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What Is Option Trading? 8 Things to Know Before You Trade | Ally

 

How to do option trading in india

How to Start Day Trading in India Sharekhan is a popular option. Terminology. Learn the trading lingo and vocabulary and you’ll unlock the door to a whole host of trading secrets. Below we have collated the essential basic jargon, to create an easy to understand day trading glossary. Know what is options trading and how to trade in options. Learn about options trading and start trading today with Kotak Securities! There are various brokerage firms which give trading advice and not to forget experts that come on the news channels everyday% of the information are rumors in the markets which are spread either to create or reduce demand and supply to benefit.



What are Options and What is Options Trading | Kotak Securities® | Kotak Securities®


Options trading allows you to buy or sell stocks, ETFs etc. This type of trading also gives buyers the flexibility to not buy the security at the specified price or date. While it is a little more complex than stock trading, options can help you make relatively larger profits if the price of the security goes up. In the same way, options trading can restrict your losses if the price of the security goes down, which is known as hedging.

They can be used as:. One of the integral parts of hedging yourself against market fluctuations is to do financial planning. Though they have their advantages, trading in options is more complex than trading in regular shares, How to do option trading in india. It calls for a good understanding of trading and investment practices as well as constant monitoring of market fluctuations to protect against losses.

You can read up these 5 ways to hedge against a small-cap crash. Just as futures contracts minimize risks for buyers by setting a pre-determined future price for an underlying asset, options contracts do the same however, without the obligation to buy that exists in a futures contract.

Unlike the buyer in an options contract, the seller has no rights and must sell the assets at the agreed price if the buyer chooses to execute the options contract on or before the agreed date, in exchange for an upfront payment from the buyer. There is no physical exchange of documents at the time of entering into an options contract. The transactions are merely recorded in the stock exchange through which they are routed.

You can read about them here. When you are trading in the derivatives segment, you will come across many terms that may seem alien. Here are some Options-related jargons you should know about.

To know about the jargons related to Futures, click here. Strike Price Intervals: These are the different strike prices at which an options contract can be traded. These are determined by the exchange on which the assets are traded. There are typically at least 11 strike prices declared for every type of option in a given month - 5 prices above the spot price, 5prices below the spot price and one price equivalent to the spot price.

Following strike parameter is currently applicable for options contracts on all individual securities in NSE Derivative segment: The strike price interval would be:. A future date on or before which the options contract can be executed. Options contracts have three different durations you can pick from:. Please note that in Indian market only European type of options are available for How to do option trading in india. The standard lot size is different for each stock and is decided by the exchange on which the stock is traded.

Open Interest: Open Interest refers to the total number of outstanding positions on a particular options contract across all participants in the market at any given point of time. Open Interest becomes nil past the expiration date for a particular contract. Let us understand with an example: If trader A buys Nifty options from trader B where, both traders A and B are entering the market for the first time, the open interest would be futures or two contract. The next day, Trader A sells her contract to Trader C, How to do option trading in india.

Now, if trader A buys more Nifty Futures from another trader D, the open interest in the Nifty Futures contract would become futures or 4contracts. Call options usually become more valuable as the value of the underlying asset increases. You can learn more about call options here. Put Option: The Put Option gives the holder the right to sell a particular asset at the strike price anytime on or before the expiration date in return for a premium paid up front.

Since you can sell a stock at any given point of time, if the spot price of a stock falls during the contract period, the holder is protected from this fall in price by the strike price that is pre-set. This explains why put options become more valuable when the price of the underlying stock falls. Similarly, if the price of the stock rises during the contract period, the How to do option trading in india only loses the premium amount and does not suffer a loss of the entire price of the asset.

This means, under this contract, Rajesh has the rights to buy one lot of Infosys shares at Rs per share any time between now and the month of May. He paid a premium of Rs per share. He thus pays a total amount of Rs 25, to enjoy this right to sell. Now, suppose the share price of Infosys rises over Rs 3, to RsRajesh can consider exercising the option and buying at Rs 3, per share.

He would be saving Rs per share; this can be considered a tentative profit. However, he still makes a notional net loss of Rs 50 per share once you take the premium amount into consideration. For this reason, Rajesh may choose to actually exercise the option once the share price crosses Rs 3, levels.

Otherwise, he can choose to let the option expire without being exercised, How to do option trading in india. Rajesh believes that the shares of Company X are currently overpriced and bets on them falling in the next few months. Since he wants to secure his position, he takes a put option on the shares of Company X.

Rajesh buys shares of Company X Put at a How to do option trading in india price of and pays Rs 30 per share as premium. His total premium paid is Rs 30, If the spot price for Company X falls below the Put option Rajesh bought, say to Rs ; Rajesh can safeguard his money by choosing to sell the put option. He will make Rs 50 per share Rs minus Rs on the trade, making a net profit of Rs 20, Rs 50 x shares — Rs 30, paid as premium.

Alternately, if the spot price for Company X rises higher than the Put option, say Rs ; he would be at a loss if he How to do option trading in india to exercise the put option at Rs So, he will choose, in this case, to not exercise the put option, How to do option trading in india. In the process, he only loses Rs 30, — the premium amount; this is much lower than if he had exercised his option.

We saw that options can be bought for an underlying asset at a fraction of the actual price of the asset in the spot market by paying an upfront premium. The amount paid as a premium to the seller is the price of entering an options contract.

Understand Naked and Covered Options Contracts here. The price of an Option Premium is controlled by two factors — intrinsic value and time value of the option. This is because contracts with longer expiration periods give the holder more flexibility on when to exercise their option. This longer time window lowers the risk for the contract holder and prevents them from landing in a tight spot.

At the beginning of a contract period, the time value of the contract is high. If the option remains in-the-money, the option price for it will be high. If the option goes out-of-money or stays at-the-money this affects its intrinsic value, which becomes zero. In such a case, only the time value of the contract is considered and the option price goes down.

As the expiration date of the contract approaches, the time value of the contract falls, negatively affecting the option price. In this section, we understood the basics of Options contracts, How to do option trading in india. In the next part, we go into details about Call options and Put options. Click here. Mon to Fri — 8. Existing customers can send in their grievances for Trading account to service. No need to issue cheques by investors while subscribing to IPO.

Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account. Circular No. Kotak Securities Ltd, How to do option trading in india. We have taken reasonable measures to protect security and confidentiality of the Customer Information. The Stock Exchange, Mumbai is not answerable, responsible or liable for any information on this Website or for any services rendered by our employees, our servants, and us.

Speedy redressal of the grievances. Telephone No. No 21, How to do option trading in india, Opp. Telephone No: Account Login Not Logged In. How to become a Franchisee? What is Options Trading? They can be used as: Leverage: Options help you profit from changes in share prices without putting down the full price of the share. You get control over the shares without buying them outright.

Hedging : They can also be used to protect yourself from fluctuations in the price of a share and letting you buy or sell the shares at a pre-determined price for a specified period of time.

About Options Just as futures contracts minimize risks for buyers by setting a pre-determined future price for an underlying asset, options contracts do the same however, without the obligation to buy that exists in a futures contract. Option Related Terms When you are trading in the derivatives segment, you will come across many terms that may seem alien.

Premium: The upfront payment made by the buyer to the seller to enjoy the privileges of an option contract. Expiration Date: A future date on or before which the options contract can be executed. Previous Chapter Next Chapter. Trading Demos. Register for our Newsletter Meaningful Minutes. Why Capital gains report?

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How to Start Day Trading in India - Tutorials and Reviews

 

How to do option trading in india

 

So as of now it is completely legal in India as per IQ Option and if it is illegal then IQ Opinion will not work in India like in USA Binary Option is completely illegal so if you will open IQ Option from the USA then they will not allow you to register. Hello guys, My name is Yash Patel and I have been working with stock exchange about 5 years NSE Ultimate options Expert, join our biggest team of trading. Wh. Option trading is for the DIY investor. Typically, option traders are self-directed investors, meaning they don’t work directly with a financial advisor to help manage their options trading portfolio. As a do-it-yourself (DIY) investor, you are in full control of your trading decisions and transactions. But that doesn’t mean you’re alone.