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Options Trading Basics is Very Important to learn, like having a Strong foundation for a Big Building.
Any trader who wants to learn Options Trading in India should first start with Index Options in Future and Options Trading Jigsaw Puzzle.
If you’ve not already gone through the Options Training Session 1 of these Series, please go through that here:
Options Trading in India Session 1
In this Options Training Session 2 of options training series, we will discuss these topics below:
- What Are Options?
- What are Puts and Calls?
- What does Index Options (Nifty Options Trading) mean?
- What do Stock Options mean?
- Why are Future And Options Trading less penetrated in India?
- How To Trade In Options In India?
Before we dive into the post, I would like to give you the video version of this post too. Whichever way you want Options Trading Basics Session 2 is Yours.
1. What Are Options?
- An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.
- An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties.
- Options include Puts and Calls to trade.
- Puts and Calls can be considered like Selling a stock and Buying a Stock
2. What are Puts and Calls?
- Calls – give the holder the right to buy the stock by a certain date for certain price.
- In simple words Call rises up in value when the Underlying Assets go Up.
- Puts – give the holder the right to sell the stock by a certain date for certain price
- Puts rise in value when the Underlying Assets go Down.
3. What does Index Options (SPECIFIC TO Nifty Option Trading) mean?
- An index option is a financial derivative that gives the holder the right, but not the obligation, to buy or sell the value of an underlying index, such as the Nifty or Sensex, at the stated exercise price or also called as Premium on or before the expiration date of the option.
- No actual stocks are bought or sold; Index options are Puts and Calls like any other Stock Options with different strike prices.
- Index Puts and Calls option are simple and popular tools used by investors, traders and speculators to profit on the general direction of an underlying index while putting very little capital at risk.
4. What does Stock Options mean?
- A stock option is a privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy or sell a stock at an agreed-upon price (premium0 within a certain period of time.
- A stock option is considered a Call when a buyer enters into a contract to purchase a stock at a specific price by a specific date.
- An stock option is considered a Put when the option buyer takes out a contract to sell a stock at an agreed-on price on or before a specific date.
5. Why is Futures And Options Trading less penetrated in India?
- Because Traders don’t learn Options trading in India before and jump to trade.
- Risk Management is the first thing to learn before jumping to Options Trading, which any Novice trader lacks.
- All of the students, I get to talk to say, I lost in 10’s of thousands; I lost in lacs together.
- Any one who aspire to trade options are Novices, who can only think of Get Rich Quick Trading Options in India.
- Options trading is a science, which is not learnt before jumping to trade options and all complain, its Gambling.
- If you learn the Best of Technical Analysis and can’t apply in Options Trading, You will still Lose.
6. How To Trade In Options In India?
- Learn Options Trading Basics.
- Learn Technical Analysis and Options Trading Strategies.
- Learn Risk Management.
- Paper Trade in Options.
- Once you are sure about making good progress, Open a trading account with a brokerage firm.
- Keep a 10K deposit in Your Trading Account and trade for perfection not to make money.
- Learn to lose and not Personalize Your Losses. If You Personalize the Losses, You can’t Personalize Profits.
- Last but not the least, Learn Book Keeping of your Daily Trading. Learn from the mistakes. Don’t repeat the same mistakes. Trading does not give a second chance!