ADX introduced single stock futures (SSF) and index futures in its Derivatives segment. The SSF is based on the leading blue chip companies that trade in the Main market segment of ADX. ADX also trades FADX 15 index futures based on the FADX 15 index. All derivative contracts on ADX are settled in cash by the AD Clear.
Benefits of dervatives
The Futures market brings exciting opportunities for investors to diversify their investments in an efficient and cost-effective way.
Cost-effectiveness: Trading derivatives can sometimes be more cost-effective than buying and selling the underlying asset itself, especially for frequently executed trades.
Diversification: Derivatives offer a way to diversify your investments beyond just stocks. This can help spread risk and potentially improve your portfolio's overall performance.
Efficiency: Derivatives can be a more efficient way to gain exposure to a particular asset class or market movement compared to buying the underlying asset directly.
Hedging: You can use derivatives to hedge existing holdings, mitigating potential losses from price movements in the underlying asset (like stocks).
Leverage: Derivatives can allow you to leverage your capital, potentially magnifying gains (but also losses). (Note: Leverage is a high-risk strategy and should be used cautiously)
Flexibility: Derivatives, unlike stocks, can allow investors to profit from a decline in the price of an underlying asset. This means that investors can start their trade with a sell position on the derivative contract
Derivatives Glossary
Contract Size
The contract size refers to the quantity of the asset on which a derivatives contract is based. For example, an ADX Stock futures contract represents 100 shares of the underlying stock.
Contract Value
The contract value of a futures contract is the current price of the futures contract, multiplied by the contract size.
Tick Size
The tick size is the smallest measurable value by which the price of a financial instrument, such as a derivatives contract, can move.
Initial Margin
The initial margin is the cash amount that must be paid upfront before taking a buy or sell position in a futures contract. It is essentially the ‘deposit’ required to trade in futures.
Maintenance Margin
Maintenance margin is the minimum amount an investor must maintain in the margin account with the broker when trading derivatives contracts.
Variation Margin
Variation margin, also called ‘mark to market’ margin is the additional cash required to be deposited by an investor to continue holding his open positions, after his positions have suffered losses to the extent that his margin account has gone below the maintenance margin requirement.
Margin Call
The cash demand by a broker to a client for additional funds to bring the margin account up to the ‘maintenance margin’,
Contract Expiry
Contract expiry refers to the last day of trading for a contract.
Settlement Type
Settlement type is the mode of settlement (cash or physical delivery) of the underlying asset in a derivatives contract.
Square Off
Square off refers to an opposing trade that an investor, with an open contract takes, in order to close his position in the contract.
