Things You Need to Know About The Risk Management In Trading

Like the way we face the days’ uncertainties relating to health, weather conditions, traffic or so, this instabilities or unpredictability factors also occur in the Bitcoin Loophole trading of stock markets.

  • Strict steps are taken regarding minimizing the effect of share prices and other characteristics related to stock markets or can be better addressed as margining systems.


For example, the value of the shares keeps on changing every day and the margins make sure that the respective buyers bring their share of the sum and the concerned sellers bring shares to tally their commitments even if the prices have moved up or down.


  • Another alarming feature is about how volatility affects margins. This can be computed based on the close prices of a share and its variation over a historical period and so it can also have referred to as historical volatility.


Commonly, a share is said to be volatile in nature if its price change by a large percentage either up or down. Whatever, volatility has the power to capture the extent of fluctuations occurring in a stock. A stock with a little variation in its concerned price would have lower volatility.


Price variations can also differ according to the nature of shares. When some see a large increase or decrease daily, the rest see lower movements.


  • The margins’ disparity across cash and the derivative markets are also needed to be considered. As we know, the stock market is a big and complex place with a variety of things or instruments traded on it. So, keeping a single margin will not be sufficient enough to handle the pressure of price uncertainty or associated risk.


However, there exist two kinds of margins within a cash market, one is linked at the time of placing the order whereas the other is to cover the notional loss occurring. Moreover, the trading conducted on a cash market is settled within a day or two but in contrast to this, the derivative contracts have longer expiry time and must face the uncertainty over an extended period.


Margin benefit is made available for all the positions in futures and options contract on the same underlying but is not open to different underlying. In addition to this, the marginal benefit is also offered to calendar spread positions which can be curbed or taken back three days prior to the expiry of the near month contract.















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