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Intraday Trading

Definition of Intraday Trading

Intraday trading refers to the buying and selling of financial instruments within the same day. There is no delivery involved in intraday trading as a result. Equity shares are the most popular instrument for intraday day but commodity options and forex futures trading also make it to the list.

Related Terms

Convertible Bonds

A convertible bond is a hybrid security that’s initially designed to be a debt instrument that pays a fixed interest rate in exchange for a loan. Once the loan’s tenure ends, the holder can decide to take one of either action:

  • Don’t convert bond: face value of the bond is transferred to the holder on maturity
  • At The Money

    At The Money is a scenario in which the strike price of an options contract is the same as the market price of its underlying security.

    Exercising an option At The Money can lead to a loss as the premium paid for the contract won’t be recovered.

    That said, At The Money is known to be a positive indicator as it indicates the option may soon have intrinsic value.

    Floating Interest Rate

    The rate of interest that changes across the tenure of a loan, generally every quarter, due to the government’s interest rate, market conditions, and other factors is known as a floating interest rate.

    Personal loans and home loans are typical examples of borrowing that carry a floating interest rate. A point to note here: the floating interest rate is added on top of a base interest rate that is charged by lenders.

    Identifiable Asset

    An identifiable asset is a tangible or intangible asset that be assigned a fair value at any point in time. This concept is important during acquisitions and mergers as not all assets on a company’s balance sheet can easily be valued.

    Simple examlpeps of identifiable assets include machinery. You can easily identify machinery as a separate entity and assign it a value based on various factors.

    Futures Contract

    A futures contract is a derivative instrument that is legal agreement between two parties for the mandatory purchase or sale of an underlying asset at a pre-agreed price and date.

    Every futures contract contains a standard lot size on top of the agreed price and date as they are a standardized derivative traded on a stock exchange, most commonly on NSE and BSE.

    The price of a futures contract is known to vary from the spot price of the same underlying asset due to factors like the cost of carry, interest rates, and more.

    Diversification

    Diversification is the act of investing in more than one asset class, sector, industry, or country to mitigate risk. It is an investment strategy designed to reduce risk by pairing a volatile asset class like equities with a fixed income asset class like fixed deposits. Or, by investing in equities in one country and complementing it by investing a portfolio in stocks from another country.



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