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Know How to Trade in Options in India and Best Time to Trade Options in India | Free Demo Available !
अभी डेमो बुक करें
Introduction of Trade in Options in India
After the pandemic hit the world, the awareness of options increased as it has less risk than any other financial instruments in the Indian Stock market. To enter into the trading options, you must be aware of the terminology used in this system. We shall first briefly understand the terminology and discuss how to trade in options in India
The Terminology Used in Trading Options in India
Options contract that gives the right to either sell or buy a certain amount of stock at a predefined price and time. At the same time, the contract holder is not bound to execute the contract.
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Premium: The premium is the amount you pay to enter into the contract
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Call option: In this contract, the holder has the right to buy the stock but is not obliged to buy it.
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Put Options: In this contract type, the holder has the right to sell the underlying stock but is not obliged to sell.
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Strike price: This is the price mentioned in the contract on which the transaction is executed, either buying or selling the stock.
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Expiry date: This is any future date on which the contract will expire. The contracts are generally on a weekly or monthly basis.
Best Way to Learn How to Trade in Options in India
As you are familiar with the basic terms, let us see how to trade in options in India. You will see a simple stepwise guide here.
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The very first requirement to start trade in Options India is to have a trading account. Our previous article mentioned how you could open a trading account.
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You must have some spare money to invest in the options trade. There are various rules on how much you should invest and how you can protect your money. The 1% rule applies here. You should only invest 1% of the total amount you have. Experienced traders can go up to 2%.
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Understanding the market movements is the next step to know how to trade in options in India. You must see whether the market is bullish or bearish. According to that, you can plan to either buy or sell the options. Entering into the call options gives the trader the right to buy the underlying asset on or before expiry. On the other hand, put options give the right to sell the underlying asset on or before expiry. If the contract is not executed, it is said to expire worthlessly.
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Choosing the best underlying asset is one of the significant aspects a trader should seek. Again, selecting the strike price is a very tough job. You need far-sightedness and must be aware of market news to select the strike price. Suppose a stock is not moving much, but you predicted it might go up in one month; you should enter the contract considering this information and choosing the best suitable strike price.
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The Last step can be said to keep monitoring the prices of the underlying stock and making decisions about executing the contract.
What is the Best Time to Trade Options in India?
Generally, the 5 minutes time frame is considered ideal for deciding the entry and exit points, while the 15 minutes time frame helps the trader to understand the trend. So, check various time frames and decide to make a move.
If you are fresher in the options market, we suggest you take some help from the financial advisor in your region and learn first about how to trade in options in India. If you want any assistance, let us know in the comment section, and we will try our best to fulfill all your queries.