Company Profile

The story of Motilal Oswal Securities Ltd goes back many years, when Mr. Motilal Oswal and
Mr. Raamdeo Agrawal met each other as students in a Mumbai suburban hostel in the early
eighties. Both the young chartered accountants hailing from a rural & an unpretentious
background had a common dream viz 'to build a professional organization with strong value
systems, to provide reliable & honest investment advice to investors'. Thus was born their first
enterprise called "Prudential Portfolio Services" in 1987.
Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with just two
people running the show. Focus on customer-first-attitude, ethical and transparent business
practices, respect for professionalism, research-based value investing and implementation of
cutting-edge technology has enabled us to blossom into an almost 2000 member team.

SUCCESS MANTRA FOR MOSL:

The success story of MOSL is driven by 8 success sutras adopted by it namely: Trust, Integrity,
Dedication, Commitment, Enterprise, Hardwork and Teamplay, Learning and Innovation,
Empathy and Humility. These are the values that bind success with MOSL.

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MOTILAL OSWAL GROUP

Background

The company was formed in 1987 by Motilal Oswal and Raamdeo Agrawal after they acquired
membership on The BSE.[2] Motilal Oswal was elected director and joined the Governing Board
of the Bombay Stock Exchange in 1998.

Motilal Oswal Securities is a Depository Participant of NSDL and a Depository Participant of

Central Depository Services Limited (CDSIL)[3] in 2000. The company started offering
Derivatives products and advisory services on both BSE as well as NSE in 2001[4]

In 2006 the company entered Private Equity and Investment Banking business.[4] In the same
year, Motilal Oswal group acquired South Indian brokerage firm – Peninsular Capital Markets.[5]
The company tied up with State Bank of India and Punjab National Bank[6] in 2006 and 2007 to
offer online trading to its customers. 2008 saw the company create one of India's largest Equity[7]
Dealing & Advisory rooms, spread over 26,000 sq ft (2,400 m2) in Malad, Mumbai.

In January 2010, Motilal Oswal Financial Services (through its subsidiary Motilal Oswal
Securities Ltd.) received the final certificate of registration approval from Securities and
Exchange Board of India (SEBI) to set up a mutual fund business in the country.

In January 2010, Motilal Oswal Financial Services (through its subsidiary Motilal Oswal
Securities Ltd.) received the final certificate of registration approval from Securities and
Exchange Board of India (SEBI) to set up a mutual fund business in the country. Motilal Oswal
Asset Management Company is registered with SEBI as the Investment Manager for Motilal
Oswal Mutual Fund. It was incorporated on November 14, 2008.

MOAMC is a 100% subsidiary of Motilal Oswal Securities Limited. It provides Investment

Management and Advisory Services to investors based within and outside India and having
Portfolio Management Services business, ETFs and Mutual Funds. Motilal Oswal Asset
Management Company Ltd., one of the fastest growing Asset Management Companies in India
and has recently crossed the $1 billion in equity Assets Under Management (AUM) mark in June
2015 registering itself into an elite club.[8]

AHFCL is a subsidiary of Motilal Oswal Securities Limited (MOSL) which is a part of Motilal
Oswal Financial Services Limited (MOFSL) Aspire Home Finance Corporation Limited
(AHFCL) is a professionally managed housing finance company with unique combination of
financially sound and technically experienced promoters who are well known in their domain for
professional ethics and strong execution capabilities.

As on dated Total Login Number is 81,447 with Amount of Rs. 9050.68 Crore out of this total
Sanctioned Number 53,405 with Amount of Rs. 5472.38 Crores. Total Disbursement till date Rs.
4145.81 Crore.

AHFCL has been rated “CRISIL A+/Stable” by CRISIL and “[ICRA]AA-(Stable)” by ICRA for
long term borrowings and “ICRA A1+” by ICRA for short term borrowings
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MOTILAL OSWAL GROUP

  Awarded as “India’s most admired and valuable Housing Finance Company” at the India
Leadership Conclave 2015
 Received “Financial Services Institution of the Year” award by ASSOCHAM India at
ICT 4 Development Awards 2015
 Awarded "Agency Innovation of the Year (BFSI Sector)" at the Brand Excellence
Awards 2015 presented by ABP News
 MALA has been awarded as “Finnoviti 2016” by Banking Frontiers & Deloite.
 Our MD & CEO Mr. Anil Sachidanand received “Community Leadership Award” to at
the 6th International Conference & Game Changers Awards organized by the HR Club
(2016)
 Awarded “Fast 50 Brands 2016” by World Consulting Research Corporation (2016)
 Awarded the “Most Admired Brand for Affordable Loans of the year” at the 2016
Leaders Awards
 Received “The Innovative Marketing Practices Award” at 7th National Conference and
Game Changers Awards, 2017.
 Received “The Innovative Product and Services Award” at 7th National Conference and
Game Changers Awards, 2017.

 About Motilal Oswal financial services ltd.

Motilal Oswal Financial Services Ltd. (BSE, NIFTY, NASDAQ, Dow Jones, Hang Seng) is a
diversified financial services firm offering a range of financial products and services such as
Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management,
Private Equity, Investment Banking, Commodity Broking and Home Finance

· Motilal Oswal Financial Services reports Q2FY17 Consolidated Revenues of Rs 461 crore,
up 71% YoY; and PAT of Rs 102 crore, up 134% YoY

Mumbai, Oct 26, 2016: Motilal Oswal Financial Services Ltd., a leading financial services
company, announced its results for the quarter ended Sep 30, 2016 post approval by the Board of
Directors at a meeting held in Mumbai on Oct 26, 2016.

Performance Highlights

Rs Crore Q2FY17 Q2FY16 YoY Change Q1FY17 QoQ Change

Revenues 461 269 71% 365 26%

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MOTILAL OSWAL GROUP

PBT 149 59 152% 106 40%

PAT 102 43 134% 79 28%

Diluted EPS - Rs (FV-Rs 1) 7.0 3.0 5.5

Performance for the Quarter ended Sep 30, 2016 · Consolidated revenues were Rs 461 crore in
Q2FY17, up 71% YoY. It was Rs 826 crore in H1FY17, up 72% YoY · Every business has fired
in terms of revenue growth during the quarter. Housing finance was up 222% YoY, Asset
management fee was up 48% YoY & Capital market businesses (broking & investment banking)
were up 46% YoY · Full exit of the 1st growth capital PE fund, IBEF I, would also be a
meaningful contributor in FY17/18 · Consolidated PAT was Rs 102 crore in Q2FY17, up 134%
YoY. It was Rs 181 crore in H1FY17, up 152% YoY · Q2FY17 included exceptional items: a
share in the profit on sale of investments (carry share) made in the first PE growth fund as well
as the impact of write-off on account of doubtful NPA. PAT impact of carry share was Rs 63
crore in H1FY17; of this Rs 37 crore was earned in Q2FY17 · Impact of operating leverage is
becoming visible, as PAT Margin improved to 22% in Q2FY17 from 16% in Q2FY16 · Balance
sheet had net worth of Rs 1,634 crore & gross borrowings of Rs 4,714 crore (including Aspire),
as of Sep 2016 · ROE for Q2FY17 was 26% on reported PAT vs 13% in Q2FYFY16. However,
this does not include unrealized gains on investments in Motilal Oswal’s mutual fund products
(Rs 273 crore, as of Sep 2016) [28] [29] [30]

Motilal Oswal Financial Services reports Q1FY17 Consolidated Revenues of Rs 365 crore,
up 72% YoY; and PAT of Rs 79 crore, up 179% YoY

Mumbai, Jul 21, 2016: Motilal Oswal Financial Services Ltd., a leading financial services
company, announced its results for the quarter ended Jun 30, 2016 post approval by the Board of
Directors at a meeting held in Mumbai on Jul 21, 2016.

Performance Highlights
Comparison Comparison
Rs Crore Q1FY17 Q1FY16 Q4FY16
(YoY) (QoQ)

Revenues 365 212 72% 317 15%

PBT 106 39 170% 68 57%

PAT 79 28 179% 47 68%

Diluted EPS - Rs (FV-Rs

5.5 2.0 3.3
1)

Performance for the Quarter ended Jun 30, 2016:[31] [32]

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MOTILAL OSWAL GROUP

  Consolidated revenues were Rs 365 crore in Q1FY17, up 72% YoY
 Q1FY17 included exceptional items: a share in the profit on the sale of investments
(carry share) made in the first PE growth fund as well as the impact of write-off on
account of doubtful NPA
 Consolidated PAT was Rs 79 crore in Q1FY17, up 179% YoY
 Some impact of operating leverage from the strategic investments made in manpower,
technology and reach during FY16 was visible in this quarter, as the PAT margin
improved to 22% in Q1FY17 from 13% back in Q1FY16
 Balance sheet had net worth of Rs 1,525 crore and gross borrowings of Rs 3,576 crore
(including Aspire), as of Jun 2016.
 ROE for Q1FY17 was 22% on reported PAT vs 12.4% in FY16. However, this does not
include unrealized gains on investments in Motilal Oswal’s mutual fund products (Rs 182
crore, as of Jun 2016)

Mission Statement:

“To be a well-respected and preferred global financial services organisation enabling wealth
creation for all our customers.”
Today MOSL is a well diversified financial services firm offering a range of financial products
and services such as

 Wealth Management
 Broking & Distribution
 Commodity Broking
 Portfolio Management Services
 Institutional Equities
 Private Equity
 Investment Banking Services and
 Principal Strategies

MOSL has a diversified client base that includes retail customers (including High Net worth
Individuals), mutual funds, foreign institutional investors, financial institutions and corporate
clients. MOSL are headquartered in Mumbai and as of March 31st, 2009, had a network spread
over 548 cities and towns comprising 1,289 Business Locations operated by our Business
Partners and us. As at March 31st, 2009, we had 541372 registered customers.

In 2006, the Company placed 9.48% of its equity with two leading private equity investors based
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MOTILAL OSWAL GROUP

out of the US – New Vernon Private Equity Limited and Bessemer Venture Partners.

The company got listed on BSE and NSE on September 9, 2007. The issue which was priced at
Rs.825 per share (face value Rs.5 per share) got overwhelming response and was subscribed
27.18 times in turbulent market conditions. The issue gave a return of 21% on the date of listing.

As of end of financial year 2008, the group net worth was Rs.7 bn. and market capitalization as
of March 31, 2008 was Rs.19 bn.

For year ended March 2008, the company showed a strong top line growth of 91% to Rs.7 bn. as

compared to Rs.3.68 bn. last year. New businesses like investment banking, asset management
and fund based activities have contributed to this growth.

Credit rating agency Crisil has assigned the highest rating of P1+ to the Company’s short-term
debt program.

 Shareholding Pattern at on 31st December 2016

As of December 31st, 2016; the total shareholding of the Promoter and Promoter Group
stood at 70.37%. The shareholding of institutions stood at 10.07% and non-institutions at
19.56%.
Their Business Streams
Our businesses and primary products and services are:

Wealth Management
Financial planning for individual, family and business wealth creation and management needs.
These are provided to customers through our Wealth Management service called ‘Purple’

Broking & Distribution services

 Equity (cash and derivatives)
 Commodity Broking
 Portfolio Management Services
 Distribution of financial products
 Financing
 Depository Services
 IPO distribution

We offer these services through our branches, Business Partner locations, the internet and mobile
channels. We also have strategic tie-ups with State Bank of India and IDBI Bank to offer our
online trading platform to its customers.

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MOTILAL OSWAL GROUP

Commodity Broking

Through Motilal Oswal Commodities Broker (P) Ltd our fully owned subsidiary; we provide
commodity trading facilities and related products and services on MCX and NCDEX. Besides
access to the best of research in the form of Daily Fundamentals & Technical Reports on highly
traded commodities, our clients also get access to our exclusive Customized Trading Advice on
both the trading platforms. We offer these services through our branches, Business Partner
locations, the internet and mobile channels

Portfolio Management Services

Motilal Oswal Portfolio Management Services offer a range of investments solutions through
discretionary services. We at Motilal Oswal have helped create wealth for our customers through
our Portfolio Management Services. Our knowledge of the markets together with our
understanding of our customers and their risk profiles has helped us design a range of portfolio
offerings for our clients. These include the Value Strategy, Bulls Eye Strategy, Trillion Dollar
Opportunity Strategy and Focused Strategy Series I. As of March 31st, 2009, the Assets Under
Management of our various portfolio schemes stood at Rs.4.77 bn.

Motilal Oswal group has applied to the regulatory bodies for a license to operate as a Domestic
Asset Management Company (Mutual Fund) and we expect to begin operations soon.

Institutional Equities

We offer equity broking services in the cash and derivative segments to institutional clients in
India and overseas. These clients include companies, mutual funds, banks, financial institutions,
insurance companies, and FIIs. As at March 31st, 2009, we were empanelled with over 300
institutional clients including 200 FIIs. We service these clients through dedicated sales teams
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MOTILAL OSWAL GROUP

across different time zones.

Investment Banking

We offer financial advisory services relating to mergers and acquisitions (domestic and cross-
border), divestitures, restructurings and spin-offs through Motilal Oswal Investment Advisors
Private Ltd. (MOIAPL)

We also offer capital raising and other investment banking services such as the management of
public offerings, private placements (including qualified institutional placements), rights issues,
share buybacks, open offers/delistings and syndication of debt and equity.

MOIAPL has closed 23 transactions in 2007-08 worth US$ 1.8 billion and had 18 mandates in
hand as at March 31, 2008.

Private Equity

In 2006, our private equity subsidiary, Motilal Oswal Private Equity Advisors Private Ltd
(MOPEAPL) was appointed as the investment manager and advisor to a private equity fund,
India Business Excellence Fund, which was launched with a target of raising US$100 million.

The fund is aimed at providing growth capital to small and medium enterprises in India, with
investments typically in the range of US$3 million to US$7 million.

MOPEAPL will manage and advise the fund and other private equity funds, which may be raised
in the future. In its final closing, in December 2007, the fund obtained commitments of US$125
mn (Rs.4,875 mn) from investors in India and overseas. The Fund has deployed/ committed $ 58
mn across 8 deals.

MOPEAPL has recently launched an INR 750 crores domestic Real Estate Private Equity Fund
called “India Realty Excellence Fund” sponsored by Motilal Oswal Financial Services Ltd.

Principal Strategies Group

For effective management of treasury operations and to capitalize on market opportunities, the
Group has set up a 30 member team which would be responsible for effective deployment of
funds into different trading and arbitrage strategies.

Focus on Research

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MOTILAL OSWAL GROUP

Research is the solid foundation on which Motilal Oswal Securities advice is based. Almost 10%
of revenue is invested on equity research and we hire and train the best resources to become
advisors. At present we have 22 equity analysts researching over 27 sectors. From a
fundamental, technical and derivatives research perspective; Motilal Oswal's research reports
have received wide coverage in the media (over a 1000 mentions last year). Our consistent
efforts towards quality equity research has reflected in an increase in the ratings and rankings
across various categories in the AsiaMoney Brokers Poll over the years

Our unique Wealth Creation Study, authored by Mr. Raamdeo Agrawal, Managing Director, is
now in its 13th year. Investors keenly await this annual study for the wealth of information it has
on the companies that created wealth during the preceding five years.

Awards and Accolades

Motilal Oswal Financial Services has received many accolades in the year gone by. Some of
them are:
 Rated ‘Best Overall Country Research’ for a Local Brokerage in the 2007 AsiaMoney
Brokers poll
 Rated India’s top broking house in terms of total number of trading terminals by the Dun
& Bradstreet survey

 Rated ‘Outstanding Commodity Broking House-2007’ by Globoil India

 Ranked second best for Customer Responsiveness in the Financial Sector at the Avaya
GlobalConnect Customer Responsiveness awards.

Corporate offices & Branches

BRANCH-HEAD OFFICE

Palm Spring Centre,

2nd Floor, Palm Court Complex,
New Link Road, Malad (West),
Mumbai 400 064,
Maharashtra, India.
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 LOCATION OF SIP COMPANY

Motilal Oswal Securities Ltd.

Pukhraj House (Super Franchisee),
VIP Road, Dharampeth,
Nagpur.-440010, Maharashtra.
Tel.:0712-2554495, 3291306, 3291304

Products Motilal Oswal deals in

 FUTURES AND OPTIONS
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MOTILAL OSWAL GROUP

Futures & options are derivatives, which derive their values from equity as their underlying.
Hence our Equity Advisory Group (EAG), equipped with all the required skills and
understanding of Equity Derivatives, will act as your advisors in futures & options segment
as well to help you take informed trading decisions.  

 Why Futures and Options

Derivatives instruments are primarily hedging tools. Clients can be assisted in protecting the
downside risk to their portfolio using appropriate combination of options. Our advisory is
skilled to help you in maximizing your gains from your existing corpus using numerous
strategies based on the direction and intensity of the views. Derivatives give an ability to
leverage; given the risk appetite clients can extrapolate their gains with the timely assistance
of our advisory. The Equity Advisor doesn’t stop at just that, he goes a step further to ensure
that your trades are settled and traded with proper margin in your account in a timely
manner. This allows us to give you a convenient single window service and your advisor
becomes the single point contact for all your equity related matters.

You can avail of our services from all our Business locations and through E broking across
India, as in equities.

EAG Process (Derivatives)

Client Profiling: MOSL Equity Advisor determines each EAG client's profile before
deciding the set of derivative strategies that will ideally suit you. If you have a good risk
appetite & are willing to take riskier bets for reciprocating returns, we will suggest
aggressive strategies like buying naked futures. On the other hand, if you are risk averse and
would like to protect yourself moderating some of your incremental gains but finding it
difficult to digest the bouts of volatility in the markets, we can suggest certain portfolio
hedging strategies to ease your worries.

Trading: The MOSL Equity Advisor is an expert in swift & timely execution of trading
ideas at the same time monitoring those ideas as per your profile.
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MOTILAL OSWAL GROUP

 Integrated Approach: We use integrated approach in our trading strategy using a
combination of futures and/or calls and/ or puts to help you optimally capitalize your view
reach your trading goal.

Portfolio Tracking Software: Your F&O position will be continuously monitored using
Portfolio Tracking Software. 

Minimum requirements and fees structure: Margins as per NSE requirement and fees
structure varies from case to case.

Normal Fees: Derivatives 0.10%. 

Our Company is a member of the National Stock Exchange, which provides equity and
derivative trades execution through offline and online channels for the customers.

The emergence of the market for derivative products, most notably forwards, futures and options,
can be traced back to the willingness of risk-averse economic agents to guard themselves against
uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets
are marked by a very high degree of volatility. Through the use of derivative products, it is
possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk
management, these generally do not influence the fluctuations in the underlying asset prices.
However, by locking in asset prices, derivative products minimize the impact of fluctuations in
asset prices on the profitability and cash flow situation of risk-averse Investors.

There are three major classes of derivatives:

 Forward Contracts: A forward contract is an agreement to buy or sell an asset on a

specified date for a specified price. One of the parties to the contract assumes a long
position and agrees to buy the underlying asset on a certain specified future date for a
certain specified price. The other party assumes a short position and agrees to sell the
asset on the same date for the same price. Other contract details like delivery date, price
and quantity are negotiated bilaterally by the parties to the contract. The forward
contracts are normally traded outside the exchanges.

 Futures: A futures contract is an agreement between two parties to buy or sell an

asset at a certain time in the future at a certain price. Futures contracts are special
types of forward contracts in the sense that the former are standardized exchange-
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MOTILAL OSWAL GROUP

traded contracts.

 Options: Options are of two types - calls and puts. Calls give the buyer the
right but not the obligation to buy a given quantity of the underlying asset, at
a given price on or before a given future date. Puts give the buyer the right,
but not the obligation to sell a given quantity of the underlying asset at a given price
on or before a given date.
 Swaps: Swaps are private agreements between two parties to exchange cash flows
in the future according to a prearranged formula. They can be regarded as
portfolios of forward contracts. The two commonly used swaps are:

 Interest rate swaps: These entail swapping only the interest related cash flows between
the parties in the same currency.

 Currency swaps: These entail swapping both principal and interest between the parties,
with the cash flows in one direction being in a different currency than those in the
opposite direction.

History of Futures and Options

History of futures

The origins of futures trading can be traced to Ancient Greek, in Aristotle's writings. He tells the
story of Thales, a poor philosopher from Miletus who developed a "financial device, which
involves a principle of universal application." Thales used his skill in forecasting and predicted
that the olive harvest would be exceptionally good the next autumn. Confident in his prediction,
he made agreements with local olive-press owners to deposit his money with them to guarantee
him exclusive use of their olive presses when the harvest was ready. Thales successfully
negotiated low prices because the harvest was in the future and no one knew whether the harvest
would be plentiful or pathetic and because the olive-press owners were willing to hedge against
the possibility of a poor yield. When the harvest-time came, and a sharp increase in demand for
the use of the olive presses outstripped supply, he sold his future use contracts of the olive
presses at a rate of his choosing, and made a large quantity of money.

Introduction to Futures:

Futures markets were designed to solve the problems that exist in forward markets. A futures
contract is an agreement between two parties to buy or sell an asset at a certain time in the future
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MOTILAL OSWAL GROUP

at a certain price. But unlike forward contracts, the futures contracts are standardized and
exchange traded. To facilitate liquidity in the futures contracts, the exchange specifies certain
standard 27 features of the contract. It is a standardized contract with standard underlying
instrument, a standard quantity and quality of the underlying instrument that can be delivered, (or
which can be used for reference purposes in settlement) and a standard timing of such settlement.
A futures contract may be offset prior to maturity by entering into an equal and opposite
transaction. More than 99% of futures transactions are offset this way. The standardized items in
a futures contract are:
· Quantity of the underlying
· Quality of the underlying
· The date and the month of delivery
· The units of price quotation and minimum price change
· Location of settlement

Futures Terminology

 Spot price: The price at which an asset trades in the spot market.

 Futures price: The price at which the futures contract trades in the futures market.

 Contract cycle: The period over which a contract trades. The index futures contracts on
the NSE have one- month, two-months and three months expiry cycles which expire on
the last Thursday of the month. Thus a January expiration contract expires on the last
Thursday of January and a February expiration contract ceases trading on the last
Thursday of February. On the Friday following the last Thursday, a new contract having
a three- month expiry is introduced for trading.

 Expiry date: It is the date specified in the futures contract. This is the last day on which
the contract will be traded, at the end of which it will cease to exist.

 Contract size: The amount of asset that has to be delivered under one contract. Also
called as lot size.

 Basis: In the context of financial futures, basis can be defined as the futures price minus
the spot price. There will be a different basis for each delivery month for each contract. In
a normal market, basis will be positive. This reflects that futures prices normally exceed
spot prices.

 Cost of carry: The relationship between futures prices and spot prices can be
summarized in terms of what is known as the cost of carry. This measures the storage
cost plus the interest that is paid to finance the asset less the income earned on the asset.

 Initial margin: The amount that must be deposited in the margin account at the time a
futures contract is first entered into is known as initial margin.

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MOTILAL OSWAL GROUP

  Marking-to-market: In the futures market, at the end of each trading day, the margin
account is adjusted to reflect the investor's gain or loss depending upon the futures
closing price. This is called marking-to-market.

 Maintenance margin: This is somewhat lower than the initial margin. This is set to
ensure that the balance in the margin account never becomes negative. If the balance in
the margin account falls below the maintenance margin, the investor receives a margin
call and is expected to top up the margin account to the initial margin level before trading
commences on the next day.

History of Options

It is not known when the first option contract traded; however, similar contracts can be traced
back as far as the Romans and the Phoenicians, who used them in shipping, and ancient Greece,
where a mathematician and philosopher named Thales used them to secure a low price for olive
presses in advance of the harvest. They were also used in the tulip trading craze in Holland in the
1600s.

Options appeared in America roughly the same time as stocks. At first they were not traded on an
exchange; trades were done privately between buyers and sellers. Growth in options trading
remained slow for the next few decades, mostly because trading by phone without being able to
determine the real market for a contract made them illiquid and cumbersome to trade.

Introduction to Options

In this section, we look at the next derivative product to be traded on the NSE, namely options.
Options are fundamentally different from forward and futures contracts. An option gives the
holder of the option the right to do something. The holder does not have to exercise this right.
In contrast, in a forward or futures contract, the two parties have committed themselves to
doing something. Whereas it costs nothing (except margin requirements) to enter into a futures
contract, the purchase of an option requires an up-front payment.

Options Terminology

 Index options: These options have the index as the underlying. Some options are
European while others are American. Like index futures contracts, index options
Contracts are also cash settled.

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MOTILAL OSWAL GROUP

  Stock options: Stock options are options on individual stoc ks. Options currently trade
on over 500 stocks in the United States. A contract gives the holder the right to buy or
sell shares at the specified price.

 Buyer of an option: The buyer of an option is the one who by paying the option
premium buys the right but not the obligation to exercise his option on the seller/writer.

 Writer of an option: The writer of a call/put option is the one who receives the option
premium and is thereby obliged to sell/buy the asset if the buyer exercises on him.

There are two basic types of options, call options and put options:

 Call option: A call option gives the holder the right but not the obligation to
buy an asset by a certain date for a certain price.

 Put option: A put option gives the holder the right but not the obligation to
sell an asset by a certain date for a certain price.

 Option price/premium: Option price is the price which the option buyer pays to the
option seller. It is also referred to as the option premium.

 Expiration date: The date specified in the options contract is known as the expiration
date, the exercise date, the strike date or the maturity.

 Strike price: The price specified in the options contract is known as the strike price or
the exercise price.

 American options: American options are options that can be exercised at any time upto
the expiration date. Most exchange-traded options are American.

 European options: European options are options that can be exercised only on the
expiration date itself. European options are easier to analyze than American options, and
properties of an American option are frequently deduced from those of its European
counterpart.
 In-the-money option: An in-the-money (ITM) option is an option that would lead to a
positive cashflow to the holder if it were exercised immediately. A call option on the
index is said to be in-the-money when the current index stands at a level higher than the
strike price (i.e. spot price > strike price). If the index is much higher than the strike
price, the call is said to be deep ITM. In the case of a put, the put is ITM if the index is
below the strike price.

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MOTILAL OSWAL GROUP

  At-the-money option: An at-the-money (ATM) option is an option that would lead to
zero cashflow if it were exercised immediately. An option on the index is at-the-money
when the current index equals the strike price(i.e. spot price = strike price).
 Out-of-the-money option: An out-of-the-money (OTM) option is an option that would
lead to a negative cashflow if it were exercised immediately. A call option on the index
is out-of-the-money when the current index stands at a level which is less than the strike
price (i.e. spot price < strike price). If the index is much lower than the strike price, the
call is said to be deep OTM. In the case of a put, the put is OTM if the index is above the
strike price.

 Intrinsic value of an option: The option premium can be broken down into two
components - intrinsic value and time value. The intrinsic value of a call is the amount
the option is ITM, if it is ITM. If the call is OTM, its intrinsic value is zero. Putting it
another way, the intrinsic value of a call is Max [0, (St — K)] which means the intrinsic
value of a call is the greater of 0 or (St — K). Similarly, the intrinsic value of a put is
Max [0, K — St], i.e. the greater of 0 or (K — St). K is the strike price and St is the spot
price.

 Time value of an option: The time value of an option is the difference between its
premium and its intrinsic value. Both calls and puts have time value. An option that is
OTM or ATM has only time value. Usually, the maximum time value exists when the
option is ATM. The longer the time to expiration, the greater is an option's time value, all
else equal. At expiration, an option should have no time value.

What Is Hedging?

The best way to understand hedging is to think of it as insurance. When people decide to hedge,
they are insuring themselves against a negative event. This doesn't prevent a negative event from
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happening, but if it does happen and you're properly hedged, the impact of the event is reduced.
So, hedging occurs almost everywhere, and we see it everyday. For example, if you buy house
insurance, you are hedging yourself against fires, break-ins or other unforeseen disasters.

Portfolio managers, individual investors and corporations use hedging techniques to reduce their
exposure to various risks. In financial markets, however, hedging becomes more complicated
than simply paying an insurance company a fee every year. Hedging against investment risk
means strategically using instruments in the market to offset the risk of any adverse price
movements. In other words, investors hedge one investment by making another.

Technically, to hedge you would invest in two securities with negative correlations. Of course,
nothing in this world is free, so you still have to pay for this type of insurance in one form or
another.

Although some of us may fantasize about a world where profit potentials are limitless but also
risk free, hedging can't help us escape the hard reality of the risk-return tradeoff. A reduction in
risk will always mean a reduction in potential profits. So, hedging, for the most part, is a
technique not by which you will make money but by which you can reduce potential loss. If the
investment you are hedging against makes money, you will have typically reduced the profit that
you could have made, and if the investment loses money, your hedge, if successful, will reduce
that loss.

How Do Investors Hedge?

Hedging techniques generally involve the use of complicated financial instruments known as

derivatives, the two most common of which are options and futures. We're not going to get into
the nitty-gritty of describing how these instruments work, but for now just keep in mind that with
these instruments you can develop trading strategies where a loss in one investment is offset by a
gain in a derivative difficult to achieve in practice.

What Hedging Means to You

The Downside
Every hedge has a cost, so before you decide to use hedging, you must ask yourself if the
benefits received from it justify the expense. Remember, the goal of hedging isn't to make money
but to protect from losses. The cost of the hedge - whether it is the cost of an option or lost
profits from being on the wrong side of a futures contract - cannot be avoided. This is the price
you have to pay to avoid uncertainty.

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We've been comparing hedging versus insurance, but we should emphasize that insurance is far
more precise than hedging. With insurance, you are completely compensated for your loss
(usually minus a deductible). Hedging a portfolio isn't a perfect science and things can go wrong.
Although risk managers are always aiming for the perfect hedge, it is

The majority of investors will never trade a derivative contract in their life. In fact most buy-and-
hold investors ignore short-term fluctuation altogether. For these investors there is little point in
engaging in hedging because they let their investments grow with the overall market.

So why learn about hedging?

Even if you never hedge for your own portfolio you should understand how it works because
many big companies and investment funds will hedge in some form. Oil companies, for example,
might hedge against the price of oil while an international mutual fund might hedge against
fluctuations in foreign exchange rates. An understanding of hedging will help you to comprehend
and analyze these investments.

1. Options Strategies: Long Call

Purchasing calls has remained the most popular strategy with investors since listed options were
first introduced. Before moving into more complex bullish and bearish strategies, an investor
should thoroughly understand the fundamentals about buying and holding call options.

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Market Opinion ?

Bullish to Very Bullish

When to Use?

This strategy appeals to an investor who is generally more interested in the dollar amount of his
initial investment and the leveraged financial reward that long calls can offer. The primary
motivation of this investor is to realize financial reward from an increase in price of the
underlying security. Experience and precision are key to selecting the right option (expiration
and/or strike price) for the most profitable result. In general, the more out-of-the-money the call
is the more bullish the strategy, as bigger increases in the underlying stock price are required for
the option to reach the break-even point.

2. Options Strategies: Long Put

A long put can be an ideal tool for an investor who wishes to participate profitably from a
downward price move in the underlying stock. Before moving into more complex bearish
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strategies, an investor should thoroughly understand the fundamentals about buying and holding
put options.

Market Opinion?

Bearish

When to Use?

Purchasing puts without owning shares of the underlying stock is a purely directional strategy
used for bearish speculation. The primary motivation of this investor is to realize financial
reward from a decrease in price of the underlying security. This investor is generally more
interested in the dollar amount of his initial investment and the leveraged financial reward that
long puts can offer than in the number of contracts purchased.

Experience and precision are key in selecting the right option (expiration and/or strike price) for
the most profitable result. In general, the more out-of-the-money the put purchased is the more
bearish the strategy, as bigger decreases in the underlying stock price are required for the option
to reach the break-even point.

3. Options Strategies: Married Put

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An investor purchasing a put while at the same time purchasing an equivalent number of shares
of the underlying stock is establishing a "married put" position - a hedging strategy with a name
from an old IRS ruling.

Market Opinion?

Bullish to Very Bullish

When to Use?

The investor employing the married put strategy wants the benefits of stock ownership
(dividends, voting rights, etc.), but has concerns about unknown, near-term, downside market
risks. Purchasing puts with the purchase of shares of the underlying stock is a directional and
bullish strategy. The primary motivation of this investor is to protect his shares of the underlying
security from a decrease in market price. He will generally purchase a number of put contracts
equivalent to the number of shares held.

4. Options Strategies: Protective Put

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An investor who purchases a put option while holding shares of the underlying stock from a
previous purchase is employing a "protective put."

Market Opinion?

Bullish on the Underlying Stock

When to Use?

The investor employing the protective put strategy owns shares of underlying stock from a
previous purchase, and generally has unrealized profits accrued from an increase in value of
those shares. He might have concerns about unknown, downside market risks in the near term
and wants some protection for the gains in share value. Purchasing puts while holding shares of
underlying stock is a directional strategy, but a bullish one.

5. Options Strategies: Covered Call

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The covered call is a strategy in which an investor writes a call option contract while at the same
time owning an equivalent number of shares of the underlying stock. If this stock is purchased
simultaneously with writing the call contract, the strategy is commonly referred to as a "buy-
write." If the shares are already held from a previous purchase, it is commonly referred to an
"overwrite." In either case, the stock is generally held in the same brokerage account from which
the investor writes the call, and fully collateralizes, or "covers," the obligation conveyed by
writing a call option contract. This strategy is the most basic and most widely used strategy
combining the flexibility of listed options with stock ownership.

Market Opinion?

Neutral to Bullish on the Underlying Stock

When to Use?

Though the covered call can be utilized in any market condition, it is most often employed when
the investor, while bullish on the underlying stock, feels that its market value will experience
little range over the lifetime of the call contract. The investor desires to either generate additional
income (over dividends) from shares of the underlying stock, and/or provide a limited amount of
protection against a decline in underlying stock value.

6. Options Strategies: Cash Secured Put

According to the terms of a put contract, a put writer is obligated to purchase an equivalent
number of underlying shares at the put's strike price if assigned an exercise notice on the written
contract. Many investors write puts because they are willing to be assigned and acquire shares of
the underlying stock in exchange for the premium received from the put's sale. For this
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discussion, a put writer's position will be considered as "cash-secured" if he has on deposit with
his brokerage firm a cash amount (or equivalent) sufficient to cover such a purchase.

Market Opinion?

Neutral to Slightly Bullish

When to Use?

There are two key motivations for employing this strategy: either as an attempt to purchase
underlying shares below current market price, or to collect and keep premium from the sale of
puts which expire out-of-the-money and with no value. An investor should write a cash secured
put only when he would be comfortable owning underlying shares, because assignment is always
possible at any time before the put expires. In addition, he should be satisfied that the net cost for
the shares will be at a satisfactory entry point if he is assigned an exercise. The number of put
contracts written should correspond to the number of shares the investor is comfortable and
financially capable of purchasing. While assignment may not be the objective at times, it should
not be a financial burden. This strategy can become speculative when more puts are written than
the equivalent number of shares desired to own.

7. Options Strategies: Bull Call Spread

Establishing a bull call spread involves the purchase of a call option on a particular underlying
stock, while simultaneously writing a call option on the same underlying stock with the same
expiration month, at a higher strike price. Both the buy and the sell sides of this spread are
opening transactions, and are always the same number of contracts. This spread is sometimes
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more broadly categorized as a "vertical spread": a family of spreads involving options of the
same stock, same expiration month, but different strike prices. They can be created with either all
calls or all puts, and be bullish or bearish. The bull call spread, as any spread, can be executed as
a"unit" in one single transaction, not as separate buy and sell transactions. For this bullish
vertical spread, a bid and offer for the whole package can be requested through your brokerage
firm from an exchange where the options are listed and traded.

Market Opinion?

Moderately Bullish to Bullish

When to Use?

Moderately Bullish
An investor often employs the bull call spread in moderately bullish market environments, and
wants to capitalize on a modest advance in price of the underlying stock. If the investor's opinion
is very bullish on a stock it will generally prove more profitable to make a simple call purchase.

Risk Reduction
An investor will also turn to this spread when there is discomfort with either the cost of
purchasing and holding the long call alone, or with the conviction of his bullish market opinion.

8. Options Strategies: Bear Put Spread

Establishing a bear put spread involves the purchase of a put option on a particular underlying
stock, while simultaneously writing a put option on the same underlying stock with the same
expiration month, but with a lower strike price. Both the buy and the sell sides of this spread are
opening transactions, and are always the same number of contracts. This spread is sometimes
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more broadly categorized as a "vertical spread": a family of spreads involving options of the
same stock, same expiration month, but different strike prices. They can be created with either all
calls or all puts, and be bullish or bearish. The bear put spread, as any spread, can be executed as
a "package" in one single transaction, not as separate buy and sell transactions. For this bearish
vertical spread, a bid and offer for the whole package can be requested through your brokerage
firm from an exchange where the options are listed and traded.

Market Opinion?

Moderately Bearish to Bearish

When to Use?

Moderately Bearish
An investor often employs the bear put spread in moderately bearish market environments, and
wants to capitalize on a modest decrease in price of the underlying stock. If the investor's opinion
is very bearish on a stock it will generally prove more profitable to make a simple put purchase.

Risk Reduction
An investor will also turn to this spread when there is discomfort with either the cost of
purchasing and holding the long put alone, or with the conviction of his bearish market opinion.

9. Options Strategies: Collar

A collar can be established by holding shares of an underlying stock, purchasing a protective put
and writing a covered call on that stock. The option portions of this strategy are referred to as a
combination. Generally, the put and the call are both out-of-the-money when this combination is
established, and have the same expiration month. Both the buy and the sell sides of this spread
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are opening transactions, and are always the same number of contracts. In other words, one collar
equals one long put and one written call along with owning 100 shares of the underlying stock.
The primary concern in employing a collar is protection of profits accrued from underlying
shares rather than increasing returns on the upside.

Market Opinion?

Neutral, following a period of appreciation

When to Use?

An investor will employ this strategy after accruing unrealized profits from the underlying
shares, and wants to protect these gains with the purchase of a protective put. At the same time,
the investor is willing to sell his stock at a price higher than current market price so an out-of-
the-money call contract is written, covered in this case by the underlying stock.

10. Options Strategies: Long Straddle

The long straddle is simply the simultaneous purchase of a long call and a long put on the same
underlying security with both options having the same expiration and same strike price. Because
the position includes both a long call and a long put, the investor in a straddle should have a
complete understanding of the risks and rewards associated with both long calls and long puts.

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**Since the straddle involves two trades, a commission charge is likely for the purchase (and any
subsequent sale) of each position -- one commission for the call and one commission for the put.

Market Opinion?

Increasing volatility and large price swings in the underlying security. Potentially profit from a
big move, either up or down, in the underlying price during the life of the options.

When to Use?

Purchasing only long calls or only long puts is primarily a directional strategy. The long straddle
however, consisting of both long calls and long puts is not a directional strategy, rather it is one
where the investor feels large price swings are forthcoming but is unsure of the direction. This
strategy may prove beneficial when the investor feels large price movement, either up or down,
is imminent but is uncertain of the direction.

An instance of when a straddle may be considered is when the investor believes there is news
forthcoming. An example may be when one is anticipating news regarding a drug in trials from a
biotechnology company. The investor feels the news surrounding the drug will introduce large
price swings in the underlying but is unsure of whether this news will have a positive or negative
impact on the price. If the news is positive, this may positively impact the price of the security. If
the news is disappointing, the stock could decline considerably. The risk is the stock remaining
at the strike price of the straddle until expiration.

11.Options Strategies: Long Strangle

The long strangle is simply the simultaneous purchase of a long call and a long put on the same
underlying security with both options having the same expiration but where the put strike price is
lower than the call strike price. Because the position includes both a long call and a long put, the
investor using a long strangle should have a complete understanding of the risks and rewards
associated with both long calls and long puts.

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Market Opinion?

Increasing volatility and extremely large price swings in the underlying security. Potentially
profit from a large move, either up or down, in the underlying price during the life of the options.

When to Use?

Purchasing only long calls or only long puts is primarily a directional strategy. The long strangle
however, consisting of both long calls and long puts is a not a directional strategy, rather one
where the investor feels extremely large price swings are forthcoming but is unsure of the
direction. This strategy may prove beneficial when the investor feels large price movement,
either up or down, is about to happen but uncertain of the direction.

An instance of when a strangle may be considered is when an earnings announcement is

forthcoming. The investor feels the projected announcement will introduce large price swings in
the underlying. If the earnings announcement and future outlook is positive, this may positively
impact the price of the security. If the earning announcement and outlook is negative, or fails to
impress investors, the stock could decline considerably. The risk is the stock remains stable or
between the strike price of the call and strike price of the put until expiration. Another risk is that
the stock's move does not produce a corresponding option price increase that is enough to cover
the two premiums paid for the position. Declining implied volatility will also negatively impact
this strategy.

 Latest News about Motilal Oswal

Financial services firm Motilal Oswal Financial Services Ltd. reported strong profit and revenue
growth in the final quarter of financial year 2016-17. The company with business arms ranging
from broking to housing finance stated that its profits rose 113 percent year-on-year to Rs 360
crore for the year ended March, 2017.

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Revenue jumped 66 percent to Rs 1,818 crore on the back of strong growth across its businesses.
Housing finance registered a 160 percent growth year-on-year while asset management grew 68
percent. The capital markets businesses grew 40 percent during the year.

The firm said in a media statement on Thursday that it is beginning to see contribution from new
businesses on its topline as well as bottomline. For instance, 57 percent of its profit came from
assets and wealth management along with housing finance in the financial year 2016-17 as
compared to 45 percent last year.

This is despite significant investments made by the company in adding manpower in its broking
and housing finance arms as well as expanding branches for its housing finance segment. The
company doubled its reach from four to nine states during the year, said Navin Agarwal,
managing director of Motilal Oswal Financial Services.

The company declared a dividend of Rs 3 per share in the quarter taking the total dividend for
the financial year to Rs 5.5 as compared to Rs 3.5 in the financial year 2015-16.

“Our strategy to diversify our business models towards linear sources of earnings is showing
definite results, with over half of the revenue and profit pie now coming from these new
businesses. They have built scale in the last year, while maintaining critical operating
parameters,” Motilal Oswal, chairman and managing director of the company said in the media
statement.

Speaking to BloombergQuint on Friday, the company’s Chief Executive Officer Navin Agarwal
said that falling retail cash volumes have not resulted in falling yields even though consolidated
results show them falling because the market has moved in favour of futures and options.

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“There is no contraction in the yields like-to-like. The reason why you are seeing a contraction in
the overall reported yields because there has been a mix-change in favour of the futures and
options market that has been continuing for the last five years,” Agarwal said.

He added that all business arms of the company gained post demonetisation with housing finance
bouncing back to record high disbursements in the last quarter as compared to pre-
demonetisation quarters.

Agarwal said that the company is now looking to diversify into other areas such as foreign
institutional managed assets where it has zero presence even though it has more than Rs 20,000
assets under management in the domestic market.

“Currently nearly two thirds of the institutionally managed assets of India are managed by
foreign investors and only one-third are managed by domestic investors. So we are looking at
gaining a worthwhile share in this foreign pool of assets over the coming years,” he added.

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 Suggestions
Motilal oswal has been a leading stock broking company in India & has been successfully
running business & serving lakhs of customers through its detailed research about stocks, scripts,
mutual funds & varieties of investments and helping them to make profitable decisions. The only
suggestion which can be given to Motilal oswal is to become more affordable & increase its
reach to semi-urban & semi-rural population of the country, so that more no. of people get
knowledge about stocks & guide them better in making their money grow & simultaneously
improving standard of living through growth. They can increase the number of branches into
semi-urban & rural areas and increase their customer base.

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 Conclusion

Derivatives are extremely important and have a big impact on other financial market and the
economy. The project is designed to upgrade investor’s knowledge with the basics of how to
make investment decisions in futures & options with reference to bear market. Analyze the
fundamental, technical and other factors for dealing in futures & options. Hedging is for
minimizing risk not for maximizing the profit. For many investors, options are useful as tools of
risk management.

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Bibliography:-

1) Derivatives Market (Basic) Module:--NCFM

2) Economic Times
3) Business Standard

4) www.Motilaloswal.com

5) www.nseindia.com

6) www.moneycontrol.com

7) www.derivativesindia.com

8) A Beginner's Guide To Hedging

9) https://www.bloombergquint.com/business/2017/04/28/motilal-oswal-profits-jump-as-
it-targets-foreign-institutional-markets

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