Options trading in india tutorial pdf

Options trading in india tutorial pdf Enriching Investors Since 1998. Profitable Trading Solutions for the Intelligent Investor. Beginners Guide to Options. What is an option? An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date. An option is a derivative. That is, its value is derived from something else. In the case of a stock option, its value is based on the underlying stock (equity). In the case of an index option, its value is based on the underlying index (equity). · Listed Options are securities, just like stocks. · Options trade like stocks, with buyers making bids and sellers making offers. · Options are actively traded in a listed market, just like stocks. They can be bought and sold just like any other security. · Options are derivatives, unlike stocks (i. e, options derive their value from something else, the underlying security). · Options have expiration dates, while stocks do not.

· There is not a fixed number of options, as there are with stock shares available. · Stockowners have a share of the company, with voting and dividend rights. Options convey no such rights. Some people remain puzzled by options. The truth is that most people have been using options for some time, because option-ality is built into everything from mortgages to auto insurance. In the listed options world, however, their existence is much more clear. Types Of Expiration. There are two different types of options with respect to expiration. There is a European style option and an American style option. The European style option cannot be exercised until the expiration date. Once an investor has purchased the option, it must be held until expiration.

An American style option can be exercised at any time after it is purchased. Today, most stock options which are traded are American style options. And many index options are American style. However, there are many index options which are European style options. An investor should be aware of this when considering the purchase of an index option. An option Premium is the price of the option. It is the price you pay to purchase the option. For example, an XYZ May 30 Call (thus it is an option to buy Company XYZ stock) may have an option premium of Rs.2. The Strike (or Exercise) Price is the price at which the underlying security (in this case, XYZ) can be bought or sold as specified in the option contract. The Expiration Date is the day on which the option is no longer valid and ceases to exist. The expiration date for all listed stock options in the U. S. is the third Friday of the month (except when it falls on a holiday, in which case it is on Thursday). People who buy options have a Right, and that is the right to Exercise. When an option holder chooses to exercise an option, a process begins to find a writer who is short the same kind of option (i. e., class, strike price and option type).

Once found, that writer may be Assigned. There are two types of options - call and put. A call gives the buyer the right, but not the obligation, to buy the underlying instrument. A put gives the buyer the right, but not the obligation, to sell the underlying instrument. The predetermined price upon which the buyer and the seller of an option have agreed is the strike price, also called the exercise price or the striking price. Each option on a underlying instrument shall have multiple strike prices. Call option - underlying instrument price is higher than the strike price. Put option - underlying instrument price is lower than the strike price. Call option - underlying instrument price is lower than the strike price. Put option - underlying instrument price is higher than the strike price. The underlying price is equivalent to the strike price. Options have finite lives. The expiration day of the option is the last day that the option owner can exercise the option. American options can be exercised any time before the expiration date at the owner's discretion.

A class of options is all the puts and calls on a particular underlying instrument. The something that an option gives a person the right to buy or sell is the underlying instrument. In case of index options, the underlying shall be an index like the Sensitive index (Sensex) or S&P CNX NIFTY or individual stocks. An option can be liquidated in three ways A closing buy or sell, abandonment and exercising. Buying and selling of options are the most common methods of liquidation. An option gives the right to buy or sell a underlying instrument at a set price. Options prices are set by the negotiations between buyers and sellers. Prices of options are influenced mainly by the expectations of future prices of the buyers and sellers and the relationship of the option's price with the price of the instrument. The time value of an option is the amount that the premium exceeds the intrinsic value. Time value = Option premium - intrinsic value. Long Term Investing. Multiply your capital by investing. long term trends.

Multi Bagger Stocks. Create wealth for yourself. quickly identifying changes in trends, riding the trend. booking profits at the end of the trend. Capture brief price swings. fast moving trending stocks. intra-day price volatility of the most active stocks in both. BULLISH & BEARISH Markets. generate a steady stream of daily income. Futures Day Trading. maximum profits everyday.

highly liquid futures contract. • Use of this website andor products & services offered by us indicates your acceptance of our disclaimer. • Disclaimer: Futures, option & stock trading is a high risk activity. Any action you choose to take in the markets is totally your own responsibility. TradersEdgeIndia. com will not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of this information. This information is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned. • All names or products mentioned are trademarks or registered trademarks of their respective owners. Options Basics Tutorial. Nowadays, many investors' portfolios include investments such as mutual funds, stocks and bonds. But the variety of securities you have at your disposal does not end there. Another type of security, known as options, presents a world of opportunity to sophisticated investors who understand both the practical uses and inherent risks associated with this asset class.

The power of options lies in their versatility, and their ability to interact with traditional assets such as individual stocks. They enable you to adapt or adjust your position according to many market situations that may arise. For example, options can be used as an effective hedge against a declining stock market to limit downside losses. Options can be put to use for speculative purposes or to be exceedingly conservative, as you want. Using options is therefore best described as part of a larger method of investing. This functional versatility, however, does not come without its costs. Options are complex securities and can be extremely risky if used improperly. This is why, when trading options with a broker, you'll often come across a disclaimer like the following: Options involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital. Options belong to the larger group of securities known as derivatives.

This word has come to be associated with excessive risk taking and having the ability crash economies. That perception, however, is broadly overblown. All “derivative” means is that its price is dependent on, or derived from the price of something else. Put this way, wine is a derivative of grapes ketchup is a derivative of tomatoes. Options are derivatives of financial securities – their value depends on the price of some other asset. That is all derivative means, and there are many different types of securities that fall under the name derivatives, including futures, forwards, swaps (of which there are many types), and mortgage backed securities. In the 2008 crisis, it was mortgage backed securities and a particular type of swap that caused trouble. Options were largely blameless. (See also: 10 Options Strategies To Know .) Properly knowing how options work, and how to use them appropriately can give you a real advantage in the market. If the speculative nature of options doesn't fit your style, no problem – you can use options without speculating. Even if you decide never to use options, however, it is important to understand how companies that you are investing in use them. Whether it is to hedge the risk of foreign-exchange transactions or to give employees ownership in the form of stock options, most multi-nationals today use options in some form or another.

This tutorial will introduce you to the fundamentals of options. Keep in mind that most options traders have many years of experience, so don't expect to be an expert immediately after reading this tutorial. If you aren't familiar with how the stock market works, you might want to check out the Stock Basics tutorial first. e-Book: 50 Futures and Options Trading Strategies. In an attempt to create awareness about the futures & options market, moneycontrol. com has come up with an e-Book on various strategies that can be used in the derivatives market. In an attempt to create awareness about the futures & options market, moneycontrol. com has come up with an e-Book on various strategies that can be used in the derivatives market. Download the pdf from the attachment. Disclaimer: The strategies mentioned in this e-book are only for learning purpose and cannot be construed as recommendations. Please consult your brokerfinancial adviser before executing a trade. tags #F&O cues #futures #options #trading strategies. These 6 fundamentally strong companies gave over 1000% return in last 10 years. Has Santa-Claus rally come to a halt?

3 stocks which could give up to 8% return. Plenty of stocks in market which can give up to 20% CAGR return for next 3-5 years. Must Watch. Copyright © e-Eighteen. com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express writtern permission of moneycontrol. com is prohibited. Copyright © e-Eighteen. com Ltd All rights resderved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express writtern permission of moneycontrol. com is prohibited. Confused? use our Compare Brokers feature.

Thank you for registering. Respective broker representative will reach you shortly. the pioneers of liberal education in India. The following is a snapshot of the educational landscape that animates the structure and scope of studies across disciplines at FLAME University making liberal education radically and decidedly modern and contemporary, yet deeply embedded in traditional Indian values and ethos. Elected Student Council Leaders. State of the art classrooms. Library Book Collection. World-class sports offerings. Lessons from the Masters. Placement Participating Companies. Students With Entrepreneurial Inclination. FLAME University exists to build an aspirational destination for students and faculty, to push the design and nature of studies and to create a societal upgradation phenomenon particularly in the fields of liberal education and leadership .

Gat No. 1270, Lavale, Off. Pune Bangalore Highway, Futures Trading Education. Here we offer a large amount of commodities trading educational material published by brokerages, the NFA, and the CFTC. This content is available for registered users, please sign in or register. If you've already registered please enter your email and password. Registering is exceptionally quick, easy, and FREE! We require it to keep our materials exclusive. E-books, Articles, and Educational Reports. Advanced Charts and Quotes Data. 30+ Chart Patterns and Analysis. Geopolitical News Center. Register: You entered the wrong password. We break our Futures trading education instructional material down into three sections for different commodity trading experience levels: Beginner, Intermediate, and Advanced.

Need to retool? Tighten up your strategies or just reassessed what you are doing? We have Day Trading RX. Beginner Futures Education on Trading. A beginner in commodities trading is somebody who wants to get involved in commodity futures trading but doesn't know the details of how contracts, markets, and exchanges work. People like this may be doctors, lawyers, businessmen, etc. who are looking for a way to diversify their investment portfolio or plan to become active day traders. This section breaks down the difference between the two main ways to get involved in futures trading, broker assist and day trading, and leads you through instruction on what futures trading is. If this is your experience level we recommend you take a look at the in-depth coverage that the Beginner section contains, and there is a summary of its material below. You can jump directly to a specific article by clicking it in this list, or you can go to the Beginner section and browse them all from there. Below are some futures trading basic that can assist you with your online futures trading Day Trading Futures 101 - the first article you should read if you are interested in futures trading. Opportunity and Risk - a 49-page report put out by the National Futures Association as an education guide to trading futures and options on futures. We provide it in PDF form. Top 50 Futures Trading Rules - the most popular answers to a survey of more than 10,000 futures traders. This is good to read once you have a fundamental grasp of futures trading.

A glossary of futures terms put out by the National Futures Association (NFA), which we provide in PDF form. This is meant to be a reference guide for you as you come across terms you don't understand. Intermediate Futures Education on Trading. Somebody who is an intermediate in commodities trading is somebody who understands the fundamentals of the futures trading market and has some basic experience with it. They may come from either a broker assist or a day trading background, and may have either short or long-term goals. This section is designed to give them a view of the more technical aspects and indicators of the futures trading market. If this is your experience level we recommend you take a look at the in-depth coverage that the Intermediate section contains, and there is a summary of its material below. You can jump directly to a specific article by clicking it in this list, or you can go to the Intermediate section and browse them all from there. Day Trading Rx - a list of steps to take to refine and tighten up your day trading. What's your futures trading blood type? - a PDF of an original e-book that is the result of decades of working with traders with a wide array of personalities, schedules, risk capital, and all trading in a variety of markets. We take these observations and put them into an easy to read publication that may help you discover your blood type and trading diet . Buying Options on Futures Contracts - a 27-page report put out by the National Futures Association as a guide to the uses and risks of options trading. Futures Options 101 - a PDF of a collection of strategies and a guide to trading futures options.

Key to Futures Trading - a letter about what the key to successful trading is in their opinion. Advanced Futures Education on Trading. Somebody advanced in commodities trading is most likely somebody who currently or recently day traded futures contracts, and understands the technical aspects of the market. This section is designed to give this type of person exposure to techniques and practices of other advanced traders to add to their knowledge. If this is your experience level we recommend you take a look at the in-depth coverage that the Advanced section contains, and there is a summary of its material below. You can jump directly to a specific article by clicking it in this list, or you can go to the Advanced section and browse them all from there. Live Day Trading Futures Webinar - During the webinar the host shares: his approach to day trading futures, strategies that can be applied to the E Mini S&P 500, crude oil futures, Euro currency, and other futures markets, and technical indicators reviews. Weekly Futures Trading Newsletter - a newsletter published once a week that contains the latest futures market news. Daily Futures Trading Blog - daily support and resistance levels reports sent out at the end of each trading day. One way to eliminate fear and greed while day trading - a report published in-house to address some of the trader's worst enemies. It focuses specifically on the drawbacks of entering multiple contracts. Page 1 of Futures Trading Chart Patterns - a collection of market movements to watch out for, and how to interpret them. Page 2 of Futures Trading Chart Patterns - more market movements to watch out for, and how to interpret them. Sharpening Your Futures Trading Skills: Tools The Winners Use - a PDF of an e-book by successful futures trader, Jim Wyckoff.

Trading commodity futures and options involves substantial risk of loss. The recommendations contained are of opinion only and do not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. This is not a solicitation of any order to buy or sell, but a current futures market view. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading! Education. Company. Have a Question For Us? Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. The NASDAQ Options Trading Guide. Equity options today are hailed as one of the most successful financial products to be introduced in modern times.

Options have proven to be superior and prudent investment tools offering you, the investor, flexibility, diversification and control in protecting your portfolio or in generating additional investment income. We hope you'll find this to be a helpful guide for learning how to trade options. Understanding Options. Options are financial instruments that can be used effectively under almost every market condition and for almost every investment goal. Among a few of the many ways, options can help you: Protect your investments against a decline in market prices Increase your income on current or new investments Buy an equity at a lower price Benefit from an equity price’s rise or fall without owning the equity or selling it outright. Benefits of Trading Options: Orderly, Efficient and Liquid Markets. Standardized option contracts allow for orderly, efficient and liquid option markets. Options are an extremely versatile investment tool. Because of their unique riskreward structure, options can be used in many combinations with other option contracts andor other financial instruments to seek profits or protection. An equity option allows investors to fix the price for a specific period of time at which an investor can purchase or sell 100 shares of an equity for a premium (price), which is only a percentage of what one would pay to own the equity outright. This allows option investors to leverage their investment power while increasing their potential reward from an equity’s price movements. Limited Risk for Buyer.

Unlike other investments where the risks may have no boundaries, options trading offers a defined risk to buyers. An option buyer absolutely cannot lose more than the price of the option, the premium. Because the right to buy or sell the underlying security at a specific price expires on a given date, the option will expire worthless if the conditions for profitable exercise or sale of the option contract are not met by the expiration date. An uncovered option seller (sometimes referred to as the uncovered writer of an option), on the other hand, may face unlimited risk. This options trading guide provides an overview of characteristics of equity options and how these investments work in the following segments: Enter a company name or symbol below to view its options chain sheet: Edit Favorites. Enter up to 25 symbols separated by commas or spaces in the text box below. These symbols will be available during your session for use on applicable pages. Customize your NASDAQ. com experience. Select the background color of your choice: Select a default target page for your quote search: Please confirm your selection: You have selected to change your default setting for the Quote Search. This will now be your default target page unless you change your configuration again, or you delete your cookies. Are you sure you want to change your settings? Please disable your ad blocker (or update your settings to ensure that javascript and cookies are enabled), so that we can continue to provide you with the first-rate market news and data you've come to expect from us. Basics of Futures and Options. We have understood Derivatives and their market landscape.

We met the key players therein. Now let us introduce ourselves to the instruments that give Derivatives their flexibility and make them lucrative for traders. By Sahaj Agrawal, AVP - Derivatives, Kotak Securities. We have understood Derivatives and their market landscape. We met the key players therein. Now let us introduce ourselves to the instruments that give Derivatives their flexibility and make them lucrative for traders. As we already know, in a Derivative market, we can either deal with Futures or Options contracts. In this chapter, we focus on understanding what do Futures mean and how best to derive the most from trading in them. A Futures Contract is a legally binding agreement to buy or sell any underlying security at a future date at a pre determined price. The Contract is standardised in terms of quantity, quality, delivery time and place for settlement at a future date (In case of equityindex futures, this would mean the lot size). Both parties entering into such an agreement are obligated to complete the contract at the end of the contract period with the delivery of cashstock. Each Futures Contract is traded on a Futures Exchange that acts as an intermediary to minimize the risk of default by either party. The Exchange is also a centralized marketplace for buyers and sellers to participate in Futures Contracts with ease and with access to all market information, price movements and trends. Bids and offers are usually matched electronically on time-price priority and participants remain anonymous to each other.

Indian equity derivative exchanges settle contracts on a cash basis. To avail the benefits and participate in such a contract, traders have to put up an initial deposit of cash in their accounts called as the margin. When the contract is closed, the initial margin is credited with any gains or losses that accrue over the contract period. In addition, should there be changes in the Futures price from the pre agreed price, the difference is also settled daily and the transfer of such differences is monitored by the Exchange which uses the margin money from either party to ensure appropriate daily profit or loss. If the minimum maintenance margin or the lowest amount required is insufficient, then a margin call is made and the concerned party must immediately replenish the shortfall. This process of ensuring daily profit or loss is known as mark to market. However, if and ever a margin call is made, funds have to be delivered immediately as not doing so could result in the liquidation of your position by the Exchange or Broker to recover any losses that may have been incurred. When the delivery date is due, the amount finally exchanged would hence, be the spot differential in value and not the contract price as every gain and loss till the due date has been accounted for and appropriated accordingly. For example, on one hand we have A, who holds equity of XYZ Company, currently trading at Rs 100. A expects the price go down to Rs 90. This ten-rupee differential could result in reduction of investment value. On the other hand, we have B, who has been tracking the performance of XYZ Company and given his intuition and expertise, feels that the stock price could increase to Rs 130 in the next three months. He wishes to buy the stock at a lower price now to sell later when the price increases in the future, thereby making a quick profit in the bargain.

However, he can only pay a nominal sum now and arrange for the necessary funds to buy the stock in three months. Now, A and B submit their orders to the Exchange to enter into a futures contract with a maturity period of three months (this is the maximum available time limit on the Exchange for the Futures segment). Once the orders are matched and traded, both traders hold their desired Futures positions as decided, so now A would hold a short position against his holdings. Thus if the stock price fell below Rs 100, A would not lose the value of his holdings as he remains hedged against the lowering of price. In the above example A would be the seller of the contract while B would be the buyer. A’s market position hence would be short (sell) while B would go long (buy). This thus reflects the expectations that each party has from the Futures Contract they have participated in - B hopes that the asset price is going to increase, while A expects that it will decrease. Futures are used to both hedge and speculate possible price movements of stock. Participants in a Futures market can profit from such contracts because they can enjoy benefits without actually having to hold on the stock until expiry. In the above example, B is holding his buy position with the expectation of a possible increase in the price until the contract expires and can also hedge his position by entering into a another Futures Contract with C as a seller, with the same Contract specifications – ie – quantity, quality, price, time period and location. B would thus, be able to deflect or offset any loss he may incur in his agreement with A. To sum up, Futures are leveraged standardised contracts with linear returns in reference to the underlying asset and are traded on a secure and monitored Exchange platform, thereby reducing credit risk. With this article outlining the basics, we hope that you are ready for the Futures! tags #AVP - Derivatives #Brokerage Recos - F&O #derivatives #F&O #Kotak Securities #Sahaj Agrawal.

These 6 fundamentally strong companies gave over 1000% return in last 10 years. Has Santa-Claus rally come to a halt? 3 stocks which could give up to 8% return. Plenty of stocks in market which can give up to 20% CAGR return for next 3-5 years. Must Watch. Trending news. Copyright © e-Eighteen. com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express writtern permission of moneycontrol. com is prohibited. Copyright © e-Eighteen. com Ltd All rights resderved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express writtern permission of moneycontrol.

com is prohibited. Confused? use our Compare Brokers feature. Thank you for registering. Respective broker representative will reach you shortly. Option Trading Tutorial. My blog was designed as a timeless option trading tutorial. I intend to keep adding option trading articles on a periodic basis. Each one takes four to six hours to compose and even though the examples might be dated, the information will stand the test of time. Within the blog, you can use the search feature to find specific option trading tutorials. In the Category section you will find a group of articles called, "How To Start Trading Options". These option trading tutorials identify resources and they help you build your knowledge base.

In the next section I teach you "How To Manage Your Trades". These option trading tutorials will explain certain setups and I will teach you how to adjust your option trades. I believe that in order to be a good option trader, you must first be a good stock trader. In the next section, "Analysis - Technical, Fundamental, Market", I explain some key concepts for technical and fundamental analysis. I describe gaps, reversals, breakouts, "V Bottoms" and much more in these option trading tutorials. As you read about option trading, you will come across many different approaches. Some are good and some are not. In this next section of my blog, "Option Strategies Good and Bad", I teach what I've learned over the past 20 years. I explain some of the strategies that I use and why they work. I also describe some of the option trading strategies that don't and I explain why they are flawed.

Options are a complex instrument and in the next section, "Option Intricacies - Expiration, Assignment, Volatility. " I describe some of the option trading nuances. Prices move very quickly and you need to know all of the details. In the next section, "Relative StrengthWeakness - My Edge", I use option trading tutorials to describe my advantage. To be a successful option trader, you must use a systematic approach to increase your odds. In the final category, "How I Trade Options", the option trading tutorials describe my personal philosophies and methods. I have been involved in almost every facet of option trading during my career and I have formed concrete opinions of what works and what doesn't. I am forever a student of the market and I try to learn something new everyday. I hope that my option trading tutorials provide you with new insights. Resources. Free Option Trading Event. Feel the power of my systematic approach as I find new stock option trades. Space is limited for this live online presentation. Register Now. The Options & Futures Guide.

Learn option trading and you can profit from any market condition. Understand how to trade the options market using the wide range of option strategies. Discover new trading opportunities and the various ways of diversifying your investment portfolio with commodity and financial futures. To help you along in your path towards understanding the complex world of financial derivatives, we offer a comprehensive futures and options trading education resource that includes detailed tutorials, tips and advice right here at The Options Guide . Profit graphs are visual representations of the possible outcomes of options strategies. Profit or loss are graphed on the vertical axis while the underlying stock price on expiration date is graphed on the horizontal axis. Before you begin trading options, you should know what exactly is a stock option and understand the two basic types of option contracts - puts and calls. Learn how they work and how to trade them for profits. Read more. Binary Option Basics: Binary option trading is quickly gaining popularity since their introduction in 2008. Check out our complete guide to trading binary options. Read more. The covered call is a popular option trading method that enables a stockholder to earn additional income by selling calls against a holding of his stock.

Read more. Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable. For instance, a sell off can occur even though the earnings report is good if investors had expected great results. Read more. Stock Option Trading Basics: For the short to medium term investor, stock option investing provide an additional suite of investment options to let him make better use of his investment capital. Read more. When trading options, you will come across the use of certain greek alphabets such as delta or gamma when describing risks associated with various options positions. They are known as "the greeks". Read more. Option Trading Advice: Many options traders tend to overlook the effects of commission charges on their overall profit or loss. It's easy to forget about the lowly $15 commission fee when every profitable trade nets you $500 or more.

Heck, it's only 3% right. Read more. Stock Options Advice: Cash dividends issued by stocks have big impact on their option prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date. Read more. Learn about the put call ratio, the way it is derived and how it can be used as a contrarian indicator. Read more. Another way to play the futures market is via options on futures. Using options to trade futures offer additional leverage and open up more trading opportunities for the seasoned trader. Read more.

Day trading options can be a successful, profitable method but there are a couple of things you need to know before you use start using options for day trading. Read more. Stock Options Tutorial: If you are very bullish on a particular stock for the long term and is looking to purchase the stock but feels that it is slightly overvalued at the moment, then you may want to consider writing put options on the stock as a means to acquire it at a discount. Read more. Stock Options Advice: To achieve higher returns in the stock market, besides doing more homework on the companies you wish to buy, it is often necessary to take on higher risk. A most common way to do that is to buy stocks on margin. Read more. Stock Option Tutorial: Some stocks pay generous dividends every quarter. You qualify for the dividend if you are holding on the shares before the ex-dividend date. Read more. Follow Us on Facebook to Get Daily Strategies & Tips!

Futures Basics. Bearish Strategies. Synthetic Positions. Risk Warning: Stocks, futures and binary options trading discussed on this website can be considered High-Risk Trading Operations and their execution can be very risky and may result in significant losses or even in a total loss of all funds on your account. You should not risk more than you afford to lose. Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. Information on this website is provided strictly for informational and educational purposes only and is not intended as a trading recommendation service. TheOptionsGuide. com shall not be liable for any errors, omissions, or delays in the content, or for any actions taken in reliance thereon. The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose. Options trading in india tutorial pdf StrategyBuilder &ndash Users can build their own strategies by searching options and then combining selected options. BingoBrowser &ndash Users can search for individual stockindex options based on parameters specified. NIFTY Tips &ndash This package is designed for NIFTY short term positional traders.

NIFTY report with targets and stop-loss is uploaded by Sunday 2:00 PM. Can be used by traders interested in NIFTY Options, Futures or Options Strategies. Options Tutorial &ndash This package can be used by traders who want to learn options trading. Content includes lots of examples from Indian market context and includes concepts which are generally not included in popular text books. Complex topics are explained in easy manner. Intraday Trading System &ndash This package is designed for intraday traders. BuySell signals are generated on the screen during market hours. This is algo based trading system which uses statistical analytical techniques to analyze realtime demand and supply situation of the stock and identifies buysellexit opportunities. Another feature of this system is that it has inbuilt trailing stop loss management so that you don't lose out the profit you deserve. No need to download any software. A premium service from trader to trader. For more information refer tools sections or get yourself registered with us. You can only trade options on a fixed number of underlyers (stocks , Index etc).

This list is maintained by exchanges and updated from time to time. In NSE website nseindia. com you can get the list under FnO section. There is a trading size defined by exchanges called &lsquolot&rsquo. You can trade in multiple of lots. For example one lot of NIFTY holds 50 contracts. At a minimum you need to trade 1 lot. Number of lots should be in whole numbers like 2, 3 4 and so on but not fractions. So if you have traded 3 lots of NIFTY you actually hold 3 * 50 (No of lots * Nifty lot size) = 150 contracts. An option is a contract to buysell a stock (underlyer). Contract defines a fixed price at which stocks could be traded. This is called strike price. Contract has a maturity date which is the date till the contract is valid. The seller (called option writer) sells the contract to Buyer.

Buyer pays the price of the contract called premium to seller. Buyer has the right, but not the obligation to buysell the stock(underlyer) at a fixed price (strike price). The contract also obligates the seller or writer to meet the terms of delivery if the contract right is exercised by the contract buyer. If you have not fully understood the concept of Options please don&rsquot give up. Continue to read the FAQ section many of your doubles will get cleared after reading subsequent sections. It is the fixed price at which owner (buyer) of the CALL option can buy the underlying asset from option seller, no matter whatever is the current price of the underlying asset. Example, If strike price of Reliance CALL option is 1300 that means buyer of this option can buy Reliance stock at 1300 even if the current market price of the stock is higher (say 1500). In case of Put options, strike price is the price at which owner (buyer) of the PUT option can sell the underlying asset to the option seller, no matter whatever is the current price of the underlying asset. Example, if strike price of Reliance PUT option is 1300 that means buyer of this option can sell Reliance stock at 1300 even if the current market price of the stock is lower (say 1100). If you are bullish. You may consider BUY-ing CALL options You may consider SELL-ing PUT options (remember that selling naked option is a risky method and mostly used by expert traders) If you are bearish. You may consider BUY-ing PUT options You may consider SELL-ing CALL option. People buy CALL option when they are bullish i. e. they anticipate that price of the underlying stock will move up. Let&rsquos understand using an example.

Suppose, today&rsquos date is 1-MAY-2008 and you buy a RELIANCE CALL option (strike=2500, maturity June 2008) @ Rs. 50 per contract when RELIANCE stock was getting traded at 2400. Let&rsquos see what happens after options expiration. Case I : Reliance stock price greater than the strike price. Reliance stock trading at 2600 on expiry day cut-off time. Net profit = (current price &ndash strike price) - premium = (2600 &ndash 2500) -50= Rs. 50 per contract. Case II : Reliance stock price less than strike price (2500) on expiry day cut-off time. Net loss = Premium paid = Rs. 50 per contract. So when you buy a CALL option you have unlimited profit potential but limited risk or downside. People buy PUT option when they are bearish i. e they anticipate that price of the underlying stock will go down. Let&rsquos understand using an example. Suppose, today&rsquos date is 1-MAY-2008 and you buy a Reliance PUT option (strike=2500, maturity June 2008) @ Rs. 50 per contract when RELIANCE stock was TRADING at 2600.

Let&rsquos see what happens after options expiration. Case I : Reliance stock price is less than the strike price. Reliance stock trading at 2400 on expiry day cut-off time. Net Profit = (Strike Price &ndash Current Price) &ndash premium = 2500 &ndash 2400 &ndash 50 = 50. Net loss = Premium paid = Rs 50 per contract. So, when you buy a PUT option you have unlimited profit potential but limited risk or downside. This is a bearish method. It has unlimited loss and limited profit potential. Selling options is not recommended for beginner level traders. Let&rsquos understand it using an example. Suppose you want to SELL NIFTY call option (strike=5000 expiration June 2008) on 1-MAY-2008 at 50 Rs per contract and NIFTY was trading at 4900 at that time. When you get a buyer for this contract you get paid @ Rs. 50 per contract and are credited to your account. Let&rsquos see what happens after options expiration. Case I : NIFTY price <= strike price on expiry day cut-off time. Net Profit = 50 (Premium credited to your account when the trade was executed) Case II : NIFTY price > strike price on expiry day cut-off time.

Net = STRIKE price &ndash Nifty cut-off PRICE + PREMIUM. Example : If NIFTY cut-off price = 5025  Net = 5000 &ndash 5025 + 50 = Rs. 25 per contract(Profit) If NIFTY cut-off price = 5100  Net = 5000 &ndash 5100 + 50 = Rs. -50 per contract (Loss) This is a bullish method. It has unlimited loss and limited profit potential. Selling options is not recommended for beginner level traders. Let&rsquos understand it using an example. Support you SELL a NIFTY PUT option (strike=5000, expiration June 2008) on 1-MAY-2008 at 50 Rs per contract when NIFTY was trading at 5050. When you get a buyer for this contract you get paid @ Rs. 50 per contract and are credited to your account. Let&rsquos see what happens after options expiration. Case I : NIFTY price >= strike price on expiry day cut-off time. Net Profit = 50 (Premium credited to your account when the trade was executed) Case II : NIFTY price < strike price on expiry day cut-off time. Loss : STRIKE &ndash Nifty cut-off price - PREMIUM. Example : If NIFTY cut-off price = 4950, Loss = 5000 &ndash 4900 - 50 = 50 (LOSS) If Nifty cut-off price = 4975, Loss = 5000 &ndash 4975 - 50 = -25 (PROFIT) A person who Sells options is a writer. Writer sells to option buyer.

Yes, any investor can sell option though his broker. That&rsquos not correct. An option writer can close the SELL option transaction if heshe wants by squaring off. OwnerBuyer of the option need not worry about the opposite party as there will always be equal number of buyers and sellers available all the time for a given contract. Employee stock options are not tradable in exchanges unlike standardized options. Employee stock option terms are not standard for example company X gives employee A an option to own 100 stocks of the company @ 50 Rs. The same company gives employee B an option to own 2000 stocks of the company @ 35 Rs. Exchange traded options have standardized terms i. e lot size and strike price of a given contract is same for all investors. The main difference between options and futures is described below: Options contract gives the buyer the right, but not the obligation to buy (or sell) the underlying asset (stock, Index etc) at a specified price at any time during the life of the contract. On the other hand futures contract gives the buyer the obligation to buy underlying asset (index, stock etc) at a specified price at any time during the life of the contract. Each trade comprises two transactions, opening transaction and closing transaction. When you go long i. e BUY call (or put) option as opening transaction it is called as &ldquoBuy to open&rdquo.

You will close this position by taking opposite position i. e. by selling the same amount of call (or put) option. Closing transaction in this case would be called as &ldquoSell to close&rdquo. Each trade comprises two transactions, opening transaction and closing transaction. When your opening transaction is SELL short call (or put) option it is known as &ldquoSell to open&rdquo. You will close this position by taking opposite position i. e. by buying the same amount of call (or put) option. Closing transaction in this case would be called as &ldquoBuy to close&rdquo. If you own(bought) an American style option, you can exercise your right to buy (in case of call options) or right to sell (in case of put options) underlying asset anytime between the purchase date and expiry date. If you own(bought) an European style option, you can exercise your right to buy (in case of call options) or right to sell (in case of put options) underlying asset only on the expiry date. The underlying asset covered by index options is not shares in a company, but rather, an underlying Rupee value equal to the index level multiplied by Lot size. The amount of cash received at upon exercise or expiration depends on the settlement value of the index in comparison to the strike price of the index option. In India Index options have EUROPEAN exercise style and Stock options are AMERICAN exercise style. For more details refer question on difference between EUROPEAN & AMERICAL exercise styles. For questions regarding option exercise & exercise styles please refer OPTION EXERCISE section. Refer nseindia.

com. Under F&O section you can see contract information. If Option type is CE means CALL European style option, CA means CALL American style option, PE means PUT European style option, PA means PUT American style option. Yes. In NSE Index options are of European style whereas stock options are of American style. A call option is in-the-money if its strike price is below the current market price of the underlier (stock, Index etc) . For example, if you bought a 4000 strike NIFTY CALL OPTION and NIFTY is trading at 4200 the call option is in-the-money. A Put option is in the money when its strike price is above the current market price of the underlier (stock, Index etc.) . For example, if you bought a 5000 NIFTY PUT OPTION and NIFTY is trading at 4900 the put option is in-the-money. A call option is out-of-money when its strike price is above the current market price of the underlier (stock) .

For example, if you bought a 5000 NIFTY CALL OPTION and NIFTY is trading at 4900 the call option is out of money. A Put option is out-of-money when its strike price is below the current market price of the underlier (stock) . For example, if you bought a 5000 NIFTY PUT OPTION and NIFTY is trading at 5100 the put option is in-the-money. An option is at-the-money if the strike price of the option equals (or nearly equals) the market price of the underlying security(stock). Intrinsic value can be defined as the amount by which the strike price of an option is in-the-money . Some people view it as the value that any given option would have if it were exercised today. For Call options, Intrinsic value = Current Stock price &ndash Strike Price. For Put Options, Intrinsic value = Strike Price - Current Stock price. Note intrinsic value cannot have negative value so minimum intrinsic value is 0 for an option. Time Value = Option Price - Intrinsic Value. Lets take an example: If stock XYZ is trading at Rs 105 and the XYZ 100 call option is trading at Rs 7, Intrinsic value = 105 &ndash 100 = 5. Time Value = 7 &ndash 5 = 2. So, we would say that this option has time value = Rs 2. Different people view it in different manner. Generalizing it may not be a good idea.

Many people interpret open interest as described below: Rise or fall in the open interest may be interpreted as an indicator of the future expectations of the market. A rising open interest number indicates that the present trend is likely to continue. If the open interest number is stagnant, then it may suggest that the market is in a cautious mode. If Open interest starts declining, then the market suggests a trend reversal mood. In a rising market, continuous decline of open interest indicates an expectation of downward movement. Similarly, in a falling market, the decline of open interest indicates that the market expects an upward trend. Volume is the number of contracts of a particular option contract that have traded on a given day, similar to it meaning the number of shares traded on a particular stock on a given day. Open interest is the number of option contracts for a particular stock at a specific strike price and a specific expiration date that were open at the close of trading on the prior trading day. While some traders look at this information as an indication of liquidity of a particular option or option chain, a more reliable indicator may be the tightness of the bid ask spread. A common misconception is that open interest is the same thing as volume of options and futures trades. This is not correct, as demonstrated in the following example. C buys 5 option and D sells 5 option contracts. A sells his 1 option and D buys 1 option contract.

E buys 5 options from C who sells 5 options contracts. -On January 1, A buys an option, which leaves an open interest and also creates trading volume of 1. -On January 2, C and D create trading volume of 5 and there are also five more options left open. -On January 3, A takes an offsetting position, open interest is reduced by 1 and trading volume is 1. -On January 4, E simply replaces C and open interest does not change, trading volume increases by 5. PCR is a very popular indicator to measure the prevailing level of bullishness or bearishness in the market. Remember Put contract is bought by investors who are bearish and Call contracts are bought by people who are bullish. PCR is calculated as: PCR = No of traded Put options no of traded call options. As this ratio increases it means that investors are putting more money into put options rather than call options. There are different ways you can interpret this information to gauge market directions. Although options are derived from stocks or indexes but they are traded as independent securities in the markets. The price movement pattern and extent could be different than the underlying stockIndex. Delta value is used interpret the relationship between price movement of an option and its underlyer stockIndex. Like the stock trading price it is purely driven by Demand (buyers) and Supply (sellers). You can compute the fair value of options using Binomial or Black Scholes formulas.

We do provide theoretical value of options in our web-site using Black-scholes model. Exercising a stock CALL option means buying the stock at the price set by the option (strike price), regardless of the stock's price at the time you exercise the option. Exercising a stock PUT option means selling the stock at the price set by the option (strike price), regardless of the stock's price at the time you exercise the option. Let&rsquos understand it using an example: Mr. Gupta bought 2500-RELIANCE-CALL option contract. The stock is currently trading at Rs. 3000. If Mr. Gupta decides to &lsquoexercise&rsquo his right he will get the stocks at the rate of 2500 even though the stock is being traded at 3000. You square off options position when you want to close your existing position. Square off can be done by taking the exactly opposite position for e. g. if you have initially bought 1 lot of CALL (or PUT) option you can square off by selling 1 lot of CALL (or PUT) option with same strike and expiry. Similarly, if you have initially sold 1 lot of CALL (or PUT) option you can square off by buying 1 lot of CALL (or PUT) option. You may want to exercise your option when you want to take delivery of underlying stock or Index. You may want to exercise if you want to take the delivery of underlying stock and you have longmedium term interest in the stock. If you want to book profit or cut your losses, you may want to close out your position by squaring off.

If the option is of American style then it can be exercised any day (when the market is open) before its expiration. In case of European options it can be only exercised on the expiration day. Yes, you can close out your position by squaring off which in short means taking the reverse position. You can sell the underlying stock as soon as you give instructions to your broker to exercise. We suggest you also double check with your broker if there are any deviations and special rules apply. It all depends on your outlook of stock and your riskreward appetite. If you believe that the stock has made its move to large extent and there is not much scope of further movement in your anticipated direction then it you may want close out the position by squaring off. On the other hand if you believe that there is lot more steam left and the stock will go a long way, you can continue to hold your position. When the holder (buyer) of options exercise the option writer(seller) is said to be assigned the obligation to deliver the terms of option contract. If it is a CALL option the writer(seller) needs to deliver the obligated quantity of the underlying security at the strike price.

In case of PUT option the writer(seller) needs to buy the obligated quantity of the underlying security at the strike price. Assignment is done on a random basis. The clearing house picks short positions that ae eligible to be assigned and then allocates the exercised positions to any one or more short positions. All in the money options whether American or European style are automatically exercised by the clearing house. No, once an order is accepted by clearing house it cannot be ordinarily revoked. There is no way to know if you could get assigned. If you have sold an option there is always a possibility of getting assigned on any business day before expiration (in case the option is American style) to fulfill your obligation to receive (and pay for) or deliver (and get paid for) shares of underlyer stock . There are some general rules that you should keep in your mind: 1. Only small portion of options actually get exercised. 2. Majority of options get exercised when they get closer to expiration. Option exercise statistics are published in NSE website nseindia. com. I you continue to hold your option sell position you cannot eliminate the posibility of being assigned.

You can close your position any time by squaring off your position i. e taking the exact opposite position. No, you have closed out your position and there is no way you can get assigned. All in the money options are exercised automatically during the expiration day. For details please contact your broker. SEBI regulation says that if the value of the declared dividend is more than 10% of the spot price of the underlyer stock on the dividend announcement day then the strike price of the stock options are refuced by the dividend amount. If the decalred dividend is less than 10% then there is no adjustment of for the dividend by the exchange. In this case market adjusts the price of the options considering the dividend announcement. All active contracts will continue to exist until the last day (as declared). After that no more contracts on this stock will available for trading. If you are holding such an option your position will be exercised and settled on last day. It is always advisable to check with your broker regarding such announcements. &lsquoBuy Call&rsquo is capital gain method which involves uncapped profit potential and limited loss, where as &ldquoSell Call&rdquo is an income generation method which involves limited profit and unlimited loss potential. Selling options are only recommended for experienced investors. &lsquoBuy Put&rsquo is capital gain method which involves uncapped profit potential and limited loss, where as &ldquoSell Put&rdquo is an income generation method which involves limited profit and unlimited loss potential.

Selling options are only recommended for experienced investors. No, you keep the premium but you still need to deliver the underlying stocks to the options holder. Options spreads are the basic building blocks of many options trading strategies. A spread position is entered by buying and selling equal number of options of the same class on the same underlying security but with different strike prices or expiration dates. Refer our StrategyFinder tool to see real tradable strategies which also includes spreads. If you do it from the same trading account it will offset each other. If you do it from different accounts then you will have a flat position from economic perspective. There is no visible advantage in doing so. Margin is the amount of cash you need to deposit with your broker as a collateral if you want to write an uncovered (naked) option. You also need to maintain margin to cover your daily position valuation and reasonably foreseeable intra-day price changes. When you short sell an option there is unlimited risk involved if the stock moves in opposite of your expected market direction. There is always a possibility that the seller will not be able to fulfil his obligation to deliver the terms of the contract due to lack of funds. If the options price has increased significantly and the seller wants to close out his position by buying out the option there is possibility that he may not have sufficient funds in his account. This kind of situations will prevent markets from functioning efficiently as the counter party wont be able to get his payment. To avoid these kinds of circumstances the concept of margins were introduced in all markets across the world.

Volatility is a measure of the rate and magnitude of the change of prices (whether up or down) of the underlying. To put it simply you can view volatility as the speed at which price of underlying can move in either direction. If volatility is high, the premium on the option will be relatively high, and vice versa. You can find out the applicable margin from your broker. Many online brokers like hdfcsec. com , icicidirect. com etc. do provide tools to calculate margin requirements. No, you will not get margin benefits in this case. Yes, you will get benefits in this case. Yes, you will get margin benefits in this case. However, the benefit will be removed three days prior to expiry if the near month contract. Delta can be defined as amount by which an option&rsquos price will change for corresponding 1 point change in price of the underlying stock or index. Long Call options have positive deltas, whereas Long put options have negative delta whereas Short Call options have negative delta, and Short put options have positive delta.

Let understand using couple of examples. Delta of NIFTY Mar-2009 3000 CALL is 0.50. Theoretically, this means that if NIFTY moves up by 1 point, this option&rsquos price will go up by 0.5 point. Similarly, if NIFTY moves down by 1 point, this options price will go down by 0.5 point Delta of NIFTY Mar-2009 2800 PUT is -0.75. Theoretically, this means that if NIFTY moves up by 1 point, this option&rsquos price will go down by 0.75 point. Similarly, if NIFTY moves down by 1 point, this options price will go up by 0.75 point. Note that DELTA values are dynamic and changes almost everyday. If Delta is viewed as the &lsquospeed&rsquo of price movement of option relative to underlying then option Gamma can be viewed as the acceleration. Basically, Gamma measures the amount by which delta changes for a 1 point change in the stock price. For example, if Gamma of an option is 0.5, that means theoretically that with 1 point price movement of underlying the delta will move 0.5. Long calls and long puts have positive gamma whereas short calls and short puts have negative gamma. Vega can be interpreted as the amount by which the price of an option will change with 1% change in implied volatility of the underlying. One common scenario when option Vega changes is when there is a large movement in underlying price. Long calls and long puts both have positive vega where as short calls and short puts will always have negative Vega.

Option theta can be interpreted as change in the price of the option with one day decrease in the remaining life of the option. To put is simply it is a measure of time decay. Note that longer the life of an option, the higher will be the premium and vice versa. With each passing day the value of option decreases (considering all factors equal). When you want to buy an option you probably want to know what is the fair value of the option is and what should be the fair price of an option, whether the option is under-valued, over valued or rightly valued. You can get answers to these questions by calculating the theoretical value of an option. There are many mathematical models and formulas available which can be used. These are mathematical models that can be used to calculate the theoretical value and greeks of options. If you consider option Greeks in taking decisions to buy or sell options you are basically increasing your probability to make a profit in your trades. Disclaimer: OptionBingo does not make any recommendations for investments.

All contents herein are provided for illustrative, educational and informational purposes only and are not intended as recommendations to buy or sell. Any information provided herein shall not be construed as professional advice of any nature. Trading involves risks and it is advised that a certified financial analyst ought to be consulted before making any decisions. Copyright © 2009 OPTION BINGO CONSULTING PRIVATE LIMITED. All Rights Reserved.