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Direct Public Offerings

Definition of Direct Public Offerings

A Direct Public Offering or DPO allows a company to issue shares directly to the public without an intermediary like investment banks. In the process, the company becomes publicly traded.

The cost of a DPO is known to be relatively low compared to an IPO.

Furthermore, the issuer of the DPO has control over the issue price while the paperwork and effort involved is also comparatively low. That said, the company must go through proper regulatory procedures during the process.

Related Terms

Basing

Basing happens when a security trades sideways after prolonged periods of falling prices.

As a result, the security forms a “base” or flat pattern which means there is little to no upward or downward movement and a decline in volatility.

This may go on for a relatively long time but is crucial as basing is an indicator of any meaningful reversal that may happen.

Future Trading

Futures trading is the buying and selling of futures contracts on a recognized exchange or over the counter. Futures contracts are derivatives that oblige a trader to buy or sell the underlying security at a predetermined price and date.

Trading futures is possible for equity shares, commodities, currencies, as well as interest rates. Those who trade futures are generally classified as speculators or hedgers.

Speculators trade futures to make a profit. Hedgers delve into futures trading to manage risk, which simply means protecting themselves from unfavorable movements in the market.

Capital in Trading

Capital is the total amount of money that a trader can use to buy and sell securities. There are variations of the term, the most common one is “starting capital”. This is the amount of money a trader starts their journey with.

Forex Trading

Forex trading means buying and selling currency pairs through exchange-traded derivatives or on the OTC market. A currency can only be bought and sold in exchange for another currency, which is why forex trading is always done in pairs.

Trading forex derivatives is carried out on stock exchanges authorized by regulatory bodies (SEBI & RBI), in tandem with approved brokers who allow users to engage with the forex futures trading and options trading markets.

Commodity Futures

A commodity futures is a contract between two parties to buy or sell an underlying commodity like gold, silver, corn, and others are a pre-determined price and date.

A commodity futures contract is an obligation that’s entered into not just by retail traders but also companies who want to lock in a favorable price. This is the place to understand all about futures contracts in trading.

Capital Gains Tax

Capital gains are profits, which means they can be taxed. The rate of taxation is based on the type of asset (debt/equity) and holding period. Here is the list of ways capital gains are taxed in India:

Asset Type Gains Type Holding Period Tax Rate
Equity Short Term Capital Gains < 1 year 15%
Long Term Capital Gains > 1 year 10%
Debt Short Term Capital Gains < 3 years As per I-T slab
Long Term Capital Gains > 3 years 20%



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