Investor pathshala

I remember that when my dad was an equity investor 15-17 years ago he would hold equity stocks for an average of 3-4 years and at times more. In those days information dissemination by corporates was limited. There was nothing like equity research the way it is today and apart from the annual results and AGM there was no connect with the management.


Also, since there were no FII investments, impact of global events was marginal, if any. This has long changed now
In today's globalised, internet connected world, where every piece of local and global information is analysed and dissected and regulatory requirements entail constant communication from companies, there is a deluge of information and attendant fluctuation in stock prices.


Simulaneously, with the advent of electronic trading and demat holdings, the ease and convenience of trading has increased abundantly as also the commission rates have come down to miniscule levels, again enticing investors to try and make the most of stock price fluctuations.


The top companies of today are radically different from the high fliers of yester years. Some of the Top Business Houses of 1960-70s are nowhere to be seen. In todays world of T20 cricket and algorithmic trading, there is a constant dilemma of whether to buy and hold or to give in to every piece of news and information to make that quick buck


To quote the legendary investor, Warren Buffet, Investors should see a stock not as something with a ticker symbol that goes up or down in the short term but to think about it as part of a business.


Further one should not get elated because something had gone up or depressed because it went down. Again to quote him again Only buy something that you'd be perfectly happy to hold if the market shuts down for 10 years.


To successfully implement buy and hold strategy it is important that the stock selection is astute with utmost emphasis on management quality, sustainability of businesses and sufficient margin of safety when investing and the psychological and mental stability to withstand long periods of notional negative returns.


Buy and hold strategy if implemented diligently helps in lowering the probability of wrong decisions, reducing transaction costs and tax outflows and normally enables to achieve superior post tax adjusted returns.


Having said this it is imperative that investors regularly monitor their portfolios and analyse the business prospects, management decisions, valuations etc. to reinforce their original beliefs. It is important that this monitoring be periodical and at the same time not being too micro.


The trick is to be able to take the call when the going is bad for a company - that is, when the headwinds being temporary, does the management have the wherewithal to make necessary adjustments? It would also be wise to question if the market has over discounted the temporary setbacks.


If investors devote sufficient time and invest in businesses which they understand, implementing a buy and hold strategy is suitable. Investors looking for long term capital appreciation and having adequate patience to stay invested across cycles should only think of attempting buy and hold strategy.

Now let's look at some individual stories.
- HDFC Bank has almost doubled from Rs.350 to Rs.675 since Jan 2008
- Shree Cements has more than tripled from Rs.1345 to Rs.4375
- Asian Paints is up 3.75 times from Rs.1200 to Rs.4496
- Infosys is up 1.7 times from Rs.1655 to Rs.2785
- TCS is up nearly 3 times from Rs.497 to Rs.1441
- ITC is up 2.63 times from Rs.114 to Rs.300
- M&M is up 2.2 times from Rs.404 to Rs.891
- Cipla is up 1.8 times from Rs.209 to Rs.380


To summarize, in today's world of instant gratification and inundation of information and experts(so called) , it is a challenge to shut out the noise and not get carried away by the temporary hype about stocks, sectors and managements.


Successful investing is all about the time you are invested for than about timing your investment. It is about investing to your strengths and riding your successful investments over a sufficiently long period of time and being patient enough to wait for your sweet spot than worrying about having a share in the pie of every success story going around

Repo or repurchase option is a means of short-term borrowing, wherein banks sell approved government securities to RBI and get funds in exchange.

In other words, in a repo transaction, RBI repurchases government securities from banks, depending on the level of money supply it decides to maintain in the country's monetary system.


Repo rate is the discount rate at which banks borrow from RBI. Reduction in repo rate will help banks to get money at a cheaper rate, while increase in repo rate will make bank borrowings from RBI more expensive.

If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate. Similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate.


Reverse repo is the exact opposite of repo. In a reverse repo transaction, banks purchase government securities form RBI and lend money to the banking regulator, thus earning interest. Reverse repo rate is the rate at which RBI borrows money from banks.

Banks are always happy to lend money to RBI since their money is in safe hands with a good interest.

Thus, repo rate is always higher than the reverse repo rate.

This ratio indicates the relationship between the marketpriceof the Shareandthe earning per share.

This is calculated as follows

(Market price of the share)/(earning per share)

For Eg Infosys has a price of Rs 3200 and its FY11E EPS is Rs 130 then the P/E works out at 25x.Normally one has to analyse the P/E ratio for the current year and the next 2 years which gives a indication whether the stock is under valued or over priced.

For example Larsen &Toubro has a price of Rs 1800 and its FY11E EPS is Rs 60 then the P/E works out to 30x

Again to look at Larsen & Toubro objectively in a proper manner it is essential to look what is the expected P/E of Larsen for the next two years going ahead.

Again one needs to compare the P/E of a particular company with thebroadindustry P/E to get a relative sense of the company vis a vis the industry.

Net Profit is calculated after taking the Profit Before Tax and deducting the Tax provision for the relevant period.

Stoploss is a buy or sell order which gets triggered automatically, once the stock reaches a certain price. The aim here is to limit the loss on a security (buy or sell) position.

A stop order to sell becomes a market order when the item is offered at or below the specified price. E.g.: If you have bought 1 share of RIL at Rs. 1,050, you will enter stoploss order at a price below Rs. 1,050, say Rs. 1,020.

If RIL share price falls to Rs. 1,020, a sell stoploss order will get triggered, which limits your loss on account of purchase to Rs. 30.

Similarly, a stop order to buy becomes a market order when the item is bid at or above the specified price. E.g.: If you have short-sold 1 share of RIL at Rs. 1,050, you will enter stoploss order at a price above Rs. 1,050, say Rs. 1,070.

If RIL share price rises to Rs. 1,070, a buy stoploss order will get triggered, which will limit your loss on account of sale to Rs. 20.

There are no set rules for stoploss orders. Traders deploy very tight stoploss orders, while investors may not need it also.

Advantage of stoploss is it avoids the need for constant monitoring of share price. Its disadvantage is that short-term price fluctuations could trigger stoploss orders very frequently. Also, setting very narrow stoploss for shares historically having wide price fluctuations could lead to unnecessary triggers of stoploss.

E.g.: If you bought 1 share of RIL at Rs. 1050 with stoploss of Rs. 1020. This means that if the stock falls below 1020, your stoploss order will automatically become a market order and share will be sold at the then prevailing market price, not necessarily the stoploss price.

Thus setting a stoploss order below the purchase price will limit the loss, but in a very fast-moving market, losses may be higher than expected.

Capital Adequacy Ratio (CAR), also known as Capital to Risk Weighted Assets Ratio (CRAR), is the measure of a bank's capital and is expressed as a percentage of a bank's risk weighted credit exposures.

CAR = Total Capital
Total Risk weighted assets
Total capital comprises of the bank’s Tier I and Tier II capital
Total risk weighted assets takes into account credit risk, market risk and operational risk.

Currently, RBI mandates minimum CRAR of 9%, but the Government of India has mandated total CRAR of 12%, with 8% Tier I capital.

Margin Trading is trading with borrowed funds/securities. It is essentially a leveraging mechanism which enables investors to take exposure in the market over and above what is possible with their own resources.

SEBI has been prescribing eligibility conditions and procedural details for allowing the Margin Trading Facility from time to time.

Corporate brokers with net worth of at least Rs.3 crore are eligible for providing Margin trading facility to their clients subject to their entering into an agreement to that effect.

Before providing margin trading facility to a client, the member and the client have been mandated to sign an agreement for this purpose in the format specified by SEBI. It has also been specified that the client shall not avail the facility from more than one broker at any time.

The facility of margin trading is available for Group 1 securities and those securities which are offered in the initial public offers and meet the conditions for inclusion in the derivatives segment of the stock exchanges.

For providing the margin trading facility, a broker may use his own funds or borrow from scheduled commercial banks or NBFCs regulated by the RBI. A broker is not allowed to borrow funds from any other source.

The "total exposure" of the broker towards the margin trading facility should not exceed the borrowed funds and 50 per cent of his "net worth".

While providing the margin trading facility, the broker has to ensure that the exposure to a single client does not exceed 10 per cent of the "total exposure" of the broker.

Initial margin has been prescribed as 50% and the maintenance margin has been prescribed as 40%.

In addition, a broker has to disclose to the stock exchange details on gross exposure including name of the client, unique identification number under the SEBI (Central Database of Market Participants) Regulations, 2003, and name of the scrip.


If the broker has borrowed funds for the purpose of providing margin trading facility, the name of the lender and amount borrowed should be disclosed latest by the next day.

The stock exchange, in turn, has to disclose the scrip-wise gross outstanding in margin accounts with all brokers to the market. Such disclosure regarding margin-trading done on any day shall be made available after the trading hours on the following day.

The arbitration mechanism of the exchange would not be available for settlement of disputes, if any, between the client and broker, arising out of the margin trading facility.

However, all transactions done on the exchange, whether normal or through margin trading facility, shall be covered under the arbitration mechanism of the exchange.

Importance & Relevance –

The Interest Cover Ratio give an indication about the repayment capabilities of a company.

How is Interest Cover Ratio Calculated –

One has to take the OperatingProfits before Interest and Tax and divide this with the total Interest outstanding which gives the interest cover ratio. It actually indicates as to many times is the Interest covered by the operating EBIDTA of the company. The higher the better.

For eq if the operating EBIDTA of a company is Rs 200 and the total interest outflow is Rs 100 then the Interest cover ratio will be Rs 200/Rs 100 = 2:1.

A consistently higher interest cover ratio year after year indicates that the company finances are in a good shape and that the company has not gross overborrowedbeyondits earnings capacity.

Enterprise value (ev) is the total value of the firm, reflecting the Market value of the entire business. Ev is calculated as under:

Market capitalisation = price x no of paid up share value
Add: debt (secured and unsecured)
Less: cash and cash equivalents

EXAMPLE : If the market cap of company is rs. 100 crore, it had debt of rs. 40 Crore and cash and bank balance of rs. 10 crore, then the enterprise Value is calculated as:

Ev = 100 + 40 – 10 crore = Rs. 130 crore

Importance & Relevance –
The enterprise value is a important parameter in Judging the value of a stock in comparsion to its business worth as on a particular date at any given point of time.

Dividend yield is dividend to price ratio. It is the percentage calculatedBy dividing dividend per share by price per share.

Dividend yield is used to Calculate the earning oninvestment(shares) considering only the Returns in the form of total dividends declaredby the company during the year.

How is this calculated

Interim + final dividend / market price of the share

Importance & relevance –

The dividend yield parameter is important and used more effectively In volatile and weak markets when safety of capital is of prime importance. Hence this parameter Is not looked upon seriously by investors in a strong bull market when growth opportunities are Unlimited.

This is indicates the extent to which equity Dividends are protected by the earning. The higher
the better

How is this calculated

(Earning per share)/ (dividend per share)

Cash profit is PAT plus any all non cash charges, i.e., charges that don't entail actual cash outflow but they are only notional charges like depreciation, writing off preliminary expenses etc.

ASBA stands for Application Supported by Blocked Amount. The facility was introduced by SEBI in July 2008 to help retail investors apply in IPOs, FPOs and rights issue of companies, with ease.

Earlier while making an application in an IPO, an investor had to pay full application money at the time of submission of the application form. In ASBA, one can make an application for shares without actually parting with the money immediately.

The amount for application money is only blocked in the account of the applicant. The money is debited from the bank account only when the basis of allotment is finalised and also only for number of shares that are finally allotted to the investor.

Money blocked under ASBA is unblocked fully or partly as and when the shares are allotted or the issue is withdrawn.

Thus ASBA eliminates problems associated with delay or non-receipt of refunds. Moreover, banks continue to give interest on account as also the money blocked in the account is considered for calculating the average daily / quarterly balances.

Thus, investors are saved of hassles on refund deposits while continuing to earn interest on the application money.

An option contract gives the buyer the right, but not the obligation to buy/sell an underlying asset at a pre-determined price on or before a specified time.

The option buyer acquires a right, while the option seller takes on an obligation. It is the buyer’s prerogative to exercise the acquired right. If and when the right is exercised, the seller has to honour it.

The underlying asset for option contracts may be stocks, indices, commodity futures, currency or interest rates

Open Interest is the total number of outstanding contracts held by market participants at the end of the day. Alternatively, it is the total number of futures contracts that have not yet been exercised (squared off) or expired.

Open interest indicates the trend in the F&O market and measures the flow of money into the futures market. The open interest position represents the increase or decrease in the number of contracts for a day, and it is shown as a positive or negative number.

Calculation of Open Interest:

Each trade completed on the exchange has an impact upon the level of open interest for that day.

There a three possibilities –

1.One new buyer, one new seller (both parties initiating a new position) - open interest will increase by one contract

2.One old buyer, one old seller (both parties are closing an existing/old position) - open interest will decline by one contract

3.One old buyer, one new buyer (old trader passing off his position to a new trader) - open interest remains unchanged

Increasing open interest means that new money is flowing into the marketplace. The result will be continuation of present trend (up, down or sideways).

Declining open interest means that market is liquidating and implies prevailing price trend is coming to an end.

Solvency ratios are used to judge the long-term solvency of a firm. The most commonly used ratios are –

Debt Equity Ratio –


Importance & Relevance –

Debt Equity ratio (total debt divided by total equity), Long term debt to equity ratio (long term debt divided by equity).

While the accepted norm for debt equity ratio differs from industry to industry, the usual accepted norm for D/E is 2:1. It should not be more than this. For certain industries, a higher D/E is accepted, e.g., in banking industry, adebt equity ratio of 12:1 is acceptable

Example

As on 31st march 2010, company had secured loan of rs. 70 crore, unsecured loan of rs. 30 crore, shareholders funds(equity and reserves) of rs. 200 crore.

DEBT-EQUITY RATIO = 70 + 30 = Rs 100 crs

NETWORTH Rs 200 crs

DEBT-EQUITY RATIO = 0.5:1

Gross block is the sum total of all assets of the company valued at their cost of acquisition. This is inclusive of the depreciation that is to be charged on each asset.

Pari passu is a Latin term commonly used in legal documents meaning 'equal in all respects' or 'in the same degree or proportion'.

For example, if issue of new shares is said to rank pari passu with the existing shares, then the rights associated with both the existing as well as the new shares are exactly the same.

Option premium is the consideration paid upfront by the option holder (buyer of the option) to the option writer (seller of the option). The option holder gets the right to buy / sell the underlying.

Valuation ratios give an indication as to whether the stock is underpricedor overpricedat any point of time. The most commonly used ratios are Price to Earnings (P/E) ratio and price to book value (PBV) ratio. But care has to be taken while interpreting these ratios.

While P/E ratio of a company should be compared with the industry P/E and the P/E of the competitors, it is the PBV that can distort.

While a lower PBV usually means a lower valuation, there can be a case where a low PBV can be because of a very huge capital base of the company.

Broadly speaking, options can be classified as ‘call’ options and ‘put’ options. When you buy a ‘call’ option, on a stock, you acquire a right to buy the stock. And when you buy a ‘put’ option, you acquire a right to sell the stock.

You can also sell a ‘call’ option, in which, you will acquire an obligation to deliver the stock. And when you sell a ‘put’ option, you acquire an obligation to buy the stock.

Equity investment is an attractive investment but it also possess some risk factors. Investors have to think before investing in equities, as there are chances to lose money in stock market by their own mistakes.

Some investors wants to accumulate wealth too quickly, so they keep looking for tips and often resort to assumptions ,they makes loss in their investment.

Following are the common mistakes by the investors while investing in the stock market.

1) Market Timing

Timing the market or predicting the feature price is dangerous thing in investing.

Many greatest investors ,who have a strong view on the price levels appropriate to individual shares does not try to time the stock market.

Stock prices do not always move for the most logical or easily predicable way . An unexpected event can send a stock’s price up or down, hence trying to time the market is inappropriate.

2)Following Heard Tips

Some Investors makes decisions based on learning from the information of others. When investing under conditions of risk, investors experience enormous pressures ,it challenges or stresses their sense of self and lead them to the direction of the heard. Occasionally it seems to be beneficial. But sometime it may go wrong and would bring in losses.

3) Relying on Tips

When you make an investment, it’s important to do your own research and analysis of any company before you even consider investing your hard earned money. Relying on the advises of others may lead to a disaster.

4)Putting all eggs in one basket

Some Investors put all money in one or few stocks, it increases the chance of loosing their money .But spreading your money among different investment is a good way to reduce risk.

By picking the right group of investments, you may be able to limit your losses. Diversification does not mean that you will make money; it just reduces the risk of loss. You can loose money in the stock market faster than any other investment, this risk gets reduced by diversifying your portfolio.

By Diversification we mean diversifying your investment as cash, stocks, and mutual funds etc.Diversification gives maximum advantage to the investor. It protect you against downturns.

5)Fear And Greed

Many Investors are driven by fear and greed .Greed is responsible for driving stock price up and fear is responsible for dripping them down.The investors ,who wants to get rich quickly start buying shares without doing any research or knowing anything about the company.

When greed is at work, they are less bothered about risk involved in it.When markets hit their top and start coming down, these same investors will hold on hoping and believes that the market will come back, Greed drives them forward. As the markets drop further, Fear slowly works and they decide to sell and get out.

6)Lack of research

Success comes through hard work, therefore market research is very essential before investing in stock market.

Many investors invest in stocks on the sayings of the brokers or financial advisors but, a smart and wise investor will never do so. He would probably search the company’s potential and do the market research before doing any investment.

7) Invest without Patience and Discipline

Invest management is a skill. Investment requires market study, planning and hard working. It also needs patience and discipline.

Discipline means that you make a plan before investing , have a line of attack, follow your own rules. Patience refers to undertake all the groundwork to pick the right stocks.

8) Having Unrealistic Expectations

All investors hops best from their investment.But greed for higher returns is not good.It will lead to bad investment performance.

8) Having Unrealistic Expectation

All investors hops best from their investment. But greed for higher returns is not good.It will lead to bad investment performance

Equity investment is an attractive investment but it also possess some risk factors. Investors have to think before investing in equities, as there are chances to lose money in stock market by their own mistakes.

Some investors wants to accumulate wealth too quickly, so they keep looking for tips and often resort to assumptions ,they makes loss in their investment.

Following are the common mistakes by the investors while investing in the stock market.

1) Market Timing

Timing the market or predicting the feature price is dangerous thing in investing.

Many greatest investors ,who have a strong view on the price levels appropriate to individual shares does not try to time the stock market.

Stock prices do not always move for the most logical or easily predicable way . An unexpected event can send a stock’s price up or down, hence trying to time the market is inappropriate.

2)Following Heard Tips

Some Investors makes decisions based on learning from the information of others. When investing under conditions of risk, investors experience enormous pressures ,it challenges or stresses their sense of self and lead them to the direction of the heard. Occasionally it seems to be beneficial. But sometime it may go wrong and would bring in losses.

3) Relying on Tips

When you make an investment, it’s important to do your own research and analysis of any company before you even consider investing your hard earned money. Relying on the advises of others may lead to a disaster.

4)Putting all eggs in one basket

Some Investors put all money in one or few stocks, it increases the chance of loosing their money .But spreading your money among different investment is a good way to reduce risk.

By picking the right group of investments, you may be able to limit your losses. Diversification does not mean that you will make money; it just reduces the risk of loss. You can loose money in the stock market faster than any other investment, this risk gets reduced by diversifying your portfolio.

By Diversification we mean diversifying your investment as cash, stocks, and mutual funds etc.Diversification gives maximum advantage to the investor. It protect you against downturns.

5)Fear And Greed

Many Investors are driven by fear and greed .Greed is responsible for driving stock price up and fear is responsible for dripping them down.The investors ,who wants to get rich quickly start buying shares without doing any research or knowing anything about the company.

When greed is at work, they are less bothered about risk involved in it.When markets hit their top and start coming down, these same investors will hold on hoping and believes that the market will come back, Greed drives them forward. As the markets drop further, Fear slowly works and they decide to sell and get out.

6)Lack of research

Success comes through hard work, therefore market research is very essential before investing in stock market.

Many investors invest in stocks on the sayings of the brokers or financial advisors but, a smart and wise investor will never do so. He would probably search the company’s potential and do the market research before doing any investment.

7) Invest without Patience and Discipline

Invest management is a skill. Investment requires market study, planning and hard working. It also needs patience and discipline.

Discipline means that you make a plan before investing , have a line of attack, follow your own rules. Patience refers to undertake all the groundwork to pick the right stocks.

8) Having Unrealistic Expectations

All investors hops best from their investment.But greed for higher returns is not good.It will lead to bad investment performance.

8) Having Unrealistic Expectation

All investors hops best from their investment. But greed for higher returns is not good.It will lead to bad investment performance

Equity investment is an attractive investment but it also possess some risk factors. Investors have to think before investing in equities, as there are chances to lose money in stock market by their own mistakes.

Some investors wants to accumulate wealth too quickly, so they keep looking for tips and often resort to assumptions ,they makes loss in their investment.

Following are the common mistakes by the investors while investing in the stock market.

1) Market Timing

Timing the market or predicting the feature price is dangerous thing in investing.

Many greatest investors ,who have a strong view on the price levels appropriate to individual shares does not try to time the stock market.

Stock prices do not always move for the most logical or easily predicable way . An unexpected event can send a stock’s price up or down, hence trying to time the market is inappropriate.

2)Following Heard Tips

Some Investors makes decisions based on learning from the information of others. When investing under conditions of risk, investors experience enormous pressures ,it challenges or stresses their sense of self and lead them to the direction of the heard. Occasionally it seems to be beneficial. But sometime it may go wrong and would bring in losses.

3) Relying on Tips

When you make an investment, it’s important to do your own research and analysis of any company before you even consider investing your hard earned money. Relying on the advises of others may lead to a disaster.

4)Putting all eggs in one basket

Some Investors put all money in one or few stocks, it increases the chance of loosing their money .But spreading your money among different investment is a good way to reduce risk.

By picking the right group of investments, you may be able to limit your losses. Diversification does not mean that you will make money; it just reduces the risk of loss. You can loose money in the stock market faster than any other investment, this risk gets reduced by diversifying your portfolio.

By Diversification we mean diversifying your investment as cash, stocks, and mutual funds etc.Diversification gives maximum advantage to the investor. It protect you against downturns.

5)Fear And Greed

Many Investors are driven by fear and greed .Greed is responsible for driving stock price up and fear is responsible for dripping them down.The investors ,who wants to get rich quickly start buying shares without doing any research or knowing anything about the company.

When greed is at work, they are less bothered about risk involved in it.When markets hit their top and start coming down, these same investors will hold on hoping and believes that the market will come back, Greed drives them forward. As the markets drop further, Fear slowly works and they decide to sell and get out.

6)Lack of research

Success comes through hard work, therefore market research is very essential before investing in stock market.

Many investors invest in stocks on the sayings of the brokers or financial advisors but, a smart and wise investor will never do so. He would probably search the company’s potential and do the market research before doing any investment.

7) Invest without Patience and Discipline

Invest management is a skill. Investment requires market study, planning and hard working. It also needs patience and discipline.

Discipline means that you make a plan before investing , have a line of attack, follow your own rules. Patience refers to undertake all the groundwork to pick the right stocks.

8) Having Unrealistic Expectations

All investors hops best from their investment.But greed for higher returns is not good.It will lead to bad investment performance.

8) Having Unrealistic Expectation

All investors hops best from their investment. But greed for higher returns is not good.It will lead to bad investment performance

DVR shares means differential voting rights shares, these shares carry lesser voting rights as compared to normal equity shares and that is the reason why these DVR trades at lower price than normal share price of stock.


DVR shareholders are entitled for dividends from the company and companies issue these DVR because they want to give option to those investors who only want economic benefit in terms of dividend and do not want any voting rights.

Different companies will have different conditions attached to DVR in terms of voting rights and dividend. Examples of DVR in Indian companies are that of Tata motors DVR, Gujarat NRE coke DVR, Jain Irrigation DVR etc

If Current Assets are Rs 200 and Current Liabilities are Rs 100 then current ratio will be CA/CL which will be 2:1

For QR one needs to take out Inventories from the Current Asset figure then the QR will be Current Assets minus inventories divided by CL. For egg if CA minus inventories is Rs 150 and Current Liabilities Is Rs 100 then QR is 1.5:1

Importance & Releveance ––

These ratios give an indication as to how liquid a firm is. The most commonly used ratios are – Current ratio (all current assets dividedby current liabilities) and quick ratio (current assets except inventory divided by currentt liab)

The accepted norm for current ratio is 1.5:1. It should not be less than this.

If Current Assets are Rs 200 and Current Liabilities are Rs 100 then current ratio will be CA/CL which will be 2:1

For QR one needs to take out Inventories from the Current Asset figure then the QR will be Current Assets minus inventories divided by CL. For egg if CA minus inventories is Rs 150 and Current Liabilities Is Rs 100 then QR is 1.5:1

In futures, both the buyer and the seller are obligated to buy and sell, respectively, the underlying asset-the quid pro quo relationship. In case of options, however, the buyer has the right, but is not obliged to exercise it. Effectively, while buyers and sellers face a linear payoff profile in futures, it’s not so in the case of options.


An option buyer's upside potential is un limited,while his losses are limited to the premium paid. For the option seller, on the other hand,his maximum profits are limited to the premium received, while his loss potential is unlimited.