How to trade options in india
An valid tradable instrument, the holder of which has options right, but no obligation to buy or sell the stock or underlying instrument. Generally the buyer will pay some price to get this right called premium. The different combination of above 4 parameters gives us a unique tradable option chain. The value of option is determined mainly by the volatility of the underlying instrument and the distance of option expiry date from today i. More volatile the instrument, or longer the life, costlier the options will be. The underlying stock, CALL options on the underlying stock and PUT options on the underlying stock are the three types of instrument for trading. One each of the above 3 instruments, one can take BUY or SELL actions e. That gives us overall 6 types of actions. An option chain is unique combination of 4 parameters given in question 2 above. Each combination is a tradable instrument on its own. Chances of this happening is very close to zero. Options are traded in lot size i. If you trade stocks, this minimum quantity is 1 hence you have much better control on the risk. My suggestion will be to learn the basics of trading first. If account is small then, use stocks for this learning. Once you have consistent and profitable performance, then move into options trading. That too with appropriate account trade. In case of any questions, feel free to leave comment or contact me. I get many requests from readers who want to start trading in Options, but lost about the path to take. In this post, I am suggesting a possible direction that should help any new option trader to get establish solid foundation for their trading. Can you make money by buying something, when market is falling? So very first thing you need to learn is to identify the current trend of the market up, down or sideway. Better you are in deciding the trend, stronger is your foundation. There are options strategies for each type of market conditions offering different return-risk profile that may options you. All other strategy is just combination of these 6 basics. These core risk graphs are for — Buy Stock, Sell stock, Buy Call, Sell Call, Buy Put and Sell Put position. Spend as much time as required to understand them on parameters I am going to mention in next point. Once, you should are in a position to draw risk graph without any option analysis tool, then you pass out of this stage. Focus not just on the theory, but also on how changes in those factors will affect the how. Watch them in real life, experiment with them using option calculator, take notes and track them over next few days using real market data. This is the stage, I will advise one to start using a tool. But when they are given the tools, then their performance and efficiency zooms. They how what they are doing, or what they want to do because they have solid foundation. IMO, a great tool in the hand of a monkey is no different from a banana or a stone in its hand. But give a great tool a professional, and see the difference. The decision is yours. But be careful about selecting the place or option that you are going for. This is just to give base in option trading, trade that you can plan an option trader properly. Trading involves Money management, developing right trading psychology, risk management, developing suitable trading system etc. Last but not the least, there is no single defined path that you need to follow to get started in options trading e. If it is done appropriately, then you can trade directly in options, without getting into stocks etc. If you know stock trading better if you have profitable track record in stock tradingthen few initial steps are not required. But that is not limitation, even if you have never traded stocks. As long as you learn options read market trend, you can start with options trading. Interpretation and possibilities for next week - As a trader, we have to be prepared to face anything that market throws on us. So lets see what might come in next week. Market has still not tested this level yet. It resulted in Hammer candle. This indicates the strength of support level. My view of short term accumulation by smart-money india turning out to be correct as prices options moving up with strong candle. It is trade not bullish move but in a sideway range with short term bullish bias. As this level is below the long term bullish trend line from March low, it confirms that the trend line is broken. In other words the Bull market that started from March low is how. The long term direction of market is down and the deciding trend line for this is the down sloping line starting from high made in Oct Important levels to watch for — For up-move —, For down-move — For sideway — Hope this analysis helps you in forming your own views on market. Feel free to drop your comments on the post. Let me know if you would like to see something more in the analysis. Disclaimer — These are my views on the market and I could be wrong in reading it. Please use your own judgment and make sensible trading decision based on your own analysis. Bullish reasons - 1 There was large pullback from the low of and bar closed marginally in green. Bearish reasons india 1 This week has given lower high and lower low too. Hence down trend continues. The low volume gives me doubt on strength of hammer candle. Lets see what happens in next week. As anticipated last week trade levels will act as new supply zone, it turned out to be true this week when price struggled to stay above and finally dropped and closed below this. Hence would like to wait for next weeks action to tell me more about it. I would like to watch it closely during next india for break or support of level. Else my view of short term accumulation by smart-money will be supported. My tracking of FII flows also giving the sign of short term how formation. Bullish reasons - 1 Weekly close is above previous weeks close. The week has also shown a green candle. Bearish reasons - 1 Market made lower high and india low on weekly chart. It also resulted in new lower swing high below the important level of Any break of this, can easily take market to level on downside. For sideway — to Observations how 1 and CALLs have seen highest OI in this new series indicating these levels as resistance. This could provide support in event of fall below level. I india struggling to find bullish reasons on chart once again on this week. Except that the volume in this bearish week are lower then previous week, which show lack of bearish strength. It the resistance zone and dropped from there. It is also wide range candle, indicating strength in bearish move. It is important to watch the price action and volume as it reaches the previous swing low point Of course india will not be straight line move and we will see some intermediate bounces. Market found some support above which is also broken later. Now levels will india as new supply zone. I would like to watch it closely during next week. Observations — 1 and CALLs have seen good addition in OI making them immediate resistance for current series. Interpretation — 1 We are in the last week of this series hence change in OI could be very fast. Highest level of PUTs is at, level. Unfortunately, that is not the case. This is indication of lack of strength in bullish move. We have seen increase in PUT OI which is going to provide support during current series, if market falls from here. Bullish reasons - 1 We had weekly Green bar indicating continuation of bullish move in short term. Bearish reasons - 1 The week made Lower High and Lower Low compared to last week, indicating weakness. This weeks range of is also among the narrower range. It indicates that market is still in consolidation phase,but sooner or later, we are going to see range expansion and move. The lower high resulted in giving us Swing High point at which will act as first resistance going forward. Market needs to cross this level to show any further sign of strength. Looking at how weakness, it is going to be a challenge. Hence this level will act as support or trend decider in days to come. This could very well be a bearish rally. We are still in down trend, global markets are still going down. In such situation, it is better to wait for more confirmation options we call it return of bull market. Subscribe via RSS Feed stay updated with blog articles. Options Trading In Indian Market Helping you improve your knowledge of option trading and improve your trading results. Recent Posts 19 August Posted by Trader anup on 19 August, This item was filled under [ Traders zone ]. What is an option? What are the specifics of an option? An option is made up of following - Underlying stock or other instrument - Option type as CALL or PUT. How to learn trading options? Posted by Trader anup on 31 March, This item was filled under [ FAQHow-ToKnowledge ]. This post is not related to SPREADs but it is my thoughts about learning that one needs to start properly in OPTIONS TRADING. It was in reply to following question —. I want to learn options trading. Do we have to be well versed with the equity trading. To be frank I have a year and half exp in swing trading that too not a active participant. AW10,Lazytrader, Kindly inform me the ways to learn options from beginning that too very basics. Have gone through the websites provided earlier and was able to grasp some of the stuffs. However, will appreciate if explained in detail step to step to gain the knowledge of options trading. Can u make money by buying something, when market is falling. Better u are in this, solid is your foundation. No great deal but just common sense. But u will surprised to see how often it is not followed in market where people buy, when market is going south. They are — Buy Stock, Sell stock, Buy Call, Sell Call, Buy Put, Sell Put. Once, you should be able to draw risk graph without any option analysis tool, then u pass out from this stage. Focus on not the theory, but how change in those factors will affect the premium. Watch them in options life, experiment with them using option calculator. And if they are given the tools, then their performance and efficiency zooms. But trade careful about selecting the place or option that u are going for. If u read wrong book, go to wrong person for training, do wrong course, etc, you will be just wasting your resources time, money, energy etc. This is just trade give base in option trading, so that u can plan an option trader properly. Trading involves Money mgmt, psychology, risk mgmt, system testing etc which is beyond the scope of this post. Last but not the least, there is not defined path that u need to follow to get started in options trading like first stocks, then futures, then options. If you know stock trading better have good track record in stock tradingthen few initial steps are not required. There are many good resources available on internet to learn about Options. Some of them are: NIFTY Weekly price action analysis — October Posted by Trader anup on 15 October, Nifty weekly price action based analysis. NIFTY Weekly price action options — October Posted by Trader anup on 9 October, Nifty weekly price action analysis. NIFTY Weekly price action analysis — September Posted by Trader anup on 2 October, NIFTY weekly price action analysis. Interpreting top 10 open interest — September Posted by Trader anup on 2 October, Interpretation — 1 PUT had seen trading in the order of 22 lacs OI. NIFTY Weekly price action analysis — September Posted by Trader anup on 25 September, Interpreting top 10 open interest how September Posted by Trader anup on 25 September, Interpreting top 10 open interest — September Posted by Trader anup on 18 September, NIFTY Weekly price action analysis — September Posted by Trader anup on 17 September, Nifty Weekly price action analysis. Blog Subscription Subscribe via RSS Feed stay updated with blog articles. Subscribe to RSS feed Subscribe in a reader. Please check out About Me page to know more about me. Posts Feed Comments Feed. Design by Bingo - The Web Design Experts.
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