Plzzzz tell me

Others 1531 views 10 replies

JaiNitH KuMaR

*Aspire Then Inspire* !!

217 Points Joined November 2011

Hello Friends..

Can anyone tell me what is thiz speculation bussiness..?? It says that : A speculation business means any business in which a contract for the purchase and sale of any commodity including stock and shares are periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity ..

But what do u mean by ultimately settled otherwise than by the actual delivery or transfer of the commodity by this..??

Plzzz explain me speculative bussiness with an example.. plzzzzzz

Thanking you

Replies (10)

Guest

It means sell or purchase settled at pricing difference without physical actual delivery.. suppose you purchase a 3 month forward contract of dollar today at price of 58 and after 3 month the actual price means spot rate is 55 then you settle the transaction by recognizing loss of 3 ...without actual delivery of dollars..

ashi agarwal

student

40 Points Joined August 2012

IILUSTRATION 1: Mr. X and MR Y are engaged in buying and selling shares. They intend to buy and sell-off the

shares off the stock exchange i.e. without going to any broker. There is a share called “TQS”. They enter in a

transaction to buy (Mr. X is the Buyer) and Sell (Mr. Y is the seller) on 12.3.2004, without giving or taken actual

delivery of the shares. The spot rate on the transaction date is 1005.00 per share and the qty under transaction is 100

shares. The buyer stands to gain if the share prices shoot up and similarly the seller will make profit if the prices go

down. Now let us say on 31.03.2004, they decide to cancel the transaction and the spot price on that date is Rs1500.00 per share. Since the market price has gone up, Mr. X will gain Rs. (1500-1005) X 100 = Rs. 49500.00 and there

is no actual delivery of the shares.

Now Mr. Y will mislay the same amount and will book it as loss in his books. The predicament with these types of

transactions is that it is very difficult to know whether they actually occurred or are deceptive, because they were

never recorded with any third party.

May be this wud help u to understand..:)

JaiNitH KuMaR

*Aspire Then Inspire* !!

217 Points Joined November 2011

thanxx ketan n ashi agarwal ur examples wer too gud.. Thank u once again

Rahul Bansal

Finalist

35929 Points Joined September 2009

agree with ketan and ashi

Gunjan Tulsyan

Article

222 Points Joined July 2011

Its is purely the business of futures and options carried out in stock markets...!!! Get some details on that and u will come to know about it..!!!

CHAITANYA

C.A.; C.S.

90 Points Joined July 2009

Originally posted by : ketan joshi
	It means sell or purchase settled at pricing difference without physical actual delivery.. suppose you purchase a 3 month forward contract of dollar today at price of 58 and after 3 month the actual price means spot rate is 55 then you settle the transaction by recognizing loss of 3 ...without actual delivery of dollars..

i think forward contracts can not be settled by otherwise than delivery

( do you want to say future contract)

CHAITANYA

C.A.; C.S.

90 Points Joined July 2009

please correct me if i m wronge

ashi agarwal

student

40 Points Joined August 2012

ya i think frwrd means future contracts...

Guest

Yes chaitanya you are right ..Its future contacts where speculator do their business...

Because Forward contracts are the private aggrement and parties are known to each other and settlement done at fix future date no clearing house ....

and In future contact..it is exchange traded and parties are unknon to each other and settlement are done thru clearing corporation...and furure contract are mark to market dailly....

Hey Jainith Kumar sorry for ealier post its was bit mistake due to hurriness...but correct my answer with this and thanx to Chaitanya for pointing my mistake and correct me if any mistake in this...

Thanx

Vaibhav Kumar Agrawal

Service

176 Points Joined July 2012

Another example is INTRADAY TRADING in stock market.

For Example,

Mr X purchased 100 shares of stock A @ 500 on Intraday Basis(delivery not taken) on a particular date.On the same date he sold those shares @ 520.

This is a case of speculation business as actual delivery has not taken place.The above profit of Rs 2000(100*20) will be treated as "Profit from Speculation Business".

Hope I m correct.