Hi FinGradians. This is a thread on options trading basics. Ask your most troublesome options trading questions here and we’ll get them all answered. Happy Trading!!
Most Popular Questions on our Instagram Q&A Session:
- How Much capital is required for options trading?
You can start options buying with a capital of Rs 10-15k. You have to buy options in lot: 50 for Nifty and 25 for Bank nifty. If the premium is Rs 100, you’re buying one lot of 50, your available capital should be Rs 100*50 = 5000.
The premium can go as high as 800-1000 for different PE/CE values, where you might have to add extra input. But in short, 10-15k is good enough to start!
Is it true that Ol data and technical analysis is not enough for option trading, Any other data is required?
Understanding of Options Chain, Change is Ol data, Technical setup with Support/Resistance, RSI, Volume, and a few more indicators is good enough for basic start of trading.
Explain the role of volume
A strong candle with high volume always gives conviction to the move and vice versa. A green candle with high volume confers bullishness and a big red candle with high volume tells bearness!
How to find bullish candle?
There are single and multiple patterns that you can look into for bullish candle. However, make sure of the fake breakouts. Using candles with indicators and volume will give you the best result.
Is there unlimited loss in option trading?
Not for all.
Options buyers can lose up to the Premium paid. For example, if you have bought a lot of 50 with premium of Rs 1000, the premium can end up to Rs 0 at expiry. Here, You can lose all the
premium paid. For the options sellers, the loss can technically go to unlimited!
- As a beginner, where to learn options from?
You can learn options trading on FinGrad, our learning platform, where market experts teach you all the technicalities from scratch. You can also ask your questions related to options on our forum after signing up. https://joinfingrad.com/
- Which is better to trade Bank nifty or Nifty?
Bank nifty is considered better as it is more volatile and makes more money in the same time frame.
Also comparatively easy to track as you’ve to only track a few top banking stocks with high weightage in Nifty Bank like HDFC bank and ICICI bank. Nevertheless, trading in the Nifty can be little easier for beginners who do not know bank nifty levels well.
The lot size is also different in both these indices!!
How a loss of option seller is technically unlimited?
The options sellers are forced to buy the stock at a certain price. When going down, the stock prices can go till zero. However, there is no limit to how high the stock can climb! Therefore, unlimited loss potential for options sellers.
How to build a strong psychology??
Trading psychology generally takes time to develop and comes with experience. No one likes losing and hence while losing money in your trades, it’s difficult to cut losses and stop trading for the day.
A few ways to develop strong trading psychology is to Document your trading, do not over-trade (restrict to only 2-3 trades in the beginning), stick to your trade system with entry, exit and stop loss points and consistently grow your trading knowledge.
- Why everyone does loss there?
If you directly jump in a swimming pool watching YouTube videos, you’ll drawn too!!
Most people do not learn the technicals and options basics and directly jump into trading. More than capital and setup…. skills, discipline and trading psychology is required to make money in options trading.
On which platform stocks implied volatility is available free of cost…?
Implied volatility can be found in options chain. You can find it on NSE India website.
What is premium decay?
Premium Decay is the Loss in the value of options premium with the passage of time as we go closer to expiry.
The monthly contract is best or weekly contract is best for option buying?
Stock options only have monthly expiry and Indices have weekly expiry. If you’ve a shorter view on indices, you can go for weekly expiry. Else, go for monthly expiry!
How many lots can we buy with a single order
A minimum of 1 lot is required. There is no maximum lot!
What’s the maximum loss which can be incurred in options, is it more than the capital?
For a seller, you can lose all your margin. For the buyer, the maximum loss is till the premium is paid. But no, you can’t erode more than your capital.