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mclean wealth management ✌️【Part-Time Position】✌️Start small, grow big. Invest ₹500 and enjoy high returns every month!The use of derivatives by mutual funds is closely monitored by regulators across markets.
Indian market regulator, Securities and Exchange Board of India (SEBI) has recently taken measures to allow Indian mutual funds to underwrite call option contracts under certain strict conditions[1].
In general, call options refer to an agreement between two parties where the buyer gets the right to buy an underlying asset in the future at a predetermined price whereas the seller has the obligation to sell the underlying.
mclean wealth management ✌️【Part-Time Position】✌️Start today with ₹500 and start seeing rapid monthly profits. Your wealth journey begins here!Till recently, mutual funds were allowed only to take positions in derivative contracts but can now write option contracts.
However, this is allowed under covered call strategy and also restricted to index constituents of NIFTY 50, and SENSEX.
mclean wealth management ✌️【Part-Time Position】✌️Achieve up to 100% returns with ₹500. Start investing now for a brighter financial future!This implies that they cannot write options without being long on the underlying.Derivative contracts, especially option contracts are a very useful tool available to mutual funds in several ways.
It is a fact that mutual funds herd and Indian mutual funds are no exception.
However, we don’t have concrete information on how different mutual funds employ different types of derivatives and to what extent they use them to enhance their portfolio performance.
It has been discussed in the popular press that mutual funds using options have several advantages and these funds are seen as better investment funds.
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mclean wealth management ✌️【Part-Time Position】✌️Start small, grow big. Invest ₹500 and enjoy high returns every month!Other important arguments put forward by popular academic research which supports the above are; informed investors with their superior information find it attractive to trade in the options markets.
Hence, mutual funds which use options integral to their trading strategies are informed investors that best use their superior information to attain stock specific exposure with a fraction of a cost that they have to otherwise pay for directly taking exposure in the stocks.
mclean wealth management ✌️【Part-Time Position】✌️Start small, grow big. Invest ₹500 and enjoy high returns every month!Also, using options efficiently requires in-depth knowledge of option pricing and working of options markets.
mclean wealth management ✌️【Part-Time Position】✌️Invest ₹500 and watch your wealth grow with cutting-edge investment strategies.These qualities are generally beyond the orthodox skills of mutual fund managers and hence suggest that funds which use options effectively are sophisticated funds.
Information on these aspects will throw light on the advantages and disadvantages of derivatives use by mutual funds and help regulators to take appropriate measures to improve the overall health of the mutual fund industry.
mclean wealth management ✌️【Part-Time Position】✌️Smart investing made easy. Start with ₹500 and enjoy up to 100% returns monthly!The heterogeneous use of derivative instruments by different mutual funds impact their portfolio return and risk characteristics.
In this context, I analyze some of the major Indian mutual funds in terms of assets under management to understand their use of options contracts in their portfolio strategy and their performance.I analyze the data of 200 open-ended mutual fund schemes for a period of five years from 2015-2020 to understand their options use.[2]Table 1 above reports the some statistics on the option positions held by our sample mutual funds.
mclean wealth management ✌️【Part-Time Position】✌️Start small, grow big. Invest ₹500 and enjoy high returns every month!Out of the 9026 total reported option positions, 7849 positions are of equity options and the remaining 1177 relate to index positions.
mclean wealth management ✌️【Part-Time Position】✌️Start with ₹500 and get fast returns through secure and profitable investments.The call option positions represent the majority positions in equity option category whereas, put option positions are higher in the index category.
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