Hedging Strategies Used in Selection of “Options” and “Forward” Contracts in Derivative Market

  • Jayaraman Balakrishnan Lecturer, Villa College, Male, Maldives
Keywords: Options, Forwards, Hedging, Volatility, Option Greeks


This Article focuses on the derivatives market, which has crossed several milestones during its developing phase, but there is still a long way to go, mainly when the International derivatives market has seen a variety of products, with sufficient liquidity, depth, and volume. One remarkable thing in the derivative market was the existence of forwarding contracts. But the major milestone in developing the derivatives market in India was the introduction of Options. The objective of introducing Options was to provide a complicated hedging strategy for the corporate in its risk management activities. Options trading can be taken to the next level with the help of understanding of Greeks (Delta Δ, Gamma Γ, Vega ν, Theta Θ, Rho ρ) and their Hedging techniques. Each Greek separates a variable that can drive an option’s price movement, giving insight on how the option’s premium will vary if that variable changes.

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