Bhavesh SIP Report

Summer Project Report on
Research on Investment behaviour of High NetWorth Individuals and

risk hedging by Options Strategies
Conducted at
Arya Fin Trade Services (India) Pvt. Ltd
Project Guide:
Mr.Bhavesh Patel
Asst. Vice President
Arya Fin Trade Services (India) Pvt.Ltd.
Submitted By:
Bhavesh L Tavethiya
Batch: 2014-16
Roll No.74
In partial fulfillment of the requirement of Summer Internship Programme
In
Masters of Business Administration (M.B.A.)
Submitted To:
M.S. PATEL INSTITUTE OF MANAGEMENT STUDIES

FACULTY OF MANAGEMENT STUDIES
THE MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA,
VADODARA 390002
DECLARATION
I, Bhavesh L Tavethiya hereby declare that this report is prepared on the basis of
research project done by me, as a part of my Summer Internship Programme, at Arya Fin Trade
Services(India) Ltd.' for the period from 15th May,2015 to 15th July, 2015 (8 weeks).
I ensure about the authentication of the content, and facts used in the report. I assure
that the data taken will be used only for academic purposes and will not be used for
commercial or any other purpose. Suggestions mentioned in the report are as per my opinion,
which are based on my findings, and are correct to the best of my knowledge.
(Bhavesh L Tavethiya)
Date:
Place: Vadodara
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ACKNOWLEDGEMENTS
It gives pleasure to present this project report, which is an outcome of the study Analysis of
High NetWorth Individuals and risk hedging by Options Strategy Completing a task is never
one-man effort. It is often the result of valuable contribution of a number of individuals in a
direct or indirect manner that helps on shaping and achieving an objective.
I wish to express my sincere gratitude to number of people who have been associated with me
throughout this project. I feel blessed to have the opportunity of expressing my heartly
gratitude to Mr.Bhavesh Patel (Asst. Vice President, Arya Fin Trade Services India Pvt. Ltd.)
who gave me an opportunity to carry out this project and without help of him my project could
not have been hatched.
I also thankful to the other staff member of Arya Fin Trade for their continuous motivation
throughout this program, which really helped me in completing this project.
Lastly I would like to extend my sincere thanks to Prof. (Dr.) Jayrajsinh Jadeja(Dean, Faculty of
Management Studies, The M.S. University of Baroda), Ms. Smita Trivedi (Asst. Prof., Faculty of
Management Studies, The M.S. University of Baroda ), Prof.(Dr.)Surendra Sundararajan(Prof.,
Faculty of Management Studies, The M.S. University of Baroda )and to the entire institute, for
availing me of the opportunity to work in such an excellent organization.
This project would not have been possible without the cooperation & response of the
respondents, I am grateful for their time & feedback to the questionnaire.
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EXECUTIVE SUMMARY
Today Indian stock market is the booming and number of High Net Worth Individuals
also rising. There is notable growth of high etworth individuals in India as the data shows in the
report. So it is good step to target high networth individuals. These projects focus on the High
networth individuals in India and influence them to invest in stock market trading by showing
the advantages of options trading.
Sometimes people have affluent amount to invest in various investment options but
lack of awareness of the right investment option and guidance of any wealth management
services they are enable to invest. Arya Fin Group currently focus on the HNI clients and many
new clients are ready to invest their wealth in stock market but fear of loss of their portfolio
suddenly during stock market crash they slightly hesitate to invest. So my report shows some
facts and evidence to shows the advantages of options trading.
One examples in report show how I have managed portfolio of these clients by using
options trading. Then in next part research was carried out to know the behavior of HNI clients
towards the options trading. On the basis of my survey analysis I give suggestion which will be
very helpful to attract new HNI clients.
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TABLE OF CONTENTS
Title
Sr. No.
Page No.
Introduction
Company Profile
12
Literature Review
15
Introduction: HNI& Derivative Market
16
Options Strategies
23
Investment options for HNI
38
History of stock market crash
42
Research Methodology
47
Data Analysis & Interpretation
50
10
Findings
67
11
Suggestions
68
12
Conclusion
69
13
Bibliography &Webliography
73
14
Annexure
88
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Charts and Tables
Charts and Tables
Page No.
1. Infrastructure
13
2. SWOT Analysis of Arya Group
14
3. Growth in Options trading
22
4. Options strategy
23
5. Example of HNI client
44
6. Data Analysis & Interpretation
50
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INDIAN STOCK MARKET

1.1Introduction
Indian Stock Markets is one of the oldest in Asia. Its
history dates back to nearly 200 years ago. The earliest
records of security dealings in India are meager and
obscure. The East India Company was the dominant
institution in those days and business in its loan
securities used to be transacted towards the close of the
eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took place
in Bombay. Though the trading list was broader in 1839, there were only half a dozen
brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a
rapid development of commercial enterprise and brokerage business attracted many men
into the field and by 1860 the number of brokers increased into 60. In 1860-61 the
American Civil War broke out and cotton supply from United States to Europe was
stopped; thus, the 'Share Mania' in India began. The number of brokers increased to about
200 to 250.
At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,
found a place in a street (now appropriately called as Dalal Street) where they would
conveniently assemble and transact business. In 1887, they formally established in
Bombay, the "Native Share and Stock Brokers' Association, which is alternatively known
as The Stock Exchange". In 1895, the Stock Exchange acquired a premise in the same
street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was
consolidated.
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The two major stock exchanges in India are: National Stock Exchange (NSE)
Bombay Stock Exchange (BSE).
1.2 National Stock Exchange

The National Stock Exchange was incorporated in 1992 by Industrial Development Bank of
India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of
India, all Insurance Corporations, selected commercial banks and others.
The National Stock Exchange (NSE) is India's leading stock exchange covering various cities
and towns across the country. NSE was set up by leading institutions to provide a modern,
fully automated screen-based trading system with national reach. The Exchange has brought
about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up
facilities that serve as a model for the securities industry in terms of systems, practices and
procedures.
Trading at NSE can be classified under two broad categories:
Wholesale debt market
Capital market
Wholesale debt market operations are similar to money market operations - institutions and
corporate bodies enter into high value transactions in financial instruments such as
government securities, treasury bills, public sector unit bonds, commercial paper, certificate
of deposit, etc.
Capital market: A market where Debt or Equity Securities are Traded.
There are two kinds of players in NSE:
Trading members
Participants
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Recognized members of NSE are called trading members who trade on behalf of themselves
and their clients. Participants include trading members and large players like banks who take
direct settlement responsibility.
NSE Nifty
S&P CNX Nifty is a well-diversified 50 stock index accounting for 22 sectors of the economy.
It is used for a variety of purposes such as benchmarking fund portfolios, index based
derivatives and Index funds.
NSE came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a
joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the
index as a core product. IISL have a consulting and licensing agreement with Standard &
Poor's(S&P), who are world leaders in index services. CNX stands for CRISIL NSE Indices. CNX
ensures common branding of indices, to reflect the identities of both the promoters, i.e. NSE
and CRISIL. Thus, 'C' Stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index.
The S&P prefix belongs to the US-based Standard & Poor's Financial Information Services.
1.3 Bombay Stock Exchange

The Bombay Stock Exchange is one of the oldest stock exchanges in Asia. It was established
as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in
the country to obtain permanent recognition in 1956 from the Government of India under
the Securities Contracts (Regulation) Act, 1956. The Exchange's pivotal and pre-eminent role
in the development of the Indian capital market is widely recognized and its index, SENSEX, is
tracked worldwide.
SENSEX
The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently
became the barometer of the Indian stock market.
SENSEX is not only scientifically designed but also based on globally accepted construction
and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks
representing a sample of large, liquid and representative companies. The base year of
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SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic
and international markets through print as well as electronic media. The SENSEX captured all
these events in the most judicial manner. One can identify the booms and busts of the Indian
stock market through SENSEX. The launch of SENSEX in 1986 was later followed up in January
1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100 stocks
listed at five major stock exchanges.
OVERVIEW OF THE REGULATORY FRAMEWORK OF THE CAPITAL MARKET IN INDIA
India has a financial system that is regulated by independent regulators in the sectors of
banking, insurance, capital markets and various service sectors. The Indian Financial system
is regulated by two governing agencies under the Ministry of Finance. They are
1. Reserve Bank of India
The RBI was set up in 1935 and is the central bank of India. It regulates the
financial and banking system. It formulates monetary policies and
prescribes exchange control norms.
2. The Securities Exchange Board of India

The Government of India constituted SEBI on April 12, 1988, as a nonstatutory body to promote orderly and healthy development of the
securities market and to provide investor protection.
Department Economic Affairs
The capital markets division of the Department of Economic Affairs regulates capital markets
and securities transactions.
The capital markets division has been entrusted with the responsibility of assisting the
Government in framing suitable policies for the orderly growth and development of the
securities markets with the SEBI, RBI and other agencies. It is also responsible for the
functioning of the Unit Trust of India (UTI) and Securities and Exchange Board of India (SEBI).
Page | 11
COMPANY PROFILE
Corporate Office:
1004, Venus Atlantis,
Near Prahalad Nagar Auda Garden,
Anand Nagar, Satellite, Ahmedabad-15
Ph. No: 079-40062207
Fax No: 079-40062209
E-Mail: info@aryafingroup.com
Registered Office:
Plot No.PTS-93/240/A/1
New City Survey,
Dr.Kelkar Road,
DIU,
Dadar Nagar Haveli-364001
INDIA
Background:
The Company is promoted and started on 22nd May, 2010 by Mr. Shani Prahladbhai Patel &
Mr. Ravi Prahladbhai Patel with an objective of carrying the Business of Broking & Trading in
Derivative, Shares and Securities Market. The company has successfully completed Four
financial years of its business with continuous expansion of its operations.
Current Operations:
Currently, the management is eying to garner the growing opportunities into the Broking
Business. Considering the recent rebound in the global indices along with the stellar
performance of NIFTY and SENSEX, we expect local markets to regain confidence of retail
investors. The volumes of the stock exchanges are on higher side compared to previous years.
The Management is having strong relationship in the market mainly with High Net-worth
Individuals (HNI) and Large corporate. The company is providing platform for trading in various
financial segment like, Equities, Currency, Commodity (Agri & Non-Agri), Future & Options,
Debt Market, Primary Market, Mutual Fund advisory through following Exchanges
1.
2.
3.
4.
National Stock Exchange (NSE)

Bombay Stock Exchange (BSE)
Multi Commodity Exchange (MCX)
National Commodity & Derivatives Exchange (NCDEX)
Page | 12
At present, the Average daily volume in Currency and Share market is of Rs. 150 cr with
company aiming to reach 1000 cr mark by 2017. To achieve this target, the management is
concentrating on providing valued added services to High Net-worth Individuals (HNI) and Large
corporate. with the help of State of the art research tools like Bloomberg, Thomson Reuters,
Capital Markets, etc. and using the modern Algo trading platforms to give an edge to its
customers over others. The Company has team of experts in concerned segment to outperform
in highly competitive business environment. The Company well equipped with the following
infrastructure facility to meet its future goals.
INFRASTRUCTURE
Sr.
No.
Particulars
Operation
1.
Office Premises 6000 Fully Furnished Office Premises located at

Square Feet.
Prahladnagar a Corporate Area declared by AMC.
2.
Man Power 25 Employees Well Experience, trained and knowledge base core
team employees to service to the client.
3.
Hardware Infrastructure
Approx. 30, Computers which offers multiple

features from varied Auto uploading, processing
reporting & mailing with Digital Signature to Client
level Portfolio Management Analysis ; Pledge
Management ; Brokerage & Remeshire Sharing
Management on multiple basis
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SWOT ANALYSIS OF COMPANY:
STRENGTH:
KNOWN FOR TRANSPARENT
FUNCTIONING
WELL MAINTAINED
INFRASTRUCTURE
GOOD RELATIONSHIP WITH
CLIENT
EXPERIENCED EMPLOYEE
HIGH NETWORTH
INDIVIDUAL CLIENT
Algo Trading
THREAT:
OPPORTUNITIES:
COMPETITORS HAVE SAME

PRODUCT/SERVICIES
EMERGING NEW
TECHNOLOGY
BROKERAGE COMPETITION
SWOT
GROWING FIRM
RIVAL COMPETITION
WEAKNESS:
LIMITED WITHIN HNI CLIENT
LACKING OF BUSINESS
DIVERSIFICATION
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LITERATURE REVIEW
New emerging trends in HNI lifestyle reflect Ready for Change attitude
HNIs are now warming up to equities as compared to the lull or sideways movement that we
saw for last five years. The perceived risk has subsided and it is more to do with the hope that
the country sees in structural reforms the new government will deliver. Today, UHNIs are in
strong contact with people globally and we realize India is gaining more traction among
emerging markets
Number of High Net Worth Households (HNIs) increased by 16 per cent to 1,17,000 in
FY 2013-2014 from 100,900 in FY 2012-2013.
Metros dominate the geographic chart for UHNH distribution at 55 per cent and the
next top six cities (Bengaluru, Pune, Ahmedabad, Nagpur, Hyderabad and Ludhiana)
account for 16 per cent share.
Optimistic economic environment and hope for a stable political environment triggers
increase in expenses from 30 per cent in 2012 to 44 per cent in 2013.
Equity and Real Estate investments overtake Debt.
26 per cent of High Net Worth Individuals (HNIs) surveyed include Private Equity (PE)
investments in their portfolios; Real Estate and IT emerge as top two sectors , and ecommerce is a new favorite on the PE investment block for UHNIs.
Over 60 per cent of the UHNIs surveyed consider philanthropy while planning annual
expenditure; education (86 per cent) followed by food for poor (79 per cent) get
preference.
Sources:wealthmanagement.kotak.com/topindia/index.html
Page | 15
Introduction to High Net WorthIndividualIn INDIA:

High net worth individuals gain more from Bull Run than retail investors
-Ashutosh R Shyam, ET Bureau Feb 18, 2015, 09.34AM IST
Super-rich: India records second highest growth in HNI population

-http://www.firstpost.com/Jun 20, 2014 08:55 IST
Who is a High Net Worth Individual (HNI)?

While there is no standard definition of HNIs
They can be based on Net Worth, Investible surplus, assets under advise
Most common standard in India
HNI: Investible surplus of Rs. 25 lac - Rs. 2 cr.
UHNI: Investible surplus of over Rs. 2 cr.(Source:www.icicidirect.com)
There is yet another superlative category in the segment known as Ultra high-net worth
individuals. As per a report, even amidst gloomy economic outlook, India recorded the
maximum growth in its Ultra High Net worth Individual (UHNIs) population amongst BRICS
nations in the last one year reaching at 7,850 super-rich individuals.
It has also been reported that India is home to the highest number of women millionaires
when compared with rest of the world with total fortunes to the tune of $95 million.
This boom in the HNI population in India was mainly on account of positive trend in the
stock market, real estate, gross national income, consumption and capitalization.
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High-net-worth Investors & Listed Options

Introduction
With the tremendous growth in the number of high-net-worth investors in the India over the
past couple decades, various investment tools have been utilized to help these investors meet
their financial goals goals that often include preservation and growth of capital, and deferral
and minimization of taxes. This report will explore some of the many ways in which a very
flexible investment tool listed options can help high-net-worth investors pursue their
financial goals.
Growth in High-net-worth Market

According to the Asia-Pacific Wealth report released by Merrill Lynch Wealth Management and
Capgemini, the combined wealth of Asia Pacifics HNWIs is estimated to grow at 8.8% annually
till 2018, which is faster than the global average of 7.1% and India is likely to treble the high net
worth individuals (HNWIs) population and add $4 trillion to its wealth by 2018, leading its
growth in the Asia-Pacific region.
Possible Benefits of Using Listed Options

This will cover many of the possible benefits of using listed options in managing high-networth88portfolios, including:
Reduces price volatility due to multiple

matching of orders at a single price
Greater liquidity due to deeper demand

supply schedule
Better Price discovery
Minimized impact cost
Add flexibility to your investment

portfolio.
Create the possibility of speculative
gains using leverage.
Sell as easily as you can buy
Transfer risk quickly and efficiently
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What is Derivatives Contracts (Futures and Options)?

The derivative itself is merely a contract between two or more parties. Its value is determined
by fluctuations in the underlying asset. The most common underlying assets include stocks,
bonds, commodities, currencies, interest rates and market indexes. Most derivatives are
characterized by high leverage.
Futures:
A contractual agreement, generally made on the trading floor of a futures exchange, to buy
or sell a particular commodity or financial instrument at a pre-determined price in the
future.
Futures contracts detail the quality and quantity of the underlying asset; they are
standardized to facilitate trading on a futures exchange. Some futures contracts may call for
physical delivery of the asset, while others are settled in cash.
Options:
An option provides the holder with the right to buy or sell a specified quantity of an
underlying asset at a fixed price (called a strike price or an exercise price) at or before the
expiration date of the option.
Since it is a right and not an obligation, the holder can choose not to exercise the right and
allow the option to expire.
There are two types of options - call options (right to buy) and put options (right to sell).
As under we can see how the actually future and options we can find from NSE website.
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Call Options:
A call option gives the buyer of the option the right to buy the underlying asset at a fixed price
(strike price or K) at any time prior to the expiration date of the option. The buyer pays a price
for this right.
Put Options:
A put option gives the buyer of the option the right to sell the underlying asset at a fixed price
at any time prior to the expiration date of the option. The buyer pays a price for this right.
Determinants of option value:
Level of Interest Rates

Strike Price of Options
Life of the Option
Expected dividends on the asset
Value of Underlying Asset
Volatility of asset price
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Before going into detail of options we have to consider some basic terms related
to options trading.
Index options: These options have the index as the underlying. In India, they have a European
style settlement. E.g. Nifty options, Mini Nifty options etc.
Stock options: Stock options are options on individual stocks. A stock option contract gives the
holder the right to buy or sell the underlying shares at the specified price.
Buyer of an option: The buyer of an option is the one who by paying the option premium buys
the right but not the obligation to exercise his option on the seller/writer.
Writer / seller of an option: The writer / seller of a call/put option is the one who receives the
option premium and is thereby obliged to sell/buy the asset if the buyer exercises on him.
Option price/premium: Option price is the price which the option buyer pays to the option
seller. It is also referred to as the option premium.
Expiration date: The date specified in the options contract is known as the expiration date, the
exercise date, the strike date or the maturity.
Strike price: The price specified in the options contract is known as the strike price or the
exercise price.
In-the-money option: An in-the-money (ITM) option is an option that would lead to a positive
cash flow to the holder if it were exercised immediately. A call option on the index is said to be
in-the-money when the current index stands at a level higher than the strike price (i.e. spot
price > strike price). If the index is much higher than the strike price, the call is said to be deep
ITM. In the case of a put, the put is ITM if the index is below the strike price.
At-the-money option: An at-the-money (ATM) option is an option that would lead to zero cash
flow if it were exercised immediately. An option on the index is at-the-money when the current
index equals the strike price (i.e. spot price = strike price).
Out-of-the-money option: An out-of-the-money (OTM) option is an option that would lead to a
negative cash flow if it were exercised immediately. A call option on the index is out-of-themoney when the current index stands at a level which is less than the strike price (i.e. spot price
< strike price). If the index is much lower than the strike price, the call is said to be deep OTM.
In the case of a put, the put is OTM if the index is above the strike price.
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Portfolio Concentrated in One Stock

Although this report will cover the risk management strategies for high-net-worth investors in
general, much of the report is focused on the risks faced by thousands of high-net-worth
entrepreneurs and employees of high-growth companies who must cope with the situation of
having most of their net worth attributed to one stock that may be restricted and may have a
low cost basis.
Many affluent investors are faced with the challenge of holding a concentrated position of a
single stock with a low tax basis. At some point, diversification of the holding becomes desirable
either from a personal perspective (increased income) or as a risk management maneuver (too
many eggs in one basket). However, income taxes stand to claim a significant portion of the
holding. The investor would like to accomplish four primary objectives:
i. Hedge: The investor wants to be hedged against a decrease in value of the stock.
ii. Defer Capital Gains Tax: The investor does not want to trigger a taxable event resulting in the
immediate recognition of a capital gains tax. Also, the investor would like the stock to receive
a step-up in basis in his or her estate upon his or her death.
iii. Gain Liquidity: The investor would like the ability to monetize the stock position (e.g.,
currently receive in cash a substantial portion of the market value of the stock position) at the
lowest possible cost.
iv. Diversify: The investor might reinvest some or all of the cash to diversify the portfolio.
(Listed options can help high-net-worth investors pursue the four above objectives)
Stocks, Listed Options and Tax Consequences:

Numerous articles have noted the fact that income taxes can be a sizable drag on the
performance of investment portfolios of taxable investors, and that these investors should
bear in mind the tax consequences of their investment decisions.
Taxable portfolios can incur unwanted large realized capital gains if there is large turnover
(purchases and sales) of stocks in the underlying portfolio. One way to minimize taxes is to
use an overlay strategy, which leaves the underlying portfolio intact and uses overlay
tools such as options to take an investment position (which often is a hedging or contrary
position to the underlying portfolio).
Options strategies may have advantages over the outright sale of stock in that options can aid
an investor who would like to:
(1) Avoid the triggering of a taxable event resulting in the immediate recognition of a capital
gains tax.
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(2) Have the stock to receive a step-up in basis in his or her estate upon his or her death.
Growth in Listed Options Trading:
Annual trading volume in stock options has grown to record levels in recent years as individual
and institutional investors have increased their use of these products to manage various risks.
Options Volume (Rs. In crore)
More banks and other financial services firms are offering options and other sophisticated
investment strategies to wealthy clients, reflecting the view that some clients may be eager to
protect against a possible downturn in the stock market.
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2009-10
2010-11
Index Options
2011-12
2012-13
2013-14
Stock Options
(Options Value calculated as (Premium + Strike price) x Quantity)

In year 2009-10 the volume of index options was 3,978,699 and stock options volume was
116907 and in year 2013-14 volume of index options was 13,823,059 and stock options 865594
Rs. (Crore).around 80% growth noticed from year to year.
As above we can see that in last five year the trading in stock options is notably increasing. The
various benefits as above shown attract investors to trade in options.We can see that index
options currently have high volume then the stock options. Stock options have less volume
because most of traders prefer Intra-day trading because of high volatility and instant huge
profit. But there is also high risk with higher profit.
The rising level of options trading shows that there is the rise in number of people who want
profit with risk hedging, without being greedy to take instant profit
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Options strategies for risk hedging Of HNI

High-net-worth investors may consider numerous types of strategies that use exchange-listed
options.
A high-net-worth investor with stock concentration concerns could consider several strategies,
including:
Hedge the stock with put options,
Hedge the stock with a collar (long puts for protection plus short calls for income),
Diversifying with stock index options
Covered call writing for income.

A high-net-worth investor with a diversified portfolio could consider several strategies,
including:
Hedge the portfolio with protective stock index put position
Hedge the portfolio with a collar (long puts for protection plus short calls for income)
Covered call writing for income.
(The examples in this report are based on hypothetical situations and should only be considered
as examples of potential trading strategies. For the sake of simplicity, tax costs, commission
costs, and other transaction costs have been omitted from the examples.)
Strategy: 1-Protective Puts Purchased Against Stock:

The purchase of equity put options permits investors to limit the downside risk of stock
ownership while retaining the upside potential
In this strategy, we purchase a stock since we feel bullish about it. But what if the price of
thestockwent down. You wish you had some insurance against the price fall. So buy a Put on
the stock. This gives you the right to sell the stock at a certain price which is the strike price.
The strike price can be the price at which you bought the stock (ATM strike price) or slightly
below (OTM strike price).
In case the price of the stock rises you get the full benefit of the price rise. In case the price of
the stock falls, exercise the Put Option (remember Put is a right to sell). You have capped your
loss in this manner because the Put option stops your further losses. It is a strategy with a
limited loss and (after subtracting the Put premium) unlimited profit (from the stock price rise).
The result of this strategy looks like a Call Option Buy strategy and therefore is called a
Synthetic Call!
But the strategy is not Buy Call Option (Strategy 1). Here you have taken an exposure to an
underlying stock with the aim of holding it and reaping the benefits of price rise, dividends,
bonus rights etc. and at the same time insuring against an adverse price movement. In simple
buying of a Call Option, there is no underlying position in the stock but is entered into only to
take advantage of price movement in the underlying stock.
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When to use:
When ownership is desired of
stock yet investor is concerned
about near-term downside risk.
The outlook is conservatively
bullish.
Risk:
Losses limited to Stock price +
Put Premium Put Strike price
Reward: Profit potential is
unlimited.
Break-even Point:
Put Strike Price + Put Premium +
Stock Price Put Strike Price
Example:
Mr. XYZ is bullish about XYZ Ltd stock. He buys XYZ Ltd. at current
market price of Rs. 4000 on 4th July. To protect against fall in the
price of XYZ Ltd. (his risk), he buys an XYZ Ltd. Put option with a
strike price Rs. 3900 (OTM) at a premium of Rs. 143.80 expiring on
31st July.
Strategy : Buy Stock + Buy Put Option
Buy Stock
Current Market Price of XYZ Ltd.
(Mr. XYZ
(Rs.)
pays)
Strike Price (Rs.)
Buy Put (Mr. Premium (Rs.)
XYZ pays)
Break Even Point (Rs.) (Put Strike
Price + Put Premium + Stock Price
Put Strike Price)*
4000
3900
143.8
4143.8
* Breakeven is from the point of view of Mr. XYZ. He has to recover the cost of the Put Option
purchase price + the stock price to break even. In above our example,
Net Debit (payout)
Maximum Loss
Maximum Gain
Breakeven
Stock Bought + Premium PaidRs. 4000 + Rs. 143.80 =Rs. 4,14,380

Stock Price + Put Premium Put Strike
Rs. 4000 + Rs. 143.80 Rs. 3900=Rs. 24,380
Unlimited (as the stock rises)
Put Strike + Put Premium + Stock Price Put Strike
Rs. 3900 + Rs. 143.80 + Rs. 4000 Rs. 3900=4143.80
The payoff schedule

XYZ Ltd. closes at
Payoff from the Net Payoff from the
Net Payoff
(Rs.) on expiry
Stock (Rs.)
Put Option (Rs.)
(Rs.)
3400
-600
356.2
-243.8
3600
-400
156.2
-243.8
3800
-200
-43.8
-243.8
4000
0
-143.8
-143.8
4143.8
143.8
-143.8
0
4200
200
-143.8
56.2
4400
400
-143.8
256.2
4600
600
-143.8
456.2
4800
800
-143.8
656.2
Page | 25
ANALYSIS
This is a low risk strategy. This is a strategy which limits the loss in case of fall in market but the
potential profit remains unlimited when the stock price rises. A good strategy when you buy a
stock for medium or long term, with the aim of protecting any downside risk. The pay-off
resembles a Call Option buy and is therefore called as Synthetic Long Call.
Option Lapse: If the investor allows his XYZ put options to lapse (that is, to expire without
exercise or sale), he is treated as if he sold the options. In that case, the cost of the premium he
paid to purchase the put options, plus any other commissions and fees, results in a capital loss.
Except for a married put that qualifies as an identified straddle, the put and the investors
appreciated XYZ shares together result in a tax straddle. As a result, any loss recognized upon
lapse of the put option will be either long- or short-term, depending on the investors holding
period for his appreciated XYZ shares at the time he purchased the put options.
Option Exercise: If the investor exercises the put options, he must deliver XYZ stock. He can
either deliver the appreciated XYZ shares he currently owns, or he can buy XYZ stock in the
open market and deliver the new shares when he exercises the put options. To determine
whether his sale of XYZ stock upon exercise of the put options results in a tax gain or loss, he
compares the amount he realized on the sale of the shares to his tax basis in the shares he
delivers.
Page | 26
Strategy: 2- Writing Covered Call Options on Stock

When to Use:
Example:
This is often employed when an
Mr. A bought XYZ Ltd. for Rs 3850 and simultaneously sells a Call
investor has a short-term neutral
option at a strike price of Rs 4000. Which means Mr. A does not
to moderately bullish view on the
think that the price of XYZ Ltd. will rise above Rs. 4000. However,
stock he holds. He takes a short
in case it rises above Rs. 4000, Mr. A does not mind getting
position on the Call option to
exercised at that price and exiting the stock at Rs. 4000
generate income from the option
premium.
(TARGET SELL PRICE = 3.90% return on the stock purchase price).
(Since the stock is purchased
Mr. A receives a premium of Rs 80 for selling the Call. Thus net
simultaneously
with
writing
outflow to Mr. A is (Rs. 3850 Rs. 80) = Rs. 3770. He reduces the
(selling) the Call, the strategy is
cost of buying the stock by this strategy.
commonly referred to as buywrite)
If the stock price stays at or below Rs. 4000, the Call option will
Risk:
not get exercised and Mr. A can retain the Rs. 80 premium, which
If the Stock Price falls to zero, the
is an extra income. If the stock price goes above Rs 4000, the Call
investor loses the entire value of
option will get exercised by the Call buyer. The entire position
the Stock but retains the
will work like this:
premium, since the Call will not
Strategy : Buy Stock + Sell Call Option
be exercised against him. So
maximum risk = Stock Price Paid
Mr. A buys
Market Price (Rs.)
3850
Call premium
stock XYZ
Upside capped at the Strike price
Ltd.
Call Options
Strike Price (Rs.)
4000
plus the Premium received. So if
the Stock rises beyond the Strike
Mr. A
Premium (Rs.)
80
price the investor (Call seller)
receives
Break Even Point (Rs.)
3770
gives up all the gains on the
(Stock Price paid stock.
Premium Received)
Reward:
Limited to (Call Strike Price
Stock Price paid) + Premium
received
Breakeven:
Stock 1)Price
paidof -XYZPremium
The price
Ltd. stays at or below Rs. 4000. The Call buyer will not exercise the Call
Received
Option. Mr. A will keep the premium of Rs. 80. This is an income for him. So if the stock has
moved from Rs. 3850 (purchase price) to Rs. 3950, Mr. A makes Rs. 180/- [Rs. 3950 Rs. 3850 +
Rs. 80 (Premium) ] = An additional Rs. 80, because of the Call sold.
2) Suppose the price of XYZ Ltd. moves to Rs. 4100, then the Call Buyer will exercise the Call
Option and Mr. A will have to pay him Rs. 100 (loss on exercise of the Call Option). What would
Mr. A do and what will be his pay off?
Page | 27
In above our example we have:

a)Sell the Stock in the market at
b)Pay Rs. 100 to the Call Options buyer
c)Pay Off (a b) received
d)Premium received on Selling Call Option
e) Net payment (c + d) received by Mr. A
f) Purchase price of XYZ Ltd.
g)Net profit
h)Return (%)
4100
-100
4000
80
4080
3850
4080-3850=230
(Rs. 4080 Rs. 3850) X
100/3850=5.97%
The payoff schedule

XYZ Ltd. price closes at (Rs.)
Net Payoff (Rs.)
3600
-170
3700
-70
3740
-30
3770
0
3800
30
3900
130
4000
230
4100
230
4200
230
4300
230
ANALYSIS:
Option Lapse:
Page | 28
If call options lapse (that is, expire without being exercised by the holder), the investor treats
the option premium he received (reduced by any commissions and fees he paid) as taxable gain
on the date of lapse. Regardless of the period the options were outstanding, he reports the
premium income on the lapse of the call options as a short-term capital gain.
Option Exercise:
If the holder exercises call options, the investor must sell XYZ shares to the holder at the option
strike price. To determine whether the sale of XYZ stock in settlement of the call options results
in a tax gain or loss, the investor compares the amount realized on the sale of the shares to his
tax basis in the shares he sells.42 If the investor delivers the XYZ shares he currently owns and
the sale results in a gain, the gain is longer short-term, depending on his holding period for his
XYZ shares.
So,an investor who considers writing a covered call can calculate in advance an expected return
for the position if assignment is made and the stock is called away. Though early assignment is
always possible, it is somewhat predictable in certain cases before a dividend paid to underlying
shareholders.
Strategy: 3- Protective Collar on Stock

When to Use:
The collar is a good strategy
to use if the investor is
writing covered calls to earn
premiums but wishes to
protect
him
from
an
unexpected sharp drop in the
price of the underlying
security.
Risk:
Limited Reward: Limited
Breakeven:
Purchase Price of Underlying
Call Premium + Put
Premium
Example
Suppose an investor Mr. A buys or is holding XYZ Ltd. currently
trading at Rs. 4758. He decides to establish a collar by writing a Call
of strike price Rs. 5000 for Rs. 39 while simultaneously purchasing a
Rs. 4700 strike price Put for Rs. 27. Since he pays Rs. 4758 for the
stock XYZ Ltd., another Rs. 27 for the Put but receives Rs. 39 for
selling the Call option, his total investment is Rs. 4746.
Strategy : Buy Stock + Buy Put + Sell Call
xyz ltd
Sell Call Option
Mr. A Receives
Buy Put Option
Mr. A Pays
Current Market Price (Rs.)

Strike Price (Rs.)
Premium (Rs.)
Strike Price (Rs.)
Premium (Rs.)
Net Premium Received(Rs.)
Break Even Point (Rs.)
4758
5000
39
4700
27
12
4746
Page | 29
1) If the price of XYZ Ltd. rises to Rs. 5100 after a month, then,
a. Mr. A will sell the stock at Rs. 5100 earning him a profit of Rs. 342 (Rs. 5100 Rs. 4758)
b. Mr. A will get exercised on the Call he sold and will have to pay Rs. 100.
c . The Put will expire worthless.
d. Net premium received for the Collar is Rs. 12
e. Adding (a + b + d) = Rs. 342 -100 12 = Rs. 254
This is the maximum return on the Collar Strategy.
However, unlike a Covered Call, the downside risk here is also limited
2) If the price of XYZ Ltd. falls to Rs. 4400 after a month, then,
a. Mr. A loses Rs. 358 on the stock XYZ Ltd.
b. The Call expires worthless
c. The Put can be exercised by Mr. A and he will earn Rs. 300
d. Net premium received for the Collar is Rs. 12
e. Adding (a + b + d) = - Rs. 358 + 300 +12 = - Rs. 46
This is the maximum the investor can loose on the Collar Strategy. The Upside in this case is
much more than the downside risk.
The Payoff schedule

XYZ Ltd. closes Payoff from Call
Payoff from Put
at (Rs.)
Sold (Rs.)
Purchased (Rs.)
4400
39
4450
39
4800
39
4850
39
5000
39
5050
-11
5200
-161
5250
-209
5300
-211
273
223
-27
-27
-27
-27
-27
-27
-27
Payoff from stock

Net payoff (Rs.)
XYZ Ltd.
-358
-308
42
92
242
292
442
490
492
Analysis:
Page | 30
-46
-46
54
104
254
254
254
254
254
Possible Outcomes
The Stock Rises The portfolio participates in any upside move up to the strike price of the calls. Above
the current price level, losses from the short call position offset gains in the underlying stock. The puts
expire worthless.
The Stock Falls The stock has protection on the downside. Below the current price level, gains from
the long put position offset losses in the underlying stock. The calls expire worthless.
The Stock Price Remains Stable If the stock price remains between the put strike and the call strike,
the options expire. In this case, the total value of the stock position is increased by the net premium
received.
Strategy: 4- Long Index Call Options for Equity Market Exposure

Buying a call is the most basic of all
options strategies. It constitutes the
first options trade for someone
already familiar with buying / selling
stocks and would now want to trade
options. Buying a call is an easy
strategy to understand. When you buy
it means you are bullish. Buying a Call
means you are very bullish and expect
the underlying stock / index to rise in
future.
When to Use:
Investor is very bullish on the stock /
index.
Risk:
Limited to the Premium. (Maximum
loss if market expires at or below the
option strike price).
Reward:
Unlimited
Breakeven:
Strike Price + Premium
Example:
Mr. XYZ is bullish on Nifty on 24th June, when the Nifty is at
4191.10. He buys a call option with a strike price of Rs. 4600 at a
premium of Rs. 36.35, expiring on 31st July. If the Nifty goes
above 4636.35, Mr. XYZ will make a net profit (after deducting
the premium) on exercising the option. In case the Nifty stays at
or falls below 4600, he can forego the option (it will expire
worthless) with a maximum loss of the premium.
Strategy : Buy Call Option
Current Nifty index
4191.1
Call Option
Strike Price (Rs.)
4600
Mr. XYZ
Pays
Premium (Rs.)
36.35
Break Even Point (Rs.) (Strike Price +

Premium)
4636.35
The payoff schedule

On expiry Nifty closes at
4100
4300
4500
4636.35
4700
4900
Net Payoff from Call Option

(Rs.)
-36.35
-36.35
-36.35
0
63.65
263.65
Page | 31
Analysis:
This strategy limits the downside risk to the extent of premium paid by Mr. XYZ (Rs. 36.35). But
the potential return is unlimited in case of rise in Nifty. A long call option is the simplest way to
benefit if you believe that the market will make an upward move and is the most common
choice among first time investors in Options. As the stock price / index rises the long Call move
into profit more and more quickly.
Strategy: 5- Long Index Put Options for Portfolio Protection

A long Put is a Bearish strategy.
To take advantage of a falling
market an investor can buy Put
options.
When to use:
Investor is bearish about the
stock / index.
Example:
Mr. XYZ is bearish on Nifty on 24th June, when the Nifty is at
2694. He buys a Put option with a strike price Rs. 2600 at a
premium of Rs. 52, expiring on 31st July. If the Nifty goes below
2548, Mr. XYZ will make a profit on exercising the option. In case
the Nifty rises above 2600, he can forego the option (it will expire
worthless) with a maximum loss of the premium.
Strategy : Buy Put Option
Risk:
Limited to the amount of
Premium paid. (Maximum loss if
stock / index expire at or above
the option strike price).
Reward:
Unlimited
Put
Option
Mr. XYZ
Pays
Current Nifty index
2694
Strike Price (Rs.)
2600
Premium (Rs.)
52
Break Even Point (Rs.) (Strike Price Premium)
2548
Break-even Point:
Stock Price - Premium
Page | 32
The payoff schedule

On expiry Nifty closes at
Net Payoff from Put Option (Rs.)
2300
248
2400
148
2500
48
2548
0
2600
-52
2700
-52
2800
-52
2900
-52
ANALYSIS:
A bearish investor can profit from declining stock price by buying Puts. He limits his risk to the
amount of premium paid but his profit potential remains unlimited. This is one of the widely
used strategies when an investor is bearish.
Strategy: 6- Long Straddle

A Straddle is a volatility strategy and is used when the stock price / index is expected to show
large movements. This strategy involves buying a call as well as put on the same stock / index
for the same maturity and strike price, to take advantage of a movement in either direction, a
soaring or plummeting value of the stock / index.
If the price of the stock / index increases, the call is exercised while the put expires worthless
and if the price of the stock / index decreases, the put is exercised, the call expires worthless.
Either way if the stock / index show volatility to cover the cost of the trade, profits are to be
made. With Straddles, the investor is direction neutral. All that he is looking out for is the stock
/ index to break out exponentially in either direction.
Page | 33
Example:
When to use:
The investor thinks that the
underlying stock / index will
experience significant volatility in
the near term.
Risk:
Limited to the initial premium paid.
Reward:
Unlimited
Break-even Point:
Upper Breakeven Point = Strike Price
of Long Call + Net Premium Paid
Lower Breakeven Point = Strike Price
of Long Put - Net Premium Paid
Suppose Nifty is at 4450 on 27th April. An investor, Mr. A

enters a long straddle by buying a May Rs 4500 Nifty Put
for Rs. 85 and a May Rs. 4500 Nifty Call for Rs. 122. The
net debit taken to enter the trade is Rs 207, which is also
his maximum possible loss.
Strategy : Buy Put + Buy Call

Nifty
index
Call and
Put
Mr. A
pays
Current Value
4450
Strike Price (Rs.)
4500
Total Premium(Call + Put) (Rs.)
207
Break Even Point

(Rs.)
4707(U)
(Rs.)
4293(L)
The payoff schedule

On expiry Nifty
Net Payoff from Put purchased Net Payoff from Call purchased Net Payoff
closes at
(Rs.)
(Rs.)
(Rs.)
4200
215
-122
93
4234
181
-122
59
4293
122
-122
0
4300
115
-122
-7
4400
15
-122
-107
Page | 34
Strategy: 7- Short Straddle

A Short Straddle is the opposite of Long Straddle. It is a strategy to be adopted when the
investor feels the market will not show much movement. He sells a Call and a Put on the same
stock / index for the same maturity and strike price. It creates a net income for the investor. If
the stock / index do not move much in either direction, the investor retains the Premium as
neither the Call nor the Put will be exercised.
However, in case the stock / index moves in either direction, up or down significantly, the
investors losses can be significant. So this is a risky strategy and should be carefully adopted
and only when the expected volatility in the market is limited. If the stock / index value stays
close to the strike price on expiry of the contracts, maximum gain, which is the Premium
received is made.
When to use:
The investor thinks that the
underlying stock / index will
experience very little volatility in
the near term.
Risk:
Unlimited
Reward:
Limited to the premium received
Break-even Point:
Upper Breakeven Point = Strike
Price of Short Call + Net Premium
Received
Lower Breakeven Point = Strike
Price of Short Put - Net Premium
Received
Example:
Suppose Nifty is at 4450 on 27th April. An investor, Mr. A,
enters into a short straddle by selling a May Rs 4500 Nifty Put
for Rs. 85 and a May Rs. 4500 Nifty Call for Rs. 122. The net
credit received is Rs. 207, which is also his maximum possible
profit.
Strategy : Sell Put + Sell Call
Nifty index
Current Value
4450
Call and Put
Strike Price (Rs.)
4500
Mr. A receives Total Premium(Call + Put) (Rs.)
207
Break Even Point
(Rs.)*
(Rs.)*
4707(U)
4293(L)
* From buyers point of view
The payoff schedule

On expiry Nifty
Net Payoff from Put purchased Net Payoff from Call purchased Net Payoff
closes at
(Rs.)
(Rs.)
(Rs.)
4200
-215
122
-93
4234
-181
122
-59
4293
-122
122
0
4300
-115
122
7
4400
-15
122
107
Page | 35
Strategy: 8- Long Call Butterfly

A long butterfly is similar to a Short Straddle except your losses are limited. The strategy
can be done by selling 2 ATM Calls, buying 1 ITM Call, and buying 1 OTM Call options (there
should be equidistance between the strike prices).
Strategy: - Short Call Butterfly

A Short Call Butterfly is a strategy for volatile markets. It is the opposite of Long Call
Butterfly, which is a range bound strategy. The Short Call Butterfly can be constructed by
Selling one lower striking in-the-money Call, buying two at-the-money Calls and selling
another higher strike out-of-the-money Call, giving the investor a net credit (therefore it is
an income strategy).
Points to be Note:
All strategy above shows the different pay off on the bases of the market conditions.
Investors should consider the above strategy as the guidance purpose.
If investors or trader are sure on the prevalent market conditions they can get reward or
insure their portfolio.
Sometime investors stick to their own decision and may be face loss, so it is better to
consult investment advisor or broking firm.
Page | 36
Current Scenario of HNIs Investment &Investment Options Available for HNI in

India:
HNI segment reports 8.21% rise in MF folios
(ET-22/04/2015)
Stock trading falls as retail, HNIs stay away from market

(ET-10/06/2015)
Are HNI investors postponing their equity investments now?
(http://wealthmanagement.kotak.com/media/to-invest-in-gold-take-sip-route)
According to the World Wealth Report 2014, released by Capgemini and RBC(Royal Bank of
Canada) Wealth Management, more than 90% of India's High Net-Worth Individuals (HNWIs)
seek to achieve more than just monetary returns while managing their wealth.
Karvys India wealth report, 2014 highlights that Indians Individuals holding Rs 202 Lakh crore
wealth today may see their wealth double in next five years.By the end of next five years i.e.
2018, Karvy Private Wealth report expects overall Individual wealth to increase to Rs 411 Lakh
crores.
Surprisingly more than half of Individuals wealth today i.e. Rs 110 lakh crore comprises of
financial assets, whereas only Rs 92 lakh crore of total Rs 202 lakh crore is held in physical
assets. The physical assets include assets as Real estate and Gold whereas excludes homes that
individuals own and use for their own living. The breakup of financial assets springs out more
surprises. Out of Rs 110 Lakh crore while fixed deposits and Bonds constitute 23%, Direct Equity
constitutes 22.1% and Insurance 17.2%. Mutual funds constitute only 3.2% while saving
deposits cash and small savings constitute 13.7, 10.4 and 5.1% each.
However looking at the break-up of private equity 38.66% (Rs 9.14 lakh crore) of 24.31 lakh
crore is what direct individuals have purchased while rest is promoters holdings (in individual
capacities). He added that while currently around 86.6% of Indians own home currently, the
percentage
should
increase
to
around
91.1
in
a
few
years.
Also in the coming years, we see a reversal in the trend of very high fresh inflows while going
into physical assets as i believe that macro-environmental conditions should bottom out in
2016, and financial Assets will start finding favor again. The India story has only taken a break.
Page | 37
Investment options for HNIs:

High net-worth individuals (HNIs) are those who have substantial and excessive resources to
invest. There is no standard definition of HNIs and the criterion varies from bank to bank.
More than safety, the main objective of HNIs is to earn capital appreciation and income
from investments. They normally don't need to worry about the safety of their capital. They
generally have the appetite to invest in high risk instruments and avenues, and as such are
not risk averse. Higher the risk, higher is the returns. These are investors who can afford to
take higher risks.
Most of the developed nations hardly have any investment opportunities which generate
returns greater than 6-10 percent as compared to the Equity markets which have
generated over 87 percent over the last year. Most of the mutual fund houses operating in
India have generated returns over 50 percent compounded annually over the last 3-4 years.
Though in the coming years the expectation is 15-20 percent , it still is quite high as
compared to what one can make in the developed markets
Creating wealth is one thing. Managing
wealth is quite another. The total wealth
of persons of Indian origin is estimated to
be about $560 billion. Out of that, onshore
is $260 billion and offshore is $300 billion.
This niche segment is growing by 20
percent per annum. Indian economy is
expected to grow by 7-9 percent in the
coming years. With the growth in the
economy, the HNI segment is also slated to
grow.
HNIs have a good amount of disposable income and little responsibilities in terms of
providing for the family. For a country which has very favorable demographics and is
predicted to have the highest percentage of young people by 2010, the potential is
immense. Every investment option will at some point of time be more attractive than the
others because of the prevalent economic, capital market and political scenario.
Asset allocation is the process of determining an optimal mix of asset classes to invest in.
This may consist of equity, debt, gold, real estate, mutual funds art, private equity,
structured products, and hedge funds and managed funds. The investment portfolio
depends on the investors' time horizon and risk appetite, as well as tax considerations. One
needs to balance out the risk and return aspects. Asset allocation would depend on the
investible surplus available with the investor.
Some avenues for HNIs:
Property
Real estate is escalating fast. The real estate market is growing at a pace of about 30-35 percent
annually. The demand for realty is on a high growth path. The demand for residential and
commercial properties is increasing. Investment in property requires a good amount of capital.
With the property prices rising day by day, it may offer a good source of returns.
Page | 38
Equity
The stock markets have been rocking. Lately, there has been a downturn, but most of it is a
correction. India is a growth story. HNIs can invest in stocks depending on their fair valuation.
There is still plenty of value in the market waiting to be exploited. Portfolio management
services of experts may be used. Stocks with strong fundamentals and a good growth potential
need to be included in the portfolio.
Art
Another avenue fast catching up is investment in art. However, it needs specialization to select
and invest. Investing in modern and contemporary works is increasing. With the newlylaunched art funds, the asset class is beginning to offer a fair amount of liquidity. Art may be
considered as a serious investment form as it can diversify a portfolio.
Debt
Debt is an attractive investment avenue for investors. Investors may invest in products like
arbitrage funds, which offer higher return than conventional income funds. With gradual
increase in the interest rates, debt securities may also offer decent returns. In India the
secondary market for trading in debt securities is still not very well developed.
Mutual funds
These are a common investment avenue in any investment portfolio.
Realty funds: Realty funds offer another source of investment for HNIs. These funds cater to
HNIs only. They invest in realty and earn income through rent as well as capital appreciation.
Venture capital funds: This is another major area of investment. Venture capitalists fund new
and risky projects. HNIs may join hands with or invest in venture capital funds. The risks are
high. So are the rewards, if the project is successful.
Gold
Along with stock markets and realty, gold also touched historic peaks. Gold funds have been
launched. HNIs may invest directly in gold or through the gold funds. Investment in gold,
through purchase of gold or through investment in gold funds, is picking up.
Private equity
There are a number of entrepreneurs who have the requisite skills and calibre to start new
projects, but don't have the funds. Still others may have a small equity base and potentially
sound projects but not enough capital. HNIs may invest in private equity of these promoters
and exit once the project becomes viable and ready for public offer.
Why investment in equity and also Options in derivative is good for

HNI?
It is called the curse of the excess. Whether through inheritance or through entrepreneurial
ability, individuals who come to possess big money sometimes fail to do the right thing with
it invest it efficiently. Another set of wealthy individuals are the fence-sitters, who
endlessly wait for the Right time to invest and in the bargain miss out on the opportunity.
Then there are those who are fixated to specific asset classes and invest only in them
without bothering about high concentration risk.
Page | 39
The fundamental investing strategy and approach does not differ significantly for different
portfolio sizes. It should consider goals, time horizon and risk-return expectation from the
overall portfolio. However bigger portfolios gives additional options (requiring large ticket
sizes) and brings complications around tax, holding structure and succession planning which
needs to be carefully considered and planned from the portfolio inception stage itself.
The most important aspect to be kept in mind in devising any investment plan is to ensure
that over long period of time the investment should yield positive real returns. The drag of
inflation and taxes makes good looking nominal returns from Debt/Fixed deposit
investments erode capital in real terms. Long term Debt returns of 7% with 5% inflation and
30% tax on interest income leads to negative real returns. Hence importance of adding
Growth asset class (Equities, Real Estate and Private Equities) in portfolio in varying
composition as per risk-reward matrix becomes paramount.
Research done on historical performances of various Equity and Debt indices over long
periods of time shows that a combination of 20% Growth assets with 80% Income yielding
assets will generate 1-1.5% real returns after accounting for long term inflation and taxes.
Although in shorter periods of time this 20% growth asset will be volatile and show negative
impact on portfolio, history shows that over long periods, investing in good quality growth
assets yield better returns than Debt.
Similarly an aggressive investor who is more keen to grow his wealth by taking some risk on
capital in shorter periods can look at a portfolio of 80% in growth assets and 20% in Income
assets and aim to generate around 7% - 10% p.a. real returns. Once the broad asset
allocation between growth and Income are arrived after considering short term risk on
capital, liquidity and other goals, it is also very important to keep this allocation dynamic to
changing market scenario. Though drastic shifts in this allocation may not be warranted a
10% -15% positive or negative allocations to Growth and Income assets are helpful to take
tactical advantage on macroeconomic and global scenarios being favorable or not.
The next step after fixing the asset allocation and tactical calls is to choose the right
investment categories and vehicles. While Debt Mutual Funds are much more tax efficient
than Interest bearing bonds due to long term capital gains getting taxed at 10% for Debt
MFs and interest from bonds being taxed at 30%, some well researched and high yielding
bonds/NCDs (like to prudent real estate developers) can offset the negative tax impact on
interest income by higher coupons.
Similarly equity investments could be made through Funds, PMS or buying shares directly.
While each approach has its own merits and limitations, investors should evaluate their
preferences and expertise in the most unbiased and detached manner to make the decision
best suited for them. Allocation to a particular category of investments and specific
schemes/products also needs to be relevant to total portfolio size.
Page | 40
A classic mistake made by many investors even after having a well-defined Asset allocation
strategy is to under or over allocate to a specific idea by looking at absolute investment
amount and not in context of total portfolio size.
Apart from the key approach stated above, mentioned below are some other areas which need
careful deliberation in HNI investment planning process:
Liquidity requirement:
It is not always true that an affluent individual has very low liquidity requirement from existing
wealth. If major chunk of wealth is inherited from earlier generation in the form of immovable
properties, then liquidity from this inheritance can be constricted. If the individual doesnt
have any other source of income, then he/she will have to generate rental yield from that asset
and supplement it with income stream from existing investments.
Investment horizon:
This is dictated by the stated financial goals. Longer horizon accords the luxury to choose from a
wide array of high return generating investments. Riskiness of investments lowers substantially
over the long term. Typically equity and alternative investments require longer horizon to reap
best results. Also avoid the trap of mixing between investment horizons with review frequency.
For monies not need for long periods, approach to invest in products with short maturity and
then renewing it every time may be less optimal than locking it for longer periods with option
to do course correction if it does fare well.
Global Allocation:
A part of portfolio getting geographically diversified not only provides a good hedge against
geopolitical risks and currency but also provides options to invest in areas, ideas and themes
which may not be available in domestic markets. There are multiple ways in which an HNI can
participate in Global Markets. Feeder Funds and Liberalized Remittance scheme is two most
easily available routes to take such exposure.
Investment Policy, Governance and Family Constitution:
These are some of the tools very relevant for smooth functioning of investment strategy in a
large family. Clearly defining the investment policy framework, ,spelling out goals and
objectives clearly, documenting dos and donts , decision making and conflict resolution process
and having an investment committee helps tremendously in remaining aligned to long term
objective by keeping all stakeholders involved.
To conclude, protecting, growing, managing and transferring wealth to next generation is as or
sometimes more difficult than creating wealth. More often than not this is the area which does
not come naturally to wealth owner like their business. A carefully thought through objectives
and well defined process along formal planning with experts and advisors can surely help HNI
investors in making a long term stable portfolio and avoiding the common pitfalls highlighted
above.
Page | 41
History of Crash in Indian Stock Market:

It was a Terrible Tuesday for the bourses. The
Sensex saw its biggest intra-day fall when it hit a
low of 15,332, down 2,273 points. However, it
recovered losses to some extent and closed at a
loss of 875 points at 16,730.Trading was
suspended for one hour at the Bombay Stock
Exchange after the benchmark Sensex crashed to
a low of 15,576.30 within minutes of opening,
crossing the circuit limit of 10 per cent.
Investors on Tuesday lost over Rs. 6 lakh crore (Rs. 6 trillion) within minutes of opening of the
Bombay Stock Exchange, which was immediately suspended for an hour after the 30-share
barometer index, Sensex, hit the circuit limit of 10 per cent.
This loss of Rs 6, 54,887 crore (Rs 6.548 trillion) comes on top of over Rs 11 trillion loss suffered
by investors on the Dalal Street in the last six days.
Sensex slumps 855 points; 7th worst single-day fall in history-6th January, 2015
The Sensex posted its seventh biggest single-day fall in history, amid weak global cues, after the
sharp fall in global crude oil prices raised worries over global growth slowdown and the political
uncertainty in Greece also weighed on market sentiment.
The 30-share Sensex ended down 854.86 points or 3.1% at 26,987.46 and the 50-share Nifty
ended down 251.05 points or 3% at 8,127.35.
(Oil prices slumped to new 5-1/2-year lows on Monday on worries about a surplus of global
supplies and lackluster demand. The two crude oil benchmarks - Brent and U.S. light crude, also
known as West Texas Intermediate - have now lost more than half of their value since mid2014. Globally traders also turned risk averse over apprehensions of Greece defaulting on its
loans and losing its status as a Euro zone country which became more pronounced with the
leftist Syriza party, committed to roll back austerity measures, emerging as the front-runner for
the January 25 election
Page | 42
What was all above?

When the stock market crash happens its not only drags your money but also make your
portfolio half compare to previous portfolio. So now question arise that what should we do
to prevent your portfolio from sudden drop?
The investors who have lost their money in stock market crash should have used some
options strategy with the stock buying so that they can prevent their investment from this
type of sudden market crash.
In my report I have mention the some strategy which will help to reduce sudden drop in the
portfolio of investors specially HNI.
Example of One Client from Arya Fin-Trade Services (India) Pvt. Ltd.:
(Live Market Screen of Arya Fin Trade Services (India) Pvt. Ltd.)
Every risk hedge has a cost, so before you decide to use hedging, you must ask yourself if the
benefits received from it justify the expense. Remember, the goal of hedging isn't to make
money but to protect from losses. The cost of the hedge - whether it is the cost of an option or
lost profits from being on the wrong side of a futures contract - cannot be avoided. This is the
price you have to pay to avoid uncertainty.
Page | 43
Assumptions:
Mr. X is very conservative towards safety of principal.
In every month the number of stocks in all companies is same, so investment may vary
slightly.
He holds stock till the end of month and buys new put options at beginning of month.
The closing price of stock is on every months options clearing date.
The strike price is slightly OTM.
The motive behind the covered put strategy is the risk hedging of stocks when price of the
stock goes down and lesser the loss.
The example does not include transaction costs in the calculations
As under I have taken assumed portfolio of one client X of Arya Group. He has portfolio of 50
lakh Rs. and He is dealing with mostly the more volatile stocks. So I have picked up 5 stocks and
allocated into the approximately equal investment value.
If X bought stock on 1st January, 2015 then as under:
Name of stock
mkt. Price 1
jan,2015
Hero Moto corp

Cipla
SBI
ONGC
TCS
3111
626
312
340
2554
No of shares
Total investment
375
1500
3000
3000
375
TOTAL
Stock price as on
29th jan,2015
1166625
939000
936000
1020000
957750
Profit or loss
2865
695
308
351
2480
1074375
1042500
924000
1053000
930000
5019375
5023875
After covered put strategy:

Name of
stock
investment
Strike
price
Total put value
Hero Moto
corp
Cipla
SBI
ONGC
TCS
Total
1166625
2990 (38*375)=14250
14250
939000
936000
1020000
957750
5019375
610
300
325
2540
15000
10200
14400
11625
65475
put
(10*1500)=15000
(3.4*3000)=10200
(4.8*3000)=14400
(31*375)=11625
put
value
Stock price
as on 29th
jan,2015
2865
695
308
351
2480
Total
investment
P/L (put
exercised)
Net P/L
1180875
1121250
1107000
954000
946200
1034400
969375
No
924000
No
952500
1027500
913800
1038600
940875
5027775
As above at the end of month January profit are 5023875 but with risk hedging it 5027775 after
deduction of put cost 65475!
Page | 44
Now when put options does not exercise it automatically expires and became zero value, and
put option which exercise on strike price this stocks automatically sold out. Now on next month
X again buys the same number of stocks which square off.
Name of stock
Hero Moto corp
mkt. Price 1
feb,2015
2877
No of shares
Total investment
375
1078875
Stock price as on
26th feb,2015
2672
Profit or loss
1002000
Cipla
698
1500
1047000
670
1005000
SBI
309
3000
927000
270
810000
ONGC
352
3000
1056000
324
972000
2482
375
930750
2663
998625
TCS
TOTAL
5039625
4787625
Name of
stock
Hero
Moto
corp
Cipla
SBI
ONGC
TCS
TOTAL
investment Strike
price
Total put value

put
put
value
1078875
2860 (37*375)=13875
13875
1047000
927000
1056000
930750
5039625
680
290
335
2465
15150
9900
13800
11067
63792
(10.1*1500)=15150
(3.3*3000)=9900
(4.6*3000)=13800
(29.75*375)=11067
Stock price as
on 26th
feb,2015
2672
670
300
324
2663
Total
P/L (put
investment exercised)
Net P/L
1092750
1072500 1058625
1062150
936900
1069800
941817
1020000 1005000
870000 860100
1005000 991200
924375 913308
4828233
The above February month data shows loss at the end of month and with put strategy it is also
loss. But there is less loss then the unhedged portfolio.
When you cannot stop the loss it is better to make lesser it by paying some cost of hedging
when buying stock.
Page | 45
Now after two past months example below is the example of the last month.
Name of
stock
mkt. Price 1
june,2015
Hero Moto
corp
Cipla
SBI
ONGC
TCS
No of
shares
Total investment
2678
375
1004250
Stock price
as on 25th
june,2015
2550
645
278
324
2610
1500
3000
3000
375
967500
834000
972000
978750
590
245
288
2567
TOTAL
4756500
Profit or loss
956250
885000
735000
864000
962625
4402875

Name
of
stock
investment
Strike
price
Total put value
1004250
2660 (31.2*375)=11700
11700
Stock price
as on 25th
june,2015
2550
967500
630 (7.9*1500)=11850
11850
SBI
834000
265 (3.4*3000)=10200
ONGC
972000
310 (3.9*3000)=11700
TCS
978750
Hero
Moto
corp
Cipla
Total
put
2590 (31*375)=11625
4756500
put value
Total
investment
P/L (put
exercised)
Net P/L
1015950
997500
985800
590
979350
945000
933150
10200
245
844200
795000
784800
11700
288
983700
930000
918300
11625
2567
990375
971250
959625
57075
4581675
Below table shows the comparison of hedged and unhedged portfolio of last six month.
Month(2015)
January
February
March
April
May
June
Total
Investment
5019375
5039625
4938650
4878550
4987850
4756500
Put
Cost
64917
63792
58741
66274
61065
57075
Hedged
Portfolio
5028333
4828233
4525665
4958965
4658985
4581675
UnHedged Portfolio
5023875
4787625
4725800
5065485
4778965
4402875
Page | 46
Page | 47
Need and Usefulness of the Research:
Arya Fin-Trade Services (India) Pvt. Ltd.:

This study will be most useful for Arya Fin-Trade Services (India) Pvt. Ltd. because currently
companys most of the clients are High Networth Individuals (HNI). Companys top
management can use my research to know the behavior of the HNI clients, the investment
pattern, risk taking ability, and willingness to do stock options trading etc. The company can
either suggest this strategy to its clients or can make some changes and then suggest the same.
Investors:
This study will also be helpful for the investors to know the benefits of Stock options trading.
How to prevent the investment in stock, when stock price suddenly fall down. Investors also
insure their investment buy just paying minor premium and if strategy goes true then get
unlimited reward.
Students:
The students can find basic idea of the derivatives market and also various options strategies.
Options trading basic in Indian stock market. They can also find research data on HNI and
behavior of HNI clients.
Page | 48
Research Objectives:
To know the behavior of High Networth Investors.

To know investment pattern of HNI clients.
To know attitude of HNI investors towards investment in equity.
To obtain the details of risk tolerance level and preferred investment period of HNI.
To know the willingness to trade in equity with options trading
(Using risk management services).
To know awareness of options strategy.
Population:
All client of Arya Fin Group (Ahmedabad)
Sampling Frame:
List of HNI clients of Arya Fin Group
Sampling technique
Census Method (Non-Probability sampling)
Sample size:
84
Research design :
Descriptive
Sampling tool:
Online questionnaire
Limitation of the research:
The result of the analysis may change depending on the time period.
This analysis we have to consider only the short term decision making.
There is no flexible trading in future contract because it is a standardized contract.
This study focused on particular companies only.
Page | 49
Data analysis and interpretation:

Gender allocation:
Total
Gender
Male
Female
Total
52
10
62
Gender
Female
16%
Male
84%
Interpretation:
In the survey there is mostly male respondents and few number of female respondents. out of
total respondents 84% male and 16% female respondents. Most of the HNI clients are males.
Page | 50
Age allocation:
Age Group
Total
Below 25
12
25 to 35
17
35 to 45
22
45 to 60
10
Above 60
Total
62
Age Group
Below 25
25 to 35
35 to 45
45 to 60
Above 60
2%
16%
36%
19%
27%
Interpretation:
There is highest age group of 35 yr to 45 yr. above the age of 60 only 2% respondents. the
number of respondents below age of 25 is also average. The change age group of HNI people
mostly falls between 35 to 60 year. The opinion or answer may be vary by change into age
group.
Page | 51
Occupation of the respondents:
Occupation
Total
Professional
19
Manager/official/proprietor
14
Trade/craft
20
Retired
Homemaker
Other
Total
62
Other
Homemaker
Retired
Trade/craft
20
Manager/official/proprietor
14
Professional
19
0
10
15
20
25
Interpretation:
Most of the occupation of the respondents is trade and business. Out of the 62 respondents the
there is 20 trader and craft. Second largest occupation group is professionals. Which is 19 out of
62 respondents and most of them are C.A. and doctors. There only one retired client.
Page | 52
Income level of the respondents:

Yearly Income
Total
Below 10
10 to 25
13
25 to 50
29
50 to 1 core
Above 1 core
Total
62
Income Rs.
Below 10
10 to 25
25 to 50
10%
14%
50 to 1 core
Above 1 core
8%
21%
47%
Interpretation:
As the definition of the HNI clients I have targeted the most of the higher income group. The
most of respondents fall under the income bracket of 25 to 50 lakhs. Out of the total 62
respondents there are only 8 % respondents have income below 10 lakhs. There is only 10%
respondents fall under the group of above 1 crore.
Page | 53
Investment options for the HNI investors:

Saving Option
percentage
Equity
Bonds
FD
Mutual Fund
Commodity
Real Estate
Private Equity Investment
Investment in Gold and Silver
Other
Total
12
12
8
9
22
15
12
6
4
100
Other
Real Estate
Commodity
percentage
Mutual Fund
FD
Bonds
Equity
0
10
15
20
25
Interpretation:
There is many investment options available for HNI clients. I have selected some of the most
famous options and in that all clients invest according to their own preference and need. At
Arya Fin Trade Services (India) most of the clients invest in commodity market.
Page | 54
Time period investors prefer to invest?

Time period
Total
Short Term
15
Medium
24
Long Term
23
Time period
Short Term
Medium
Long Term
24%
37%
39%
Interpretation:
The change in the terms of the investment depends of the availability of the funds to the clients
and how they has the capacity to bear the risk. Here out of the total respondents averagely in
all categories same number of respondents came.
Page | 55
Factor investors consider before investing:

Total
factor you consider before investing

Safety of principal
18
Low risk
High return
12
Maturity period
13
Other
11
Total
62
Factores
18
12
13
11
Safety of principal
Low risk
High return
Maturity period
Other
Interpretation:
Out of the many factors of the investment decisions there is we can say the 18 clients out of 62
want their safety of deposit or principal amount. Other factors like their own personal need and
some personal reasons they invest into different options. There is 8 respondents who want low
risk while taking investment decisions.
Page | 56
What is purpose behind investment?

purpose
Total
Wealth Creation
16
Tax saving
11
Earn return
18
Future Expenditure
13
Other
Total
62
6%
26%
Purpose
21%
Wealth Creation
Tax saving
Earn return
Future Expenditure
18%
Other
29%
Interpretation:
The motive or purpose behind investment may vary from person to person on the basis of
personal need and willingness. In survey I have found that there averagely all clients has
purpose behind investment is earn return by long term investment and to create wealth to
meet future expenditures.
Page | 57
Have you invested/are you interested to invest in share trading?

Answers
Total
Yes
38
No
24
Total
62
Respondes
40
30
20
10
0
Respondes
Yes
No
Interpretation:
Out of the total respondents there is 38 respondents who has invested their wealth in equity
market or they want to invest in equity markets. There is also 24 people who has not invest till
date in equity market and do not want to invest in stock market.
Page | 58
If yes, then in which way you invest in Equity?

ways to invest in Equity
Total
By Mutual Fund
26
By Stock Broker
12
Total
38
Way to Invest
By Mutual Fund
By Stock Broker
32%
68%
Interpretation:
There is most famous two ways to invest into share market. And out of 62 respondents who
want to invest or who is already investing in equity market is 38. Out of 38 respondents the
number of clients generally depends on brokers decision and 26 people out of 38 prefer
mutual fund services that is 68% because of many reasons and own preferences in future
needs.
Page | 59
If No, then please select reason for it.

reason for it
Total
Lack of knowledge about share trading
12
Enjoy investing in other
Its benefit is not enough to drive you for investment
Other
No answers.
Total
24
Reason of No
No answers.
Other
Its benefit is not enough to drive you for
investment
0
10
12
14
Interpretation:
The reason behind not to invest in equity market may vary from person to persons. In survey
we can see that out of the 24 respondents who deny to invest in equity generally based on the
lack of knowledge about stock market and fear of loss of their wealth.
Page | 60
How many Percentage you invest in Equity from Your portfolio?
Percentage
Total
No Investment
Below 10%
10 To 20%
11
20 To 30%
14
30 To 40%
Above 40%
Total
38
Percentage
14
12
10
8
6
4
2
0
No
Below 10% 10 To 20% 20 To 30% 30 To 40% Above 40%
Investment
Interpretation:
The percentage investment in equity out of the total portfolio of HNI most of them invest
between 20 to 30% of their income in equity. Some of the clients who is 2 not include any
equity in their portfolio.
Page | 61
Which Equity trading do you prefer?
Trading Options
Total
Cash
29
Futures & Options
Total
38
Trading Options
Futures &
Options
24%
Cash
76%
Interpretation:
Out of the total investment by clients in equity there is 76% of the respondents prefer the cash
trading which is also include intraday trading. the people in category of Futures and options is
very less compare to cash market the reasons are many. Only 24% of total 38 investors in
equity invest in options and futures.
Page | 62
Which investment Horizon do you prefer?

investment Horizon
Total
Active risk management
27
Leave it to Market
35
Total
62
Investment Horizon
Leave it to Market
44%
56%
Interpretation:
Active risk managements by broker by various trading strategies like Algotrading and other
options today make the change into the risk levels in stock markets. Out of the total
respondents of the 62 that is investors and not investors give answers shows that 56% leave it
to market conditions.
Page | 63
What is your risk tolerance?
Risk tolerance Level
Total
Very conservative
11
Moderate conservative
10
Moderate
21
Moderately aggressive
11
Very aggressive
Total
62
Risk tolerance Level

25
20
15
10
5
0
Very conservative
Moderate
conservative
Moderate
Moderately
aggressive
Very aggressive
Interpretation:
The tolerance levels vary from person to person and in survey we can see that average number
of clients stay on the moderate level of risk. They also conservative and very aggressive but it
vary from individual person opinion. Out of the total 62 clients there is 21 clients who is based
on moderate levels of risk.
Page | 64
Have you heard about risk management by using Options strategies?

Awareness of options strategy:
Total
Yes
12
No
40
Total
62
Awareness of options strategy

40
12
Yes
No
Interpretation:
The above charts shows that there is very less awareness of the options trading among the
investors and the reasons many effects on it like uncertainty in return and complex calculations.
Out of all respondents there is only 12 clients who is totally aware about the options.
Page | 65
Would you prefer a broker with active risk management services using Options
strategy?
Preference of active risk management Broker
Total
Yes
45
No
17
Total
62
Preference of active risk management Broker
27%
Yes
No
73%
Interpretation:
The pie chart shows that there is 73% respondents are ready to accept the risk
management by options strategies and the broking firm should take this as new
opportunity. The 17 respondents still may be confuse towards their decisions.
Page | 66
FINDINGS
Options strategies are very good way to hedge portfolio by individuals for short term.
Options strategies are useful way to risk hedging by broker for long term with some
transaction cost.
Options strategies will not completely eliminate loss but it will minimize it.
Indian derivatives markets were more volatile during the study period.
I found that there is very less awareness among investors of Options markets and the
options various strategies.
The HNI mainly focus on the return with safety of their principal because they have very
huge surplus to invest.
India is emerging market for options trading and brokers should take this opportunity to
serve higher return.
Number of HNI persons are increasing as the world wealth report shows in India.if they
got the proper risk management by options strategies their confidence to invest in stock
market will increase.
The clients of Arya Group are focusing on commodity markets and Arya Group has the
very good option to divert them in equity trading by hedging their fund with options
strateges.
In my illusory portfolio for the long term investor I found that there is cost of PUT Buy
but if the market falls at any time they can hedge their portfolio.
Page | 67
SUGGESTIONS
For Arya Fin Trade Services(India) Pvt. Ltd:
Arya Group has strengths as Algo-Trading facility so they can use all options
strategies to protect portfolio of HNI clients.
They can create awareness among investors by showing the benefit of Options
Trading.
Protection of portfolio will influence more client to create relation with company.
Arya group should also focus on retain clients with HNI because in India currently
imerging trend of investments.
They can arrange Options awareness seminar for general Public.
For Investors:
Reasonable transaction cost of settlements on Options(PUT/BUY) can hedge your
sudden lost of precious wealth.
Hedging portfolio will minimize risk(market fall crash risk) in your portfolio so you
can be safe player.
If sudden crash in market happen then options strategies will work out and you will
realize the importance of this strategies.
Normally, derivatives have certain risk so the investors should not take immediate
investment decision and instead they should wait and watch the market
movement.
The Descriptive statement helps the investors invest their securities in the best
leading company.
Investors should have the adequate knowledge about technical and fundamental
analysis.
The investors should aware about the stock market conditions (e.g. inflation, war,
social and political issues, currency fluctuation, etc.)
The present study recommends that whenever the performances of sectors
declines in response to crisis announcement, the shareholders should take
immediate decision either to buy or sell the stocks with options.
Page | 68
Learning Experience:
To be a part of Arya Fin-Trade Services (India)Pvt.Ltd. was the best opportunity for me to have:
1. A practical exposure of corporate world.
2. Basic knowledge of online stock trading.
3. Understanding of Derivative market and specially options trading.
4. Understanding of operations in stock broking firm
Conclusion:
The Indian derivative market has achieved tremendous growth over the years, and also has a
long history of trading in various derivatives products. The derivatives market has seen ups and
downs. The new and innovative derivative products have emerged over the time to meet the
various needs of the different types of investors.
Though, the derivative market is burgeoning with its divergent products, yet there to, lack of
economics of scale, tax and legal bottlenecks, increased off-balance sheet exposure of Indian
banks, need for an independent regulator etc. Solution of these issues will definitely lead to
boost the investors confidence in the Indian derivative market and bring an overall
development in all the segments of this market.
Page | 69
Link for Online survey:

http://surveynuts.com/surveys/take?id=31211&c=237203617FDVV
Questionnaire
Please Specify your Gender
Male
Female
What is your age Group?
Below 25
25 to 35
35 to 45
45 to 60
Above 60
What is your Occupation?
Professional/Technical
Trade/Craft
Homemaker
Manager/Official/Proprietor
Retired
Other
Page | 70
What is Your Yearly Income level (Rs. in lac) (It will be confidential)
Below 10
25 to 50
Above 1 crore
10 to 25
50 to 1 crore
Where you Invest Your Savings?
Equity
Fixed Deposit
Commodity Market
Other
Bonds and Debentures

Mutual Fund
Real Estate
What time period you prefer to invest?
Short Term
Medium
Long Term
Which factor you consider before investing?
Safety of principal
Low risk
High return
Maturity period
Other
What is your purpose behind Investment?
Wealth Creation
Tax saving
Earn return
Future Expenditure
Other
Have you invested/are you interested to invest in share trading?
Yes
No
If yes, then in which way you invest in Equity?
By Mutual Fund
By Stock Broker
Page | 71
If No, then please select reason for it.

Its benefit is not enough to drive you for investment
Other
No answers.
How many Percentage You invest in Equity from Your portfolio?
No Investment
Below 10%
10 To 20%
20 To 30%
30 To 40%
Above 40%
Which Equity trading do you prefer?
Cash
Futures & Options
Which investment Horizon do you prefer?

Leave it to Market
What is your risk tolerance?
Very conservative
Moderate conservative
Moderate
Moderately aggressive
Very aggressive
Have you heard about risk management by using Options strategies?
Yes
No
Would you prefer a broker with active risk management services using Options strategy?
Yes
No
Page | 72
BIBLIOGRAPHY & WEBLIOGRAPHY

BOOKS:
RESEARCH METHODOLOGY
- C.R.KOTHARI
BUSINESS RESEARCH METHODS
- NAVAL BAJPAI (2ND EDITION)
World wealth report-2015
Top of the period report-2015(Kotak wealth Management)
WEBSITES:
http://www.nseindia.com/
http://www.bseindia.com/
http://economictimes.indiatimes.com/
http://www.moneycontrol.com/
http://www.rediff.com/
https://www.capgemini.com
http://www.investopedia.com/
https://in.finance.yahoo.com/
www.icicidirect.com
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Bhavesh SIP Report

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Bhavesh SIP Report

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Summer Project Report on

Research on Investment behaviour of High NetWorth Individuals and

Arya Fin Trade Services (India) Pvt. Ltd

M.S. PATEL INSTITUTE OF MANAGEMENT STUDIES

Introduction: HNI& Derivative Market

Investment options for HNI

History of stock market crash

Data Analysis & Interpretation

Charts and Tables

Charts and Tables

2. SWOT Analysis of Arya Group

3. Growth in Options trading

5. Example of HNI client

6. Data Analysis & Interpretation

INDIAN STOCK MARKET

1.2 National Stock Exchange

1.3 Bombay Stock Exchange

2. The Securities Exchange Board of India

National Stock Exchange (NSE)

Office Premises 6000 Fully Furnished Office Premises located at

Approx. 30, Computers which offers multiple

SWOT ANALYSIS OF COMPANY:

COMPETITORS HAVE SAME

Introduction to High Net WorthIndividualIn INDIA:

Super-rich: India records second highest growth in HNI population

Who is a High Net Worth Individual (HNI)?

High-net-worth Investors & Listed Options

Growth in High-net-worth Market

Possible Benefits of Using Listed Options

Reduces price volatility due to multiple

Greater liquidity due to deeper demand

Better Price discovery

Minimized impact cost

Add flexibility to your investment

What is Derivatives Contracts (Futures and Options)?

Determinants of option value:

Level of Interest Rates

Portfolio Concentrated in One Stock

Stocks, Listed Options and Tax Consequences:

Options Volume (Rs. In crore)

(Options Value calculated as (Premium + Strike price) x Quantity)

Options strategies for risk hedging Of HNI

Hedge the stock with put options,

Diversifying with stock index options

Covered call writing for income.

Strategy: 1-Protective Puts Purchased Against Stock:

Stock Bought + Premium PaidRs. 4000 + Rs. 143.80 =Rs. 4,14,380

The payoff schedule

Strategy: 2- Writing Covered Call Options on Stock

In above our example we have:

The payoff schedule

Strategy: 3- Protective Collar on Stock

Current Market Price (Rs.)

The Payoff schedule

Payoff from stock

Strategy: 4- Long Index Call Options for Equity Market Exposure

Strike Price (Rs.)

Break Even Point (Rs.) (Strike Price +

The payoff schedule

Net Payoff from Call Option

Strategy: 5- Long Index Put Options for Portfolio Protection

Current Nifty index

Strike Price (Rs.)