of hearing that derivatives don’t provide any value. They do provide value but the value is intangible. There’s no real product or service in the traditional sense but there is a system that fulfills the needs of various participants. Government wants taxes, intermediaries want profits on their investment/infrastructure, those with hedging needs need a liquid product to hedge with, speculators want returns on the risk and the liquidity they are providing. There are various parties involved with different needs and if there can be system called derivatives market that can fulfill all these needs, that’s enough value by itself.
I think people who themselves are not directly involved perhaps due to lack of interest or success are more likely to view trading cynically. Too much preaching and expecting people to slave it out and give up their skills for some vague target of ‘nation building’ whatever that means. There are many many professions that i might view as having no value but may have value to someone else. Just pray we don’t have this type of thinking within SEBI. Dictatorial mindset is terrible.
Anyway, SEBI has done nothing yet They will probably be reasonable.
I think trading and in general stock market related professions will aquire much more veneration in the coming days. More and more of retail segment will succeed in the market. The only sad part is that some people related to the market are spreading too much cynicism towards the market.
I understand the technology part of it. It definitely is great. If NSE could export the technology and make money, that would be even more wonderful. But probably, NSE is a test bed for the imported technology.
Especially in derivative segment, 95 % lose money. That implies every one is working for the remaining 5%. Probably, you might be one of the 5%. So, it does not matter. Unfortunately, with zero education/knowledge and taking personal loans, people enter the derivative segment. It is for these people, SEBI has to do some thing. Derivative segment is a rich man’s game (money wise, knowledge wise). Some experts say Futures player do not have future and naked options can make one naked. A big investor called high leverage trading as weapons of mass destruction. How many of the new entrants know this simple fact.
I never said stock market is bad. I understand the value/place for it (esp. commodities, currency). We are talking about the high leverage instruments not getting used for hedging.
Many of investors (esp. I know few Jain investors) do not invest in alcohol companies or cigarette companies. I understand it is just a perspective, Intended usage of the derivatives for hedging is mostly done by only big players.
How do you check the intellect and knowledge and ofcourse the financial status ? It may be that SEBI should allow a participant with no finance background (a speculator) to trade in derivatives only after few years of trading experience for example.
You ever seen banks how they hound you with phone calls for making you take their credit card if you have big bank balance or receiving consistent salary. Shouldn’t they ban banks selling credit card to salaried class. As a matter of fact they shouldn’t even be given loans to buy house ? because that itself is a leverage in first place. If you buy house or land in real estate with loans its essentially leverage only.
I have no idea why people F&O see this way. You are saved in F&O in a way because Margin call literally square your position away, I don’t think losses and time are that big as losing down-payment & EMI in real estate
Who typically invests in start ups ? Angel investors that have deep pockets and capability to understand the business of start up (knowledge). It is not easy to get the funding. Further, these are ready to loose in many of the investments and still know that their win in few would be good enough to compensate and also provide big profit.
You have noted it well… credit card companies do not come behind those who can not afford. In fact, they run algos. to find how much reliable you are by looking at credit score/company that you work for etc… Same should be true for derivative segment as well. May be the SEBI should introduce some kind of score ( that may include CIBIL score, tax that you pay etc…) .
yes instead of locking everything with too much regulations in my view government or SEBI should educated public on How to trade and What to trade to become wealth creator. Government must introduce stock market education from class 8 to 10th as Basic fundamentals papers which will turn public from fools to tools to make our economy more stronger than ever.
Well dude you need to understand something that 99% of people don’t understand. It is that , it doesn’t matter what your income, what your credit score is ,it is money management that keeps you consistent and being profitable trader. This is for life as well. I know so many many rich families that went under bus because of taking too much debt. And financial health is fundamental, I have seen families fall apart especially when house, car is under emi, no investment or backup funds and when income stops usually due to job loss, things happen like divorce, partner separation and cheating, kids being displaced , kids education ruined ;all drama I have seen. As a matter of fact there many girls & guys that are actually in a state where they never should have babies because they can’t afford it and mostly are laden with dumb idiotic consumerist nightmare debt like costly marriage , house , car etc ;all on managed by a single income EMI with little to some back up by parents(mostly they don’t have,c’mon they can’t give retirement funds as emergency funds for their kids). They all lacked money management.
Compared to above the stock market , F&O are absolutely nothing. You mentioned 95% lose money . Nope 99% lose money in stock market and in F&O. They lose because they have no money management. It’s that simple. If I had the best money management system and you have great technical analysis system or fundamentals with no MM and I took trade just flipping a coin, I would easily defeat you.
Now for money management you need certain psychology and changing yourself as person. A lot of it has got to do with self discipline, patience , resilience , persistence , initiative all which average comman man does not have.
Disagree. Huge margin requirements in unlimited risk products and physical delivery for ITM options act enough as a detterent for retail clients. Trading/investing no longer takes place on a credit basis. There’s no need for a CIBIL score/net worth criteria cause you literally can’t place a trade without having enough margin and the margins aren’t loose either. They are there to protect you from going into negative balance even in the worst case scenario. If someone has got the money and is willing to pay, what right does any entity have to deny you from transacting?
Disagree. The dreams of stock market must not be sold to the young minds. Basic finance management is okay and all, so that financial upliftment of people at large can take place and hopefully poverty and impoverishment can reduce in the long run. That’s the best scenario scenario I believe. But at the same this is just my personal opinion.
The general problem with some people’s mindset with respect to derivatives basically boils downs to 4 arguments -
It doesn’t generate value and is an empty system.
Most people lose money in this segment.
It is akin to gambling cause of the above 2 arguments and also because one cannot predict the markets.
It hurts the equity segment by the way of speculation.
First of all, there’s no real basis to the above four arguments. Let me explain briefly -
Value is subjective. I find value in derivatives cause I think it provides me and the intermediaries with an earning opportunity. And one might still say, but where is the usefulness, where is the end consumer, it’s just money exchanging hands. And I think that’s a very one dimensional way of thinking about things. I think part of value lies in the liquidity generation that results from all these transactions that ultimately end up benefitting those with real hedging needs. That’s part of the equation and not the whole picture I get it. The whole picture implies that the speculative activity exceeds the actual hedging activity and that’s probably where is whole “zero value” argument is coming from. But I would say how is that a bad thing? It’s not like it’s evil or anything. No one’s getting hurt at least. People losing money is an outcome that results not from the system itself but rather because of people’s own decisions. And someone has to lose at the end of the day. It’s just a part of things and part of life at large. Everyone can’t be a winner. Real evil is when a necessary medicine has its price skyrocketed just because the underlying the company has got the exclusive patent and people are dying as a result. Real evil is when a company indulges in malpractice for the sake of their profits. And basically you get the idea. You can’t blame derivatives cause you can’t really say it’s evil or anything and yes people losing money is not evil, but part of the process.
Just like everything else in life.
You can make educated, smart trades that have high probability of winning. There are systems out there that have a good edge. Won’t dig much deeper into this. Gambling relates to absolute uncertainty whereas speculation is probabilistic uncertainty.
It doesn’t hurt equity investors and actually provides them with a tool to hedge/protect their portfolio.
Rest people can attach emotions and biases to their arguments. I prefer to attach logic and I am willing to change my argument when someone else has got a better point.
Engineering colleges in this country churn out less than 5% who are employable. A similar rate applied to education and trading success means that the profitable percentage is not going to go much beyond the current 1% mark in trading.
Its very easy to get lost in the financial jungle with all jargons and all those paper strategies and remain confused about what is going to work. Its always better if a clear path to success can be shown. This is true in all fields.
E g :- When I work with engineering project students if I give them a bunch of IEEE papers, application notes, datasheets they are absolutely lost. The probability of someone figuring it out is around the 1% mark only. If I point out specific areas which needs to be read to do the task at hand the success rate is over 90%.
They will probably be reasonable.