Market Participants (traders) must understand that derivatives are leveraged instruments, have risks like counterparty risk (default by counterparty), price risk (loss on position because of price move), liquidity risk (inability to exit from a position), legal or regulatory risk (enforceability of contracts), operational risk (fraud, inadequate documentation, improper execution, etc.) and may not be an appropriate avenue for someone of limited resources, trading experience and low risk tolerance. A market participant should therefore carefully consider whether such trading is suitable for him/her based on these parameters.
All prospective participants should read this Model Disclosure Document issued by the members of Exchanges and contains important information on trading in Equities and F&O Segments of exchanges before trading on Capital Market/Cash Segment or F&O segment of the Exchanges
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In our next educational series we would discuss on ‘Products of Derivatives Markets‘
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