Derivative
DerivativesA contract whose value is derived from an underlying asset such as a stock or index.
In plain terms
A bet on something else’s price. Leverage makes it fast in both directions.
1492 terms
Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
Showing 13 terms
Ban period
DerivativesAlso called: F&O ban
The state a stock enters when derivatives open interest crosses 95% of its market wide position limit, during which only position-reducing trades are permitted.
In plain terms
The 8:40 local at Dadar with the guard on the door — people can still get off, nobody can board. It lifts only below 80% utilisation, so a rally on falling open interest in a banned name is shorts leaving, not the market forming a view.
Contract specification
DerivativesAlso called: Contract specifications
The exchange document defining a derivative contract — lot size, quotation unit, tick size, expiry, settlement basis, and for a deliverable commodity the grade and delivery centre.
In plain terms
For a commodity this is the nearest thing to reading an annual report. It tells you what would actually be delivered, where, and in what quantity, which is what the price is a price of.
Evening session
DerivativesAlso called: Extended commodity session
The extended trading session Indian commodity derivatives run after the equity market closes, so that domestic contracts can track international markets while those are open.
In plain terms
It usually carries most of the day’s volume, which means a daily commodity candle averages two very different markets — a thin Indian afternoon and an active overseas evening.
Expiry
DerivativesThe day a derivatives contract ceases to exist.
In plain terms
Much of the volume is position unwinding rather than a view, so price action means little.
Lot size
DerivativesThe fixed number of units in one derivative contract, set by the exchange.
In plain terms
You cannot buy one NIFTY future — contracts trade in exchange-defined lots.
Market wide position limit
DerivativesAlso called: MWPL
A cap set by the exchange on the aggregate derivatives open interest permitted in a single stock, expressed as a number of shares.
In plain terms
It stops the derivatives tail growing large enough to wag the cash market. The basis on which it is computed has been revised, so read the current circular for the formula — what has not changed is that the names reaching the ceiling are overwhelmingly midcaps with concentrated promoter holdings and thin deliverable float.
Open interest
DerivativesThe total number of derivative contracts outstanding and not yet settled.
In plain terms
Rising open interest with rising price suggests new money entering, not just position squaring.
Participant-wise open interest
DerivativesDaily exchange data showing how each category of participant is positioned across index and stock derivatives.
In plain terms
Cash selling alongside a growing long futures position is a different story from cash selling alongside growing shorts. Published free, read by almost nobody.
Physical settlement
DerivativesSettlement of a derivative contract by delivery of the underlying shares against cash, rather than by paying the cash difference.
In plain terms
It takes every single-stock future open at expiry and every single-stock option that finishes in the money, while index contracts stay cash-settled — which is why the two behave so differently in the final week. A cheap option finishing marginally in the money becomes an obligation for the full strike price times lot size.
Proprietary trading
Trading & ordersAlso called: Prop trading
A brokerage trading its own capital rather than client money, mostly intraday and in derivatives.
In plain terms
Plumbing, not a signal. These desks have no directional view worth copying, and the market would work far worse without them.
SPAN margin
DerivativesThe core initial margin on a derivatives position, computed as the worst single-day loss across a grid of simulated price and volatility scenarios.
In plain terms
It rises when volatility rises, which is precisely the day the position is losing money. The margin call and the loss are correlated by design, and that correlation is what turns a bad session into a forced exit.
Short interest
Technical analysisA periodically published figure for the total shares sold short in a security, standard in the United States and not published in that form here.
In plain terms
There is no Indian days-to-cover statistic to look up. A crowded short position shows up in derivatives open interest instead.