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A

SUMMER INTERNSHIP PROGRAMME REPORT


ON
“A STUDY ON INVESTOR’S PERCEPTION FOR INVESTING IN
OPTION TRADING”
AT

Submitted to
L.J.INSTITUTE OF MANAGEMENT STUDIES

UNDER THE GUIDANCE OF


Faculty Guide:- Company Guide:-
CA Kiran khatri Mr. Jatin Patel
(Assistant Professor) (Regional Director)
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD OF THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION (MBA)
offered by
Gujarat Technological University
Ahmedabad
Prepared by:-

Varun Raval
177290592121
1
MBA SEMESTER – III
AUGUST 2017
[Batch: 2017-19]

Student’s Declaration

I hereby declare that the Summer Internship Project Report titled “ A STUDY ON
INVESTOR’S PERCEPTION FOR INVESTING IN OPITON TRADING ” is a
result of my own work and my indebtedness to other work publications, references, if
any, have been duly acknowledged. If I am found guilty of copying from any other
report or published information and showing as my original work, or extending
plagiarism limit, I understand that I shall be liable and punishable by the university,
which may include ‘Fail’ in examination or any other punishment that university may
decide.

NAME ENROLLMENT NO. SIGNATURE

Varun Raval 177290592121

Place: Ahmedabad

Date: ……..

2
Institute’s Certificate

This is to Certify that this Summer Internship Project Report Titled “A STUDY ON

INVESTOR’S PERCEPTION FOR INVESTING IN OPTION TRADING” is the


bonafide work of Mr. Varun Raval Enrollment No.- 177290592121, who has carried out the research
under my supervision. I also certify further, that to the best of my knowledge the work reported
herein does not form part of any other project report or dissertation on the basis of which a degree or

award was conferred on an earlier occasion on this or any other candidate. I have also checked the

plagiarism extent of this report which is ……… % and it is below the prescribed limit of 30%.
The separate plagiarism report in the form of html /pdf file is enclosed with this.
Rating of Project Report [A/B/C/D/E]: ______
(A=Excellent; B=Good; C=Average; D=Poor; E=Worst)
(By Faculty Guide)

Signature:-

CA Kiran khatri
(Assistant Professor)
Faculty Guide

Signature:-

Dr. Siddharth Bist


Director

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Company Certificate

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PREFACE

The project report pertains to the making project of a “Master of Business Administration” curriculum
of semester – III. The objective of preparing project report is to know about the Derivative market.

Professors give theoretical knowledge of various subjects in the college but practically exposed of such
subjects when i get training in the organization. It is only the training throw which come to know that
what a corporate world is and how it works.

I have learnt within a few pages but still tried my best to cover as much as possible about “A STUDY
ON INVESTOR’S PERCEPTION FOR INVESTING IN OPTION TRADING” in this report.

I have tried to put in best of my effort in preparing this report on “Patel Wealth Advisor Pvt Ltd”
and Errors and mistakes are part of human life and some errors might have crept in this report.

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Acknowledgement

It is my great pleasure to present this report before you.

First of all are thankful to Gujarat Technological University who introduced this subject as a part of
syllabus.

Secondly, I am very thankful to mentor CA Kiran khatri for their help and guidance, inspiration for
the preparation of this project.

Third thankful to all person of Patel Wealth Advisor Pvt Ltd. And a special thanks go to Regional
Director Mr. Jatin Patel & branch manager Mr Piyush Parmar. The supervision and support that he
gave truly helped the progression and smoothness of the internship programme. The co-operation is
highly appreciated.

Project studied during the programme were highly interesting and educative. The enthusiasm and
interest shown by the office Owner and sales manager of the company during my internship helped me
in understanding appropriately the functioning of this company.

This internship programme has made me realize the value of working together as a team and gave me a
new experience in working in a social environment, which challenges my mental and physical faculties
every minute. The 45 days long internship programme provided to me a lot of opportunity to work in
different settings and exposed me to interaction with different sets of people. The working
environment in the company was highly motivating and inspiring.

I would also like to thank all the faculty members of L.J. Institute of Management Studies for their
critical advice and guidance without which this project would not have been possible.

Last but not the least I place a deep sense of gratitude to my family members & my friends who have
been constant source of inspiration, guidance during the preparation of this project work.

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Executive Summary

The summer internship Project at “Patel Wealth Advisor Pvt Ltd” has given an exposure into the
investment scenario in India. The project while working at “Patel Wealth Advisor Pvt Ltd” includes
advisory services. This involves catering to the queries of the investors about the concept of stock
market, the various options that an investor can invest his money into, funds management of investors.

In this a study conduct research on investor’s perception for investing in Option Trading during my
summer training. In study used questionnaire for data collection. The analysis and interpretation of
data of overall majority investor’s not many aware towards Derivative market in this study. So,
recommendation is that to SEBI should take more actions to create awareness level in investors about
the derivative market.

Analysing the investor’s behaviour includes understanding the concerns a person has towards Stock
Market, his stages in life and wealth cycle, the effect of the investments made by the peer groups,
effect of the profession he/she is in, education qualification, importance of tax benefits, the most
preferred saving tool etc. and this all is analysed with the help of a schedule prepared.

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Table of Content/ Index

Chapter No. Particular Page no.

1 Introduction 1

A) About Company
I. Profile Of The Company 10

II. Introduction Of Patel Wealth Advisors 12

III. Product And Services, brokerage Of Patel Wealth Advisors 14


IV. Organizational Structure of Patel Wealth Advisors 16
V. Main Competitors 17

B) About Indian Stock Market


I. Introduction To Industry 18
II. Introduction To Derivative 22
III. Details About Option Trading in Share Market 24

2 Literature Review 28

3 About The Study


I. Problem Statement 31

II. Objective Of Study 31

III. Scope Of Study 31

IV. Limitations of the Study 31

4 Research Methodology
I. Research Design 33
II. Data Collection Method 33
III. Tools Of Presentation & Analysis 33
IV. Sampling Plan 33

5 Data Analysis & Interpretation 35

6 Contribution & Learning


I. Finding 53

II. Conclusion 54

III. Recommendations 55

IV. Learning From the Project 56

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V. Bibliography 57

VI. Questionnaire 58

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Chapter: 1

INTRODUCTION

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A) ABOUT THE COMPANY

I. PROFILE OF THE COMPANY

Name Of The Company: “Patel Wealth Advisor Pvt. Ltd.”

Date of Incorporation: 25 June 2015

Headquarter: "Oxygen", M/2/3, Housing Board, and Opp.

Pradhyuman-, Royal Heights, Near Neel Da Dhaba,

Kalawad Road., Rajkot, Gujarat, India – 360005.

Branch : 1) Kamdhenu Complex, Office no. B-46, Opp.

Sahajanand College, Panjara Pol Cross Road, Ambawadi,,

Ahmedabad, Gujarat:- 380015.

Branch : 2) New cloth market, Office no. 173, Opp.

Raipur Gate, New cloth market Cross Road,

Ahmedabad, Gujarat:- 380002.

Nature of Business: Service Provider

Services: Depository Services, Online Services and Technical Research.

SEBI Reg. No. for NSE/BSE, CM/F&O/Currency Derivatives Segments: INZ000018432

BSE Member ID: 6626

NSE Member ID: 90074

ISO 9001: 2008 CERTIFIED COMPANY

Website: www.patelwealth.com

Slogan: Because advice matters


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II. INTRODUCTION OF PATEL WEALTH ADVISOR

Patel Wealth Advisors is entrepreneurs from Western Gujarat engaged in offering a wide range of
financial services with a primary focus on qualitative financial advice and helping small and medium
businesses to access capital at economical costs. The excellent leadership under of industry stalwarts
named Minish Patel, Denish Patel and Kaushal Patel, They have expanded his offerings from stocks
and derivatives, commodity derivatives and depository services to research and advisory services,
distribution of mutual funds, IPO and many more.

His journey started more than two decades (Since 1995) ago as franchisees affiliated to reputed
Broking house, and in the process appointed his own Sub broker/Authorized Persons in Gujarat and
rest of India. In course of time they added to his Experience and Excellence thereby becoming a full
service financial firm.

They understand that delivery of financial products and services to a global clientele demands an
excellent infrastructure with high transmission capacity and backup facility and hence They have a
robust infrastructure in an office space of more than 10,000 sq ft.

MANAGEMENT TEAM:

Although they started off in a small way, they are now well on the way to achieving the brand
recognition at national level in financial services. As his history speaks for itself, there has been no
turning back for us. What was a small acorn planted way back two decades ago by his pioneer, Mr.
Minish Patel is a national name in financial services. The journey has been a learning experience for
the group and the lessons picked up by us shall be utilized to create a responsible, sustainable and
ebullient financial services group that would to cater to customers across the board.

Mr. MINISH PATEL

SEBI approved Research Analyst - Registration NumberINH000002871. A pioneer and veteran House
of Patels, A pioneer with passion for technology. He is valued for his understanding of the economy
and the stock-market. Research – based & personalized advisory services are Patel Wealth’s forte, and
he has undoubtedly been the brain behind it. When it comes to analysing the market, he is a true

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virtuoso. His hands – on experience and fundamental knowledge of the market can predict the market
trend early. His experience spans 20 years in Corporate Advisory and Portfolio

Management Service:-

Mr. DENISH PATEL

With his past experience, in depth knowledge and strong analytical skill, he efficiently ensures
flawless operations of the group. Being in the securities market business for more than 10 years, he has
seen all the phases of Stock market and handled all the matters efficiently. He looks after the policy,
vision and major part of the operational activities of the group.

Mr. KAUSHAL PATEL

He played vital role in the development of group’s state- of-art web portal, IT & internet based trading
platform. His key roles & responsibilities include business development, risk management,
technological up-gradation &development and administration of day to day activities at Group. He
actively participates in business promotions, operations and compliance functions of Group. His key
strength lies in meticulous and strategic planning and implementation of radical concepts for the
overall business development. He has lead many successful initiatives, redefined people policies and
delivered substantial growth for Group.

Vision:-

” To operate in all spectra of financial services from broking to banking at economical cost through
state-of-art delivery mechanism designed to cater to global customers.”

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Mission:-

"Financial advice at customer door step at affordable cost and minimal effort to customers".

III. PRODUCT AND SERVICES, BROKERAGE OF PATEL WEALTH


ADVISOR:-

Equity & Derivatives

Investment in shares and its derivatives is most common and largely preferred to earn inflation beating
returns. This involves buying, holding and trading of shares whereby income is generated by the
increase in the price of shares.

Commodities & Currency

They offer excellent consulting services for trading commodities and currency. They believe that
diversifying the financial portfolio is a safeguard against loss of portfolio value due to fluctuation in
asset prices.

Service

They offer full opportunity to grow with team and thus, becoming a part of the success. They conduct
seminars and training workshops to offer the right solutions to clients or customers. They organize
meetings for customers with a panel of dedicated advisors who assist with the research work needed to
make decisions in finance field.

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They Offerings

 Stocks and Derivatives : BSE , NSE


 Commodity Derivative : MCX
 Depository Service : NSDL
 Research & Advisory Service : On individual Stock
 Internet & Mobile Trading
 Index (Nifty for both long & short terms)
 Mutual Fund distributions:
 Currency Derivatives : NSE, BSE
 IPO Distributions : As agents of reputed Syndicate Members
 Portfolio Management Services

Brokerage Charges

Brokerage is what company charges from its clients in lieu of its services

 For Delivery Trades: It ranges between 0.50 paisa ie.0.50% to 0.30 paisa i.e. 0.30% on Trading
volumes.

 For Intraday or Future Trades in Stock & Currency: Normally it is 1/10th of delivery brokerage
i.e. ranges between 0.05 paisa i.e. 0.05% to 0.03 paisa i.e. 0.03% on Trading volumes..

 Brokerage on Options: Brokerage on Options is charged per on per lot (Normally between Rs.
60 to 100 per lot.

 Brokerage in Commodities : Brokerage in Commodities is charged similarly as charged in


Intraday / Future trading Ranges between 0.04% to 0.02% (slightly lower than Equities / F&O )

The Brokerage remains negotiable depending upon the volumes of Clients & can be negotiated for
clients giving good & regular trading volumes.

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IV. ORGANIZATIONAL STRUCTURE OF PATEL WEALTH
ADVISORS

Regional Officer

Branch Manager

RMS (Risk IT HR Back Office


management
services)

B2B B2C

Relationship
Relationship Business Unit Executive
Manager Development Manager
Manager

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V . Main Competitors

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B) ABOUT CAPITAL MARKET

I. Introduction to Industry:

 CAPITAL MARKET IN INDIA

Primary Market

• Primary market is generally referred to the market of new issues or market for mobilization of
resources by the companies and government undertakings, for new projects as also for
expansion, modernization, addition and diversification and up gradation.
• Primary market is also referred to as New Issue Market.
• Primary market operations include new issues of shares by new and existing companies,
further and right issues to existing shareholders, public offers, and issue of debt instruments
such as debentures, bonds, etc.
• The primary market is regulated by the Securities and Exchange Board of India (SEBI a
government regulated authority).
• Primary market provides opportunity to issuers of securities.

IPO (Initial Public Offer)

 IPO refers to Initial Public Offer, it may be also called Primary Market, where company issues
Equity & raise Capital.

 Now days most Company adapts Book building route for raising capital through IPO, where
online bidding tooks place through exchange for applying in IPO.

 For applying for shares in an IPO either investor have to fill physical form & submit or may
apply through online option given by some Members to its client who then on client behalf fill
& apply for the IPO.

IPO allotment / refund is processed within 15 days & the shares are listed & traded in Secondary
Market / Stock Exchange in maximum 21 days of IPO closing.

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SECONDARY MARKET
Secondary market operations involve buying and selling of securities on the stock exchange through its
members. The companies hitting the primary market are mandatory to list their shares on one or more
stock exchanges in India. Listing of scrip’s provides liquidity and offers an opportunity to the investors
to buy or sell the scrip’s.

 STOCK MARKETS IN INDIA:

A common platform where buyers and sellers transact in stocks and shares. The Bombay Stock
Exchange (BSE) and the National Stock Exchange (NSE) are the two leading Exchanges.
It is an association of brokers for the purpose of self regulation and protecting an interest of its
members.
A stock exchange operating in the 19th century were those of Bombay set up in 1875 and
Ahmedabad set up in 1894.

The stock exchange is a form of exchange which provides services for stock brokers and traders
to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue of
securities and other financial instruments, and capital events including the payment of income
and dividends.

The initial public offering of stocks and bonds to investors is by definition done in the primary
market and subsequent trading is done in the secondary market. The stock exchange is often the
most important component of a stock market. The supply and demand in stock markets are
driven by various factors that, as in all free markets, affect the price of stocks.

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be
subsequently traded on the exchange.

Increasingly, stock exchanges are part of a global market for securities.

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BSE

Bombay Stock Exchange, referred to as the BSE, is a stock exchange located on Dalal
Street, Mumbai, Maharashtra, India. It is the world’s 10th largest stock exchange with an overall
market capitalization of more than $2.3 trillion on as of April 2018.

PREMCAND ROYCHAND is the founder of BSE.

There are about 5000 Companies are listed in BSE or Bombay Stock Exchange.

NSE

The National Stock Exchange (NSE) is stock exchange located in Mumbai.

(Hindi: राष्ट्रीयशे यरबाजार Rashtriya Śhare Bāzaār)

It is the 11th largest stock exchange in the world by Market Capitalization and largest in India by
daily turnover and number of trades, for both equities and derivative trading.

More than 1600 Companies are listed in NSE

NSE has a market capitalization of more than US$2.27 trillion.

It was in year 1992 that the National stock Exchange was for the first time incorporated in India. The
national Stock exchange was incorporated as a tax paying company and had got the recognition of a
stock exchange only in year 1993 the recognition was given under the provisions of the Securities
Contracts (Regulation) Act, 1956.

SEBI

 Securities exchange board of India (SEBI) was established in the year 1988 as a non-
statutory Body for regulating securities market.
 It becomes an autonomous body in 1992 and more powers were given through an audience.
Since then it regulates the market through its independent powers.
 It is an apex body for overall development and regulation of the securities market. it was set
up on April 12,1988

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 In 1988 the Securities and Exchange Board of India (SEBI) was established by the
Government of India through an executive resolution, and was subsequently upgraded as a
fully a statutory Board in the year 1992 with the passing of the Securities and Exchange
Board of India Act (SEBI Act) on 30th January 1992.

The basic objectives of the SEBI were identified as

 To protect the interests of investors in securities


 To promote the development of Securities Market;
 To regulate the securities market
 To makes rules and regulation of securities markets.
 To Promote efficient services by brokers, merchant bankers, so that they competitive and
professional.

Power of SEBI

 Power to call periodical returns form recognized stock exchange.


 Power to call information or explanation from recognized stock exchanges or members.
 Power to grant approval by-laws of recognized stock exchanges.
 Power to control and regulate stock exchanges
 Power to grant registration to market intermediaries.

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II. INTRODUCTION TO DERIVATIVES

 A derivative is a financial instrument whose value is derived from the value of another asset,
which is known as the underlying.
 Derivative is a contract or a product whose value is derived from value of some other asset
known as underlying. Derivatives are based on wide range of underlying assets.
 A Derivative is not a product. It is a contract that derives its value from changes in the price of
the underlying. When the price of the underlying changes, the value of the derivative also
changes.
 Example :
The value of a gold futures contract is derived from the value of the underlying asset i.e. Gold.

 DERIVATIVE PRODUCTS

Derivative contracts have several variants. The most common variants are futures, options.

Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain
time in the future at a certain price. The Futures contracts are special types of forward contracts in the
sense that the former are standardized exchange-traded contracts.

Options: Options are of two types - calls and puts. Calls give the buyer the right but not the
obligation to buy a given quantity of the underlying asset, at a given price on or before a given future
date. Puts give the buyer the right, but not the obligation to sell a given quantity of the underlying asset
at a given price on or before a given date.

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 Market Participants

There are three types of participants in the derivatives market – 1.Hedgers, 2.Traders (also called
speculators) and 3.Arbitrageurs. An individual may play different roles in different market
circumstances.

Hedgers
They face risk associated with the prices of underlying assets and use derivatives to reduce their risk.
Corporations, investing institutions and banks all use derivative products to hedge or reduce their
exposures to market variables such as interest rates, share values, bond prices, currency exchange rates
and commodity prices.

Speculators
They try to predict the future movements in prices of underlying assets and based on the view, take
positions in derivative contracts. The Derivatives are preferred over underlying asset for speculation
purpose, as they offer leverage, are less expensive (cost of transaction is generally lower than that of
the underlying) and are faster to execute in size (high volumes market).

Arbitrageurs
The Arbitrage is a deal that produces profit by exploiting a price difference in a product in two
different markets. Arbitrage originates when a trader purchases an asset cheaply in one location and
simultaneously arranges to sell it at a higher price in another location. Some opportunities are unlikely
to persist for very long, since arbitrageurs would rush in to these transactions, thus closing the price
gap at different locations.

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III. Details About Option Trading in Share Market

Meaning of Option

An Option is a contract in which the seller of the contract grants the buyer, the right to purchase from
the seller a designated instrument or an asset at a specific price which is agreed upon at the time of
entering into the contract. It is important to note that the option buyer has the right but not an
obligation to buy or sell. The buyer decides to exercise his right the seller of the option has an
obligation to deliver or take delivery of the underlying asset at the price agreed upon. Seller of the
option is also called the writer of the option.

HISTORY

The options market makes up for a significant part of the derivative market, particularly in India.

Here is a quick background on the same –

o Custom options were available as Over the Counter (OTC) since the 1920’s. These options were
mainly on commodities

o Options on equities began trading on the Chicago Board Options Exchange (CBOE) in 1972

o Options on currencies and bonds began in late 1970s. These were again OTC trades

o Exchange-traded options on currencies began on Philadelphia Stock Exchange in 1982

 Here is a quick recap of the history of the Indian derivative markets –

o June 12th 2000 – Index futures were launched

o June 4th 2001 –Index options were launched

o July 2nd 2001 – Stock options were launched

o November 9th 2001 – Single stock futures were launched.

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 Generic terms used in options

Call Option

An option contract is called a ‘call option’, if the writer gives the buyer of the option the right to
purchase from him the underlying asset.

Put Option

An option contract is said to be a ‘put option,’ if the writer gives the buyer of the option the right to
sell the underlying asset.

Characteristics of Option:-

The following are the main characteristics of options.

1. Option holders do not receive any dividend or interest.


2. Option holders receive only capital gain.
3. Option holders can enjoy a tax advantages.
4. Option creates the possibility of gaining a windfall profit.
5. Option holders can enjoy a much wider risk-return combinations.
6. Option can reduce the total portfolio transaction costs.

Do’s and Don’ts in Option Trading


As option trading is very beneficial it has some risks also. If your strategy does not meet with
expectations you can lose all your investment. If you are not able to cope with the market you can lose
everything in not time. Due to this reason it is very much necessary to be well aware of Do’s and
don’ts do in option trading.

Do’s
 Read, as more as you can, about option trading from books or websites.
 You must diversify you option portfolio.
 You must hedge your portfolio so can save your money in the time of recession.

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 You must be a technical analyzer and if not you must learn about technical analysis. This helps
you in for seeing the market position.
 You must be up to date and follow all the news about stock changes in the market.
 Time is the most important factor. You know when to take step so be consistent in your work
but don’t be too late, wait for the time to get things to reach their lowest price and buy them.
 Before staring any business you must have a plan. So pre-planning helps you.

Don’ts
 Trading according to the newsletter. You must be a creative thinker or follow your broker’s
advice.
 Over trading, this causes the commissions to consume all your money and as a result you are
left with nothing.
 Lack of knowledge and still trading in something. It is a matter of fact that if you do not know
what to do, you will face disaster only.
 Be greedy and risk more than a specified value in your portfolio. This value is mostly 10%.

These are the do’s and don’ts that must be followed in order to be a successful trader. Finding
new ways is no wrong but if you have something to know, you must know. This information is
just for your benefit.

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Chapter: 2
LITERATURE REVIEW

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Varadharajan.P and Vikkraman.P (2011) in their study has stated that an investor decides on an
investment after getting opinion from family, friends and colleagues, Broker’s recommendation and
also other professional advice. The investor also takes into consideration the market situations like
financial results of the companies, bonus issue, price earnings ratio and the reputation of the company.

Pasha (2013) studied retail investors’ perception on financial derivatives in India. It is found that 55
percent of the small investors (respondents) are of the opinion that derivatives are new, complex, and
high-tech products. 38 percent of the respondents, who are familiar with derivatives, said derivatives
are not new, complex, and high – tech products. And the remaining 7 percent of the investors could not
answer the question. This shows that a large number of investors are not familiar with derivatives. The
study also found that 62 percent of the small investors are of the opinion that derivatives are purely
speculative and highly leveraged instruments.

Bhatt. N Dr. Babraju conducted study on ―Perception of Investor towards Derivatives as On


Investment Avenue in the year 2014. The derivatives are risk management tool that support in
effective management of risk by various stockholders. Derivatives provide a chance to transfer risk
from the one who wish to avoid it: to one who wish to agree it. India‘s experience with the
introduction of the equity derivatives market has been really encouraging and successful. The
derivatives turnover on the NSE has surpassed the equity market turnover.

Tripathi (2014) studied investor’s perception towards derivative trading. The study shows Indian
investors mainly invest their money in real estates and insurance as they are the options offering great
returns with minimum risk associated with it. It is found that more than 75 percent of investors are
aware about derivatives, out of which 74 percent have invested in derivatives. Most of the users often
invest 10 percent – 20 percent of their total investment in derivatives followed by users who invest 20
percent – 35 percent of their total investment in derivatives. Out of derivative users 76 percent
investors have invested in options which offer benefits like risk diversification and promises their
investors great profits with minimum investment. The study concluded that derivative market is
dominated by male investor with 72 percent whereas female investors are only 28 percent. He has
found in his research that education, profession and gender do not affect the derivative investing
behaviour. However income is found to have a significant role on derivatives. He also added that
investors are using these securities for different purposes namely risk management, profit
enhancement, speculation and arbitrage.

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Dr. Y. Nagaraju (2014) studied investors' perception towards derivative instruments and markets. The
study shows that even though most people look at derivatives with fear, they should understand the
fact that derivatives help in shifting the risk to the other party. There are many myths that surround
derivative market. All these can be done away with proper system in place. Derivative instruments and
derivative markets are not so the popular among individual investors. Only educated investors with the
help of friends and brokers are investing in this derivative market. The reasons for not investing in this
market are lack of knowledge and very complex nature of instruments. Some people have a wrong
perception about derivatives. The study suggests that measures should be taken to make sure that the
investors get a right picture of the instruments and their risk factors.

Abdulla Yameen (2001) delivered massage, investors will need to be alert to any new development in
capital market and take advantage of the Investor Education and Awareness Campaign program which
to be undertaken by the Capital Market Section to acquaint of the risks and rewards of investing on the
Capital market. Speech was also focused on to create a new breed of financial intermediaries, which
will deal on the market for their clients. These intermediaries have to be professionals with quite
advanced knowledge on stock exchange operations, techniques, law and companies valuation.
Investors depend to a large extent on their professional advice when investing on the market.
Furthermore, these intermediaries must be men of integrity and honesty as they would deal with
clients‟ money Confidence of investors in these professionals is a key to the success of the capital
market.

P. M. Deleep Kumar and G. Raju (2001) showed that the capital market is becoming more and
more risky and complex in nature so that ordinary investors are unable to keep track of its movement
and direction. The study revealed that the Indian market is probably more volatile than developed
country markets, which is probably why a much higher proportion of savings in developed countries
go into equities. More than half of individual shareowners in India belonged to just five cities. The
distribution of share ownership by States and Union Territories show that just five States accounted for
74.7 per cent of the country’s share ownership population and 71.7 per cent of the aggregate value of
the shareholdings of individuals in India. Among the five States Maharashtra tops the list with Gujarat
as a distant second followed by West Bengal, Delhi and Tamil Nadu. In the midpoint of the study also
argued that introduction of derivatives is the first step to hedge the risk of unfavourable movement in
the market. This will also lower transaction cost and provides depth and liquidity to the market.

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Devi. S and Renuga Bharathi, (2008) found that the following factors namely advertisement, risk
factor, investor grievances, investment pattern, change in life style, stock broker service, investment
knowledge, investment information, personal savings, size of investment, economic condition and
decreasing level of sensex influences the perception of investors on investment.

Arvid O.I. Hoffmann, Thomas Post and Joost M.E. Pennings (2012) in their research found out
that investor perception during 2008-09 financial crisis fluctuate significantly with risk tolerance and
risk perceptions being less volatile than return expectations. During the worst months of the crisis
investors’ return expectations and risk tolerance decrease while risk perception increase. Towards the
end of the crisis, investor perceptions recover. They also documented substantial swings in trading and
risk-taking behaviour that are driven by changes in investors’ perceptions. Overall individual investors
continued to trade actively and did not de-risk their investment portfolios during the crisis.

30
CHAPTER: 3
ABOUT THE STUDY

31
I. PROBLEM STATEMENT:
Study to discover & understand the concept of investor’s perception of investments in Option
trading.

II. OBJECTIVES OF THE STUDY:

 To identify option stocks in which majority of investor invest in option trading in share market and
to study their strategy.
 To analyze the perception of investors towards investments in Option trading in share market.

III. Scope of the Study:

The study is INVESTOR’S PERCEPTION FOR INVESTING IN OPTION TRADING towards


Research & Survey in Ahmedabad only. The study can’t be said as totally perfect. Any alteration
may come.

IV. Limitations of the Study:

 Limited resources were available to collect the information about Option Trading.
 During this limited period of study, the study may not be a detailed.
 The primary data has been collected through a structured questionnaire to a sample of 100
investors, which may not reflect the opinion of the entire population.

32
CHAPTER: 4
RESEARCH METHODOLOGY

33
Research Design

Research design constitutes the blueprint for collection, measurement and analysis of data was a
Descriptive Research . Descriptive research involves collecting numerical through self-reported
collected through questionnaire. For present study, the research was descriptive and conclusion
oriented.

Data collection Method

1) Primary Data
 Primary data collected from investors who invest in Option trading market.
 I have used survey method for collection of data.
 In survey I use Questionnaire for collect data.

2) Secondary Data
 Secondary Data collected from internet, Magazine and other research project.

Tools of presentation & Analysis

 Percentage, Bar graphs & pie charts: these tools were used for analysis of data.
 Descriptive analysis.

Sampling Plan

Sampling Method: Convenience method of sampling is used to collect the data from the
respondents, Researchers or field workers have the freedom to choose whomever they find,
thus the name Non Probabilistic – Convenience sampling

Sample Size: The sample size selected for the Research is 100 in the area of Ahmedabad.

Sampling Unit: For purpose the sampling unit is investor who invests in Option trading in
share market.

Sample Frame: Existing Customer of Patel wealth in Ahmedabad.


34
CHAPTER- 5
DATA ANALYSIS & INTERPRETATION

35
Age (Year):

TABLE NO. 1 AGE

Age 15 to 22 23 to 30 31 to 37 Above 38
Percentage 26% 32% 21% 21%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, majority age of 15 - 22 are 26%, 32% are age of between 23 – 30 and 21% are
age of between 31- 37, 21% are Above 38 years investors who invest in Option trading.

36
GENDER

TABLE NO. 2 Gender

Gender Percentage
Male 64%
Female 36%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, When MALE is 64% and FEMALE is 35% investors who invest in Option
trading.

37
Education:

TABLE NO. 3 EDUCATION


Education 12th Pass Graduate Post Professional Other
Graduation Degree
holder

Percentage 15% 40% 28% 9% 8%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 15% have done 12th pass, 40% have done Graduate, 28% have done Post
Graduation, 9% have done Professional Degree Holder, while 8% investors who invest in Option
trading market have done in others degree.

38
Occupation:

TABEL NO. 4 Occupation


Field Percentage
Student 21%
Government Office 9%
Business 39%
Private Job 13%
Retired 5%
Others 13%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 21% are student , 9% Government officer, 39% Private job, 13% Business, 5%
retired , 13% investors who invest in Option trading market have done in other field.

39
Family Structure

TABEL NO. 5 Family Structure


Type Percentage
Joint 48%
Nuclear 53%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 48% is a Joint family & 53% is a nuclear family.

40
Annual Income:

TABEL NO. 6 ANNUAL INCOME


Annual Up to 200000 300000– 400000 – More than
Income 400000 500000 500000
Percentage 20% 23% 28% 29%

Interpretation:-
From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 20% are earning Up to Rs. 2,00,000 while 23% are earning between
Rs.3,00,000 – 4,00,000 while 28% are earning between Rs.4,00,000- 5,00,000 and 29% investors
who invest in Option trading market are earning More than Rs.5,00,000.

41
Q1. Are you trading in Derivative Market?

TABEL NO. 7
Response Percentage
Yes 66%
No 34%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 66% are in YES and 34% are in no investors who invest in Option Trading
market.

42
Q- 2. If No is the reply in the Q-1 Question, Reasons for not investing in Derivative
Market ?
TABEL NO. 8
Types Percentage
Lack of Knowledge 30.8%
Lack of awareness 38.5%
Very risky 26.9%
Huge amount of investment 13.5%
Other 30.8%

Interpretation:-
From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 30.8% are in lack of knowledge, 38.5% are in lack of Awareness, 26.9% are in
very risky, 13.5% are in Huge amount of investment, 30.8% are in other reasons for investing in
Derivative Market.

43
Q-3 What percentage of income do you save ?

TABEL NO.9
Response Less than 5% 5% - 10% 10% - 15% More than
15%
Percentage 21.5% 38.7% 25.8% 14%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
saving income, 21.5% are available income less than 5%, 38.7 % are available income between 5% -
10%, 25.8% are available in 10% - 15%, while 14% are available income more than 15%.

44
Q- 4 How much percentage of your income you trade in Option Trading ?

TABEL NO.10
Trade in Less than 5% 5% - 10% 10% - 15% More than
Option 15%
Percentage 51.6% 31.2% 12.9% 4.3%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 51.6% are available income less than 5%, 31.2 % are available income
between 5% - 10%, 12.9% are available in 10% - 15%, while 4.3% are investors who invest in Option
trading market are available income more than 15%.

45
Q- 5. How long have you been investing with Option Trading ?

TABEL NO.11
Invest in 1 year 1 – 5 years 5 – 10 years More than 10
Derivative years
Percentage 40% 38.9% 14.4% 6.7%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 40% are trading for 1 year, 38.9% are trading in 1 – 5 year, 14.4% are trading
in 5 – 10 year and while 6.7% investors who invest in Option trading market are trading for more than
10 years.

46
Q-6 . You participate in derivative market as?

TABEL NO.12
Participate Hedger Speculator Arbitrager Other
Percentage 32% 18% 32.6% 36%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 32% are hedge, 18% are speculator, 32.6% are arbitrager and while only 36%
investors who invest in Option trading market are purpose to other.

47
Q-7. What is the annual rate of return expected by you from Option trading?

TABEL NO.13
Annual Rate Less than 10% - 25% 25% - 50% More than
10% 50%
Percentage 23% 37.9% 24.1% 14.9%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 23% are take return in less than 10%, 37.9% are take return in 10% - 25%,
24.1% are take in 25%-50%, while only 14.9% investors who invest in Option trading market are
purpose to more than 50%.

48
Q-8. What technique do you use to manage the risk in Option Trading?

TABEL NO.14
Technique Avoidance Exit with Diversification Average Ignore Invest with Other
minimum down the risk the trend in
loss market

Percentage 28.4% 27.3% 23.9% 23.9% 23.9% 29.5% 13.6%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 28.4% are take avoidance, 27.3% are take to exit with minimum loss, 23.9%
are take diversification, 23.9% are take a average down, 23.9% are take ignore the risk, and 29.5% are
invest in tread in market and while only 13.6% investors who invest in Option trading market are
purpose to other.

49
Q-9. According to you what is the most important advantage of Option Trading?

TABEL NO.15
Advantage Certainty of High liquidity Low margin Transparency
performance deposit in pricing
Percentage 37.2% 41.9% 36% 31.4%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 37.2% are certainty of performance , 41.9% are high liquidity, 36% are in low
margin deposit and 31.4% are in transparency in pricing to Option Trading.

50
Q-10. According to you what is the disadvantage that you facing the most in
Option Trading ?

TABEL NO.16
Disadvantage Mandatory The holder Stock price Margin High
nature is exposed variation deposit contract
to risk price
Percentage 33.3% 37.9% 42% 25.3% 25.3%

Interpretation:-

From the above mentioned table and figure, it is revealed that the out of 100 investors who invest in
Option trading market, 33.3% are in mandatory nature, 37.9% are in the holder is exposed to risk,
42.5% are in stock price variation, 25.3% are in margin deposit, 25.3% are in high contract price that
all are disadvantage of Option trading market.

51
CHAPTER -6

CONTRIBUTION & LEARNING

52
FINDING

 Age of Between 23 to 30 years they can higher invest in derivative Option market.
 40% of respondents are graduates. Very less 9% are 12th pass investors.
 Whose annual income is More than 5 Lakhs they are invest 29% in derivative Option trading
market.
 66% of respondents are invested in Option Trading and 34% of respondents are not invested in
Option Trading.
 38.5% Lack of awareness is bigger disadvantage of Derivative market.
 38.7% of respondents are expected 5%-10% saved income.
 40% of investors are taking 1 years positions. 6.7% of investors are taking more than 10 years.
 36% Hedger participate in Derivative market.
 37.9% of respondents are expected 10% -25% annual rate of return.
 29.5% Invest with the trend in market use to manage the risk in Option trading.
 41.9% High Liquidity of performance is bigger advantage of Derivative market.
 42.1% stock price variation is bigger disadvantage of Derivative market.

53
Conclusion

In this project, I found that derivative Option trading market is very risky and all investor are not
prefer to this market and also know that this is the less than investor in this market.

Being new to markets maximum number of investors have not yet understood the full implications of
the trading in option, SEBI should take action to create awareness in investors about the derivative
market.

Survey to this market and also know that all investor’s are neutral to this derivative Option trading
market.

54
Recommendation

 The investor does not have thorough knowledge in regarding Option trading.
 SEBI should take more actions to create awareness level in investors about the derivative market.
 Derivatives are mostly used for hedging purpose.
 Contract size should be minimized because small investors cannot afford this much of huge
Investment.
 The investor who invests in derivate majority of them fell that were investor disagree regarding
the regulation of derivate market. But investor feels that there is doesn’t need to strengthen the
regulation in derivate market of India.

55
LEARNING FROM THE SIP (Summer internship project)

 Practical aspect of share market.


 How trading is done on terminal.
 To have telephonic conversation with clients.
 How to convince the clients for a particular investment.
 Learned about the Mutual Fund & PMS (Portfolio Management System).
 Research of Broker & Sub broker data via internet.
 Time Management
 Coordination
 Understand of consumer behaviour.

56
BIBLIOGRAPHY

Reference:
• Ravi Agarwa , Shiva Kumar3 ,Wasif Mukhtar3 ,Hemanth Abar3 (2009)
• Mark Broadie Mikhail Chernov Michael Johannes May 12, 2005
• Dr. Premalata Shenbagaraman
• Sumeet Khurana, Pinal Agarwal, RidhimaMeher, Sanjay Solanki, Perception of
Investors towards Derivative Market with Special Reference to Guajart District.

Books Referred:
• Research Methodology (Methods and Techniques) by C.R. Kothari, New Age
International (P) Limited, Publishers, ISBN (13) : 978-81-224-2488-1

Data Retrieved from the Websites and Links:


• Bombay stock exchange - www.bse.com
• National Stock Exchange - www.nse.com
• Securities Exchange Board of India - http://www.sebi.gov.in
• www.patelwealth.com
• http://www.derivativesindia.com/scripts/derixchg/index.asp
• www.shodhganga.com

57
QUESTIONNAIRE

Please mention your Name below?: ________________.

Age
o 15 to 22 years
o 23 to 30 years
o 31 to 37 years
o Above 38 years
Gender
o Male
o Female
Education
o 12th Pass
o Graduate
o Post Graduate
o Professional degree holder
o Others

Occupation
o Student
o Government Officer
o Private job
o Business
o Retired
o Other

Family Structure
o Joint
o Nuclear
Annual Income
o Up to 2 lakhs
o 3 lakhs to 4 lakhs
o 4 lakhs to 5 lakhs
o More than 5 lakhs
58
1. Are you trading in Derivative Market?
o Yes
o No

2. If No is the reply in the Q-1 Question, Reasons for not investing in Derivative Market ?

o Lack of knowledge
o Lack of awareness
o Very risky
o Huge amount of investment
o Other

3.What percentage of income do you save?


o Less than 5%
o 5% - 10%
o 10% - 15%
o More than 15%

4. How much percentage of your income you trade in Option Trading?


o less than 5%
o 5% - 10%
o 10%- 15%
o More than 15%

5. How long have you been invested with Option Trading?


o Less than 1 year
o 1 - 5 years
o 5 - 10 years
o More than 10 years

6. You participate in derivative market as?


o Hedger
o Speculator
o Arbitrager
o other

59
7. What is the annual rate of return expected by you from Option Trading?
o Less than 10%
o 10% - 25%
o 25% - 30%
o More then 50%

8 What technique do you use to manage the risk in Option Trading?


o Avoidance
o Exit with minimum loss
o Diversification
o Average down
o Ignore the risk
o Invest with the trend in market
o Other

9. According to you what is the most important advantage of Option Trading?


o Certainty of performance
o High liquidity
o Low margin deposit
o Transparency in pricing

10. According to you what is the disadvantage that you facing the most in Option Trading?
o Mandatory nature
o The holder is exposed to risk
o Stock price variation
o Margin deposit
o High contract price

60