Magnifyingglassusesin laboratory

Speculators predict the direction of price movement in a market as per an intrinsic valuation and economic condition and choose to take an opposite stance in the present to gain from such price fluctuations. Taking a futures and options example, if an investor predicts the price to increase in the future, he/she can assume a short position in the derivatives market. It indicates a purchase of a stock/derivative in the present to sell it on a later date, at a higher price.

However, in case of a price rise in the potato market, a farmer stands to lose out on profits. Such losses can be offset through a put option contract, which gives the farmer a right but not an obligation to meet the conditions of a contract. In case of a fall in the market price level, he/she can execute the options contract to ensure negligible losses. Price rise on the other hand, allows the farmer to withdraw from the contract and sell the items in the marketplace at the prevailing price.

Arbitrageurs essentially remove all price differences arising from imperfect trading conditions, as they change the demand and supply patterns to arrive at equilibrium.

Magnifying lens usesand functions

Futures and options trading is widely practised on leverage, wherein the entire cost of trading does not have to be paid upfront. Instead, a brokerage firm finances a stipulated percentage of an entire contract, provided an investor keeps a minimum amount (mark to market value) in his/her trading account. It increases the profit margin of an investor substantially

Subsequently, a long position is undertaken by individuals expecting the prices to fall in the future as per their market analysis. Investors plan on buying securities in the future at a reduced price through such contracts, to profit in relative terms.

Most magnifying glasses are double-convex lenses and are used to make objects appear larger. This is accomplished by placing the lens close to the object to be viewed. In this way the light rays are bent toward the center of the lens. When these bent rays reach the eye they make the object appear much larger than it actually is. However, if the object is far enough away from the lens, the image will flip, appearing smaller and upside down. The distance at which this flip occurs is twice the focal length (the distance from the optical center of a lens to the point where the light rays converge) of the lens. The focal length of any lens is determined by the amount of curve on the lens’ face. The magnified image is called a virtual image while the smaller, inverted image is called the real image.

Futures and options are the major types of stock derivatives trading in a share market. These are contracts signed by two parties for trading a stock asset at a predetermined price on a later date. Such contracts try to hedge market risks involved in stock market trading by locking in the price beforehand.

10usesofmagnifyingglass

Such individuals enter into futures and options contracts in the share market to reduce investment volatility concerning price changes. Locking in a price for transaction at a future date helps individuals realise relative gains if the price moves adversely with respect to a trading position assumed by a buyer. However, in case of a favourable fluctuation, individuals entering into a futures contract can incur significant losses. Such risk is mitigated in an options contract, as an investor can pull out of a deal in case of favourable price swings.

Magnifying lensconcave or convex

Future and options in the share market are contracts which derive their price from an underlying asset (known as underlying), such as shares, stock market indices, commodities, ETFs, and more. Futures and options basics provide individuals to reduce future risk with their investment through pre-determined prices. However, since a direction of price movements cannot be predicted, it can cause substantial profits or losses if a market prediction is inaccurate. Typically, individuals well versed with the operations of a stock market primarily participate in such trades.

While futures contract holds the same rules for both buyers and sellers of a contract, an options derivative can be divided into two types. Individuals entering an options contract to sell a particular asset at a pre-asserted price on a future date can do so by signing a put option contract. Similarly, individuals aiming to purchase a particular asset in the future can enter into a call option to lock in the price for future exchange.

A futures contract to buy/sell underlying security has to be followed up on the predetermined date at a contractual price. On the other hand, an options contract provides a buyer with a choice to do the same, if he/she profits from a trade.

Magnifying lens usesfor reading

Future and option trading are different in terms of obligations imposed on individuals. While futures act a liability on an investor, requiring him/her to follow up on a contract by a pre-set due date, an options contract gives an individual the right to do so.

Many people have used a magnifying glass and sunlight to ignite a piece of paper. When the lens is held at exactly two focal lengths from the paper, all of the light will be concentrated into a tiny point, generating enough heat to start a fire.

10usesofmagnifyingglass in laboratory

Most speculators engaging in derivatives trading aim to opt for cash settlement, wherein the physical transfer of an asset is not conducted. On the contrary, a difference between spot price (current market price) and the price quoted to the derivative is settled between two parties, thereby reducing the hassles of such trade.

Hedgers aim to secure their gains or expenditures in the future by entering into a derivative contract. Such traders are popular in the commodity market, wherein individuals try to secure an expected price of a particular item for a successful exchange. Understand it with the help of a future and option trading example. A farmer can enter into a futures contract with a wholesaler to sell 50 kg of potato for Rs. 20 per kg three months from the current date. On the day of maturity, if the price of potatoes falls below that level, the farmer successfully hedged his position to minimise the overall risk associated with trading in the future.

Hedgers primarily opt for physical trade wherein the asset is exchanged upon maturity of the contract. It is particularly popular in the commodity market, wherein physical trade is undertaken by producers and companies to keep the cost of raw materials at a fixed level. It ensures stability in the price levels in an economy.

However, as explained above, futures and options have high risks associated, as accurate predictions regarding the price movements have to be made. A thorough understanding of stock markets, underlying assets and issuing organisations, etc., have to be kept in mind to profit from derivative trading.

The magnifying glass is one of the most ancient optical devices known to science. Thousands of years ago Egyptians used chips of crystal or obsidian (a type of shiny stone) to better view small objects. In Rome Emperor Nero (a.d. 37-68) was known to have peered through gemstones at actors on a distant stage. The first magnifier constructed for scientific purposes is believed to have been designed by the English philosopher Roger Bacon (circa 1220-1292) sometime during the thirteenth century.

Arbitrageurs aim to profit from price differences in the market, which arise due to market imperfections. A price quoted in futures and options trading includes the current price and cost of carry, along with an underlying assumption that a strike price matches the contractual price. Any price difference arises from carrying the underlying security to the future date, known as the cost of carry.

The magnifying glass was the forerunner of the compound microscope (in which a series of lenses are used to focus, magnify, and refocus an image), one of the basic tools used in medicine.