Monday, 7 October 2013

WHY AND HOW TO TRADE IN STOCK OPTION( CALL/PUT)?

WHY AND HOW TO TRADE IN STOCK OPTION( CALL/PUT)?

Option is a not understood or misunderstood instrument in Indian stock market.
But it is the best solution for small as well as big trader.

WATCH THIS VIDEO FOR DETAIL OPTION TARDING



Option means limited risk.
If you are seeing bullishness in suppose Reliance industries at 850, you expect it 920 in 10 days.

Now ,
there are many ways to trade this opportunity,
first, 
buy 100 shares of RIL. Invest 85,000 + 1.5% delivery brokerage & taxes.
profit may be +7000

second,
Trade intra day daily,but it is difficult to get 30 point out of total 70 pt movement,because
market gives biggest chunk of profit in GAP UP opening.
All daytraders miss this chance. But their cost is maximum in terms of time ,energy and recurring daily brokerage,even if intra day brokerage in 0.1% only.

third,
buy 1 call option suppose price ( premium ) of 900 call is 20,
then investment is 20*250=5000/- total
so our maximum risk is -5000 only and profit unlimited.
Brokerage is generally rs 50/- per trade.

If direction is not clear to us, whether RIL will go up or down ,then
Buy call for bull trend
+ buy PUT for bear trend

total investment 5000 for CALL +5000 for PUT=10,000/-
sometime we have seen up to 50,000 profit in this 10,000 investment,when nifty breaks it's medium term levels.
generally 5000 can be gained in 10,000.
make a safe combo and sleep for 10 days
till 15th of month.

last Thursday is expiry date,
CALL/PUT show price decay near expiry,so we should not make any CALL/PUT combination without any special reason.

If market goes up suddenly,
or goes down suddenly then you are in profit.
If stock becomes range bound then both CALL & PUT premium will decrease,
causing losses.

If RIL goes 920 from 850,then we shall get 5-7000 profit in  investment and risk of -5000 only.

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5 comments:

  1. Option Call For Today
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  2. The stock options are trading instruments, not investing instruments, and have much shorter trading horizons than if you trade stocks. This is also why options trading is associated so closely with technical analysis these days because technical analysis is extremely useful in identifying short term trends or reversal of trends. Thanks for providing such informative video as I have found the same at http://goo.gl/H3WRld . I highly recommend this learning resource to all to have a look and learn the art of making money. Thanks and best of luck!!!

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