Best stock for option trading in india.
As the logic of trying to limit trading to those who can afford trade with larger amounts, I'm sure it isn't because they are better at making money. And why would Sebi want to do that? This strategy has to be adopted in bearish markets for stocks which are not expected to rise in price. To the uninitiated like me, this appears to be an astonishingly low qualifying level for an activity whose only goal is supposed to be to earn money, but then I suppose that it must be rare n achievement. If a trader is holding a stock in cash segment, he can sell the corresponding call options for the stock. An Option is a contract between two parties buyer and seller to buy or sell stocks or a set of stocks loosely called a lot at a specific price decided on or before a certain date.
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Winning Strategies for Stock Options Trading by Shailesh Saraf - 25th Jan'17.
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This is the opposite of a call option, which gives the holder the right to buy shares.
We all negotiate on a daily basis.
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In this regard, trading online gives you control that would otherwise lie with your stock broker, and.
What is a commodity.
With a strategy, traders can look to focus on situations in which the market may be giving them the best probabilities of success.
The Indian Wall Street.
By Wealth Park – WealthPark. org.
5 ways to Make money in Futures & Options.
Derivatives or Futures and Options are leveraged instruments to trade in the stock market. There are broadly 3 groups of people who use derivatives-
Short term traders for making quick buck – most of them want to make a quick buck. Leveraged trading means, you can potentially make 100% returns from a 10% movement in the stock. 100% returns from a 10% move looks lucrative! The only issue is you can lose bigger amount if stock moves in opposite direction Long term stock investors for hedging portfolio - these category of people may use derivatives for long term hedging of their portfolio or making some extra return on their stock holdings. They mainly use options. And, the idea is to hedge the portfolio, and not make great returns from short term trading Long term investors who buy special long term options with a long term view - These include big investors including Warren Buffett and many others buying warrants, convertible debentures, long term calls etc.
Majority of people who trade in derivatives come in the first category. More than 95% of traders lose money. Mostly these are young people who get job in corporate companies, open a new demat account and want to make some quick money. They are replaced by new traders (as new graduates complete college and get job). The cycle repeats.
Here is an interview of Nithin Kamath where he mentions –
“Why choose Bangalore? Couldn’t Zerodha have made it bigger by being in those hotbeds of trading — Mumbai or Ahmedabad? “It’s a myth that all the stock market trading is happening out of Mumbai or Ahmedabad. If Bangalore or Chennai had Mumbai’s population, we would have as many traders here too,” he laughs. Trading stocks, commodities and currencies, he says, is quite the rage with the salaried IT crowd in these two cities of the South. “ Every month, your trading ‘fund’ gets replenished by your salary ,” he says”
This article by Prashanth Krish, who has spent decades in Brokerage industry, confirms that more than 95% of traders lose money.
So, how to make big and safe money in derivative trading. There must be a way out. Yes, there are many ways, and people in India and outside are making huge money from derivatives trading.
Here are the 5 ways to become Rich from trading-
Open a Brokerage firm - Nithin Kamath realized that trading doesn’t make much money but starting a brokerage firm for traders will make it big. Within a few years, his brokerage firm Zerodha is valued at several Thousand Crores. He charges brokerage only from derivative trades. An inspiring story on how to make Big Money from Derivatives – yourstory/2012/11/zerodha/ Become a sub-broker - If you don’t have enough money to start your own brokerage company. You can start small, and become a sub-broker. Several people on Twitter have this Modus operandi. They suggest trades for no charge, and make good money from brokerage Workshops - You can do workshops on derivative trading and sell seats for a certain amount, which is not big for an individual like 10k, but is good enough for you with a size of 40 people in one day. This idea is well known in the western world , and Indian traders have recently started copying the idea Sell trading Softwares/Data - Software sellers, data sellers again have a guaranteed income. If your software hits it big like Amibroker, you can again make several thousand crores Start a Newsletter/Tip service – This is the easiest one. Divide your potential clients in 2 groups - Tell one group to go long on Nifty for coming days, and tell other group to short nifty for coming few days. You will be God for 1 group. Again divide the first group into 2 parts. Repeat the process. After 2-3 consecutive hits with 1 group (due to sub-division), the people in the group will be ready to pay you whatever you ask!
Each of the above options should make you good money. Go ahead, and all the best!
If you want to trade derivatives, you should read this article by Prashanth Krish - where he clearly mentions that.
You got to be Full time More than 95% lose Even Survival is difficult.
Call Option Trading Example.
How To Make Money Trading Call Options.
Example of Call Options Trading:
Trading call options is so much more profitable than just trading stocks, and it's a lot easier than most people think, so let's look at a simple call option trading example.
Call Option Trading Example:
Suppose YHOO is at $40 and you think its price is going to go up to $50 in the next few weeks. One way to profit from this expectation is to buy 100 shares of YHOO stock at $40 and sell it in a few weeks when it goes to $50. This would cost $4,000 today and when you sold the 100 shares of stock in a few weeks you would receive $5,000 for a $1,000 profit and a 25% return.
While a 25% return is a fantastic return on any stock trade, keep reading and find out how trading call options on YHOO could give a 400% return on a similar investment!
How to Turn $4,000 into $20,000:
With call option trading, extraordinary returns are possible when you know for sure that a stock price will move a lot in a short period of time. (For an example, see the $100K Options Challenge)
Let's start by trading one call option contract for 100 shares of Yahoo! (YHOO) with a strike price of $40 which expires in two months.
To make things easy to understand, let's assume that this call option was priced at $2.00 per share, which would cost $200 per contract since each option contract covers 100 shares. So when you see the price of an option is $2.00, you need to think $200 per contract. Trading or buying one call option on YHOO now gives you the right, but not the obligation, to buy 100 shares of YHOO at $40 per share anytime between now and the 3rd Friday in the expiration month.
When YHOO goes to $50, our call option to buy YHOO at a strike price of $40 will be priced at least $10 or $1,000 per contract. Why $10 you ask? Because you have the right to buy the shares at $40 when everyone else in the world has to pay the market price of $50, so that right has to be worth $10! This option is said to be "in-the-money" $10 or it has an "intrinsic value" of $10.
Call Option Payoff Diagram.
So when trading the YHOO $40 call, we paid $200 for the contract and sold it at $1,000 for a $800 profit on a $200 investment--that's a 400% return.
In the example of buying the 100 shares of YHOO we had $4,000 to spend, so what would have happened if we spent that $4,000 on buying more than one YHOO call option instead of buying the 100 shares of YHOO stock? We could have bought 20 contracts ($4,000/$200=20 call option contracts) and we would have sold them for $20,000 for a $16,000 profit.
Call Options Trading Tip: In the U. S., most equity and index option contracts expire on the 3rd Friday of the month, but this is starting to change as the exchanges are allowing options that expire every week for the most popular stocks and indices.
Call Options Trading Tip: Also, note that in the U. S. most call options are known as American Style options . This means that you can exercise them at any time prior to the expiration date. In contrast, European style call options only allow you to exercise the call option on the expiration date!
Call and Put Option Trading Tip: Finally, note from the graph below that the main advantage that call options have over put options is that the profit potential is unlimited! If the stock goes up to $1,000 per share then these YHOO $40 call options would be in the money $960! This contrasts to a put option in the most that a stock price can go down is to $0. So the most that a put option can ever be in the money is the value of the strike price.
What happens to the call options if YHOO doesn't go up to $50 and only goes to $45?
If the price of YHOO rises above $40 by the expiration date, to say $45, then your call options are still "in-the-money" by $5 and you can exercise your option and buy 100 shares of YHOO at $40 and immediately sell them at the market price of $45 for a $3 profit per share. Of course, you don't have to sell it immediately-if you want to own the shares of YHOO then you don't have to sell them. Since all option contracts cover 100 shares, your real profit on that one call option contract is actually $300 ($5 x 100 shares - $200 cost). Still not too shabby, eh?
What happens to the call options if YHOO doesn't go up to $50 and just stays around $40?
Now if YHOO stays basically the same and hovers around $40 for the next few weeks, then the option will be "at-the-money" and will eventually expire worthless. If YHOO stays at $40 then the $40 call option is worthless because no one would pay any money for the option if you could just buy the YHOO stock at $40 in the open market.
In this instance, you would have lost only the $200 that you paid for the one option.
What happens to the call options if YHOO doesn't go up to $50 and falls to $35?
Now on the other hand, if the market price of YHOO is $35, then you have no reason to exercise your call option and buy 100 shares at $40 share for an immediate $5 loss per share. That's where your call option comes in handy since you do not have the obligation to buy these shares at that price - you simply do nothing, and let the option expire worthless. When this happens, your options are considered "out-of-the-money" and you have lost the $200 that you paid for your call option.
Important Tip - Notice that you no matter how far the price of the stock falls, you can never lose more than the cost of your initial investment. That is why the line in the call option payoff diagram above is flat if the closing price is at or below the strike price.
Also note that call options that are set to expire in 1 year or more in the future are called LEAPs and can be a more cost effective way to investing in your favorite stocks.
Always remember that in order for you to buy this YHOO October 40 call option, there has to be someone that is willing to sell you that call option. People buy stocks and call options believing their market price will increase, while sellers believe (just as strongly) that the price will decline. One of you will be right and the other will be wrong. You can be either a buyer or seller of call options. The seller has received a "premium" in the form of the initial option cost the buyer paid ($2 per share or $200 per contract in our example), earning some compensation for selling you the right to "call" the stock away from him if the stock price closes above the strike price. We will return to this topic in a bit.
The second thing you must remember is that a "call option" gives you the right to buy a stock at a certain price by a certain date; and a "put option" gives you the right to sell a stock at a certain price by a certain date. You can remember the difference easily by thinking a "call option" allows you to call the stock away from someone, and a "put option" allows you to put the stock (sell it) to someone.
Here are the top 10 option concepts you should understand before making your first real trade:
Options Resources and Links.
Options trade on the Chicago Board of Options Exchange and the prices are reported by the Option Pricing Reporting Authority (OPRA):
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Can You Really Make Money with Binary Options Trading - Iqoption | Hindi\Urdu Video Tutorial.
Warning: NOTE: THIS VIDEO IS NOT INVESTMENT ADVICE.
Warning Risk: Your capital may be at risk. This material is not investment advice.
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