Option trading strategies in india pdf viewer
Pick one from the recommended brokers list , where only brokers that have shown themselves to be trustworthy are included. The top broker has been selected as the best choice for most traders. These videos will introduce you to the concept of binary options and how trading works.
If you want to know even more details, please read this whole page and follow the links to all the more in-depth articles. There are however, different types of option. Here are some of the types available:.
Options fraud has been a significant problem in the past. Fraudulent and unlicensed operators exploited binary options as a new exotic derivative. These firms are thankfully disappearing as regulators have finally begun to act, but traders still need to look for regulated brokers. Here are some shortcuts to pages that can help you determine which broker is right for you:.
The number and diversity of assets you can trade varies from broker to broker. Commodities including gold, silver, oil are also generally offered. Individual stocks and equities are also tradable through many binary brokers. These lists are growing all the time as demand dictates. The asset lists are always listed clearly on every trading platform, and most brokers make their full asset lists available on their website. Full asset list information is also available within our reviews. The expiry time is the point at which a trade is closed and settled.
The expiry for any given trade can range from 30 seconds, up to a year. While binaries initially started with very short expiries, demand has ensured there is now a broad range of expiry times available. Some brokers even give traders the flexibility to set their own specific expiry time.
While slow to react to binary options initially, regulators around the world are now starting to regulate the industry and make their presence felt. The major regulators currently include:. There are also regulators operating in Malta and the Isle of Man.
Many other authorities are now taking a keen a interest in binaries specifically, notably in Europe where domestic regulators are keen to bolster the CySec regulation. Unregulated brokers still operate, and while some are trustworthy, a lack of regulation is a clear warning sign for potential new customers. We have a lot of detailed guides and strategy articles for both general education and specialized trading techniques. From Martingale to Rainbow, you can find plenty more on the strategy page.
For further reading on signals and reviews of different services go to the signals page. If you are totally new to the trading scene then watch this great video by Professor Shiller of Yale University who introduces the main ideas of options:. In addition, the price targets are key levels that the trader sets as benchmarks to determine outcomes. We will see the application of price targets when we explain the different types. Expiry times can be as low as 5 minutes. How does it work?
First, the trader sets two price targets to form a price range. If you are familiar with pivot points in forex, then you should be able to trade this type. This type is predicated on the price action touching a price barrier or not. If the price action does not touch the price target the strike price before expiry, the trade will end up as a loss.
Here you are betting on the price action of the underlying asset not touching the strike price before the expiration. Here the trader can set two price targets and purchase a contract that bets on the price touching both targets before expiration Double Touch or not touching both targets before expiration Double No Touch.
Normally you would only employ the Double Touch trade when there is intense market volatility and prices are expected to take out several price levels. Some brokers offer all three types, while others offer two, and there are those that offer only one variety. In addition, some brokers also put restrictions on how expiration dates are set. In order to get the best of the different types, traders are advised to shop around for brokers who will give them maximum flexibility in terms of types and expiration times that can be set.
Most trading platforms have been designed with mobile device users in mind. So the mobile version will be very similar, if not the same, as the full web version on the traditional websites.
Brokers will cater for both iOS and Android devices, and produce versions for each. Downloads are quick, and traders can sign up via the mobile site as well. Our reviews contain more detail about each brokers mobile app, but most are fully aware that this is a growing area of trading. Traders want to react immediately to news events and market updates, so brokers provide the tools for clients to trade wherever they are.
So, in short, they are a form of fixed return financial options. Call and Put are simply the terms given to buying or selling an option. As a financial investment tool they in themselves not a scam, but there are brokers, trading robots and signal providers that are untrustworthy and dishonest.
Our forum is a great place to raise awareness of any wrongdoing. Binary trading strategies are unique to each trade. Money management is essential to ensure risk management is applied to all trading. Different styles will suit different traders and strategies will also evolve and change.
Traders need to ask questions of their investing aims and risk appetite and then learn what works for them. Binary options can be used to gamble, but they can also be used to make trades based on value and expected profits.
So the answer to the question will come down to the trader. If you have traded forex or its more volatile cousins, crude oil or spot metals such as gold or silver, you will have probably learnt one thing: Things like leverage and margin, news events, slippages and price re-quotes, etc can all affect a trade negatively.
The situation is different in binary options trading. There is no leverage to contend with, and phenomena such as slippage and price re-quotes have no effect on binary option trade outcomes.
This reduces the risk in binary option trading to the barest minimum. The binary options market allows traders to trade financial instruments spread across the currency and commodity markets as well as indices and bonds. This flexibility is unparalleled, and gives traders with the knowledge of how to trade these markets, a one-stop shop to trade all these instruments. A binary trade outcome is based on just one parameter: The trader is essentially betting on whether a financial asset will end up in a particular direction.
In addition, the trader is at liberty to determine when the trade ends, by setting an expiry date. This gives a trade that initially started badly the opportunity to end well. This is not the case with other markets.
For example, control of losses can only be achieved using a stop loss. Otherwise, a trader has to endure a drawdown if a trade takes an adverse turn in order to give it room to turn profitable. The simple point being made here is that in binary options, the trader has less to worry about than if he were to trade other markets. Traders have better control of trades in binaries. For example, if a trader wants to buy a contract, he knows in advance, what he stands to gain and what he will lose if the trade is out-of-the-money.
For example, when a trader sets a pending order in the forex market to trade a high-impact news event, there is no assurance that his trade will be filled at the entry price or that a losing trade will be closed out at the exit stop loss. The payouts per trade are usually higher in binaries than with other forms of trading.
This is achievable without jeopardising the account. In other markets, such payouts can only occur if a trader disregards all rules of money management and exposes a large amount of trading capital to the market, hoping for one big payout which never occurs in most cases.
You can do it on calls and puts at the same time. Is it better to do long strangle now or wait till end of April…. I mean it would be cheap now or then…I understand there are many factors that will play significant role into it such as time value of option and volatility. But any idea from previous Election data? I think the best bet would be to wait as close to the event as possible and then take a strangle, 3 to 4 weeks before the results. That has historically been the best time to take strangles around the election.
This time around, with the increased popularity of option trading, everyone is trying to play the volatility game, and somehow my gut says that this time around there may not really be that much volatility around the election.
I had been doing my research on long strange strategy and decided to study about VIX. Thanks a ton for sharing your practical experience on the topic. There are number of valid strategies that you can play with as already discussed here but I would like you to note that last date if polling is 12th May monday and result day is 16th may friday.
Exit poll results will come out on 12th itself. So you need to pay for exit poll results day and not results days as you have been stressing in your post and it will make a lot of difference. Recent assembly polls in Dec saw a lot of spike in volatility and it died down on 5th dec itself even though results came out on 8th Dec.
So one other strategy you can consider is go short on volatility on 12th May if you see volatility REALLY running up during election Nithin is skeptical of volatility rise. This way you will be more sure and also not loose due to big theta of long strangle kind of strategy. I am a registered user of Zerodha trading account as well as tge demat account. My id is ZS and name is ayush sharma. I have one query: Also, pls tell me how do i put trailing stop losses?? And how to modify the stop loss?
Check this post on placing SL order. Also check this video. Weekly Contracts much difficult to handle…. U r great sir. VIX the word itself is so complicated, but you have explained it in a very simple and effective manner. I am very excited to trade. Anyone who needs to read this article to understand VIX futures should stay away from trading them.
They are inherently complex instruments and the primary purpose of trading them should be to negate the beta of your portfolio. Do not be fooled into trading them as easy money. Hi Nithin, Do you see end of retail trading in near future. I am asking because I have heard that SEBI is trying to reduce margin it means do we need to have atleast half of the margin to trade Nifty Future in future.
I think it will kill the market…what do you feel? Arpit, what the article talks about is margin funding norms, basically where people borrow money to buy for stocks for a lot more than what they can buy with the money in their account. This has nothing to do with the futures trading business. There is no concept of margin funding when trading derivatives. Yes decided, the lot size is , and margin required is around 2.
It is Rs 2. I have been prepping to develop a simple options trading system. And how do I back test option strategies?. Kindly throw some light on this. Yes Shankar, Presently as explained in the post above, we have only VIX future contracts, options contract might be introduced in the future.
I am new to stock market. I want to read the fundamentals of stock trading. Can you pl guide me the right material to understand the basic concepts. A good way to actually start trading I am saying trading not investing is by using technical analysis, a lot more easier to get started. Sir, I have a suggestion, Zerodha has branches in Southern Zone. In India with increase in awareness about financial markets in public, it has become indispensable to enlarge the knowledge horizons about financial markets..
It would help the masses to acquire skills in financial field as well as to have optimum leverage of the available opportunities and skill-oriented labs in achieving their goals of investment.
We are not really looking at expanding physically, but we are trying our bit to educate via various online initiatives. It is seen in your website that Zerodha has launched automated trading in the year Can you pl brief me about automated trading regarding its operation, technical analysis etc. Automated trading is not allowed for a retail trader.
Can you pl brief me about automated trading regarding its operation, technical analysis etc? Hi, First let me introduce myself, I am Sundar from Chennai, trading only in options and making lot of money, at least Rs 10 lakh a month. Second, let me appreciate your effort in making low brokerage venture a reality. Third, everybody want to buy options ahead of elections to make money. That is actually a wrong strategy. So the buyer usually makes money when there is something surprise.
For example, in , nobody expected Congress coalition to get majority without Left support, that happened, so the markets shot up, option buyers made money. You may check, option prices for May series onwards are really very high. Assuming that one buys May series Put and Call, he has to pay Rs He will make money only when Nifty crosses or fall below Let us see what happens next month.
Option buyer pays only premium, option seller pays margin money which is very high. Option buyer has limited risk, seller has unlimited risk. So think basically why should any body want to be on sell side with everything is favorable on the buy side? The answer is simple. If you want high profit, you have take high risk Example: Buy lottery ticket, your investment is only Rs 10 or 20, you may get Rs 1 crore if you are lucky, no risk absolutely, but probability is very low So, the fact is that the probability of seller winning is very high.
I have not seen anybody making good amount of money consistently by buying options. I am a living example for making money consistently by selling options. What I mean to say, the amount of money which you are prepared to loose completely, only must be deployed in buying options.
Last but not the least, option seller has the advantage of hedging his positions and can continue to apply delta hedging in order to come out if market goes against him.
Option buyer has no options if his views go wrong, except getting out with stop loss. Hope option buyers understand all the risks involved.
You want to get married. You have two girls. One, beautiful, well educated and has lot of money. The other girl is ugly, not educated and very poor.
Which girl will you choose? A common sense will tell you that every one will choose the first one and nobody will choose the second one. Come to option buying and option selling. Option buyer has limited risk, unlimited profit and low margin money like beauty, education and money all three working in buyers side. Then logically everybody should be on the buy side and no one should be on the sell side. But the fact is that for every contract buyer there is one contract seller.
This equality is in amount not the number of people people may buy options but one person will sell the equivalent options.
Let us rob a bank, investment is very low, reward is very high, but corresponding risk is very high, if you are caught you will be spending rest of your life in Jail. You buy a lottery ticket, risk is limited to Rs Reward can be as high as Rs 1 crore. But what is the probability?
It is very low. But people are aware of that. This is why most people do not buy lottery tickets. But buying of options is the same. But people do not realise this. Against lottery ticket awareness is created, some states like Tamil Nadu even has banned the sale of lottery ticket.
On the other hand brokers make big money out of these people and make sure that these innocent people do not get any awareness. Options are introduced for the purpose of hedging for that matter even futures are also introduced for the purpose of hedging , but being used by people for gambling.
At the very outset,kindly excuse me for taking your precious time to read this note in your busy schedule. Shorting in current scenario after hiking of lot size by sebi ,will it b a smart choice? Had recently answered this query, check this video. Yeah, tape reading is essentially looking at market depth window and price and trading. Have you checked out http: Why IndiaVIX has risen by 13 vol points in the last weeks 2. Now, do you think shorting the IndiaVIX future 29 Apr expiry make sense given the future is trading at So, you are protected till the spot level rises to As I said, shorting 29th April VIX future would have made sense as in just a week span of time it has fallen from So, my forecast of IndiaVIX spot and its future levels turned out to be the absolutely accurate.
Given the spot level of IndiaVIX at At the same time, this is one of the most crucial events in the last 5 yrs, yet IndiaVIX is no where close to its highs of 50 level. So, from risk-reward perspective, it makes sense to long 13th May VIX future. I still think it has more to go in the remaining 2 trading days, so I would advice to continue holding it. Thanks Nitin for your prompt response.
What will be the impact of election result on these two stocks? This move might not be sufficient to make profit. On the other hand, if third party gains majority, market fall will be unstoppable. Fail to understand why is India VIX expiring on May 20, trading at significant discount to underlying. It is around Hi, India VIX was trading around 15 few months before. VIX shot up due to election. Election results will be announced on 16 May.
By 19 May, the results will be fully priced in the market. So volatility is likely to go down drastically by 20 May. It is a contract that requires a margin of around 7 lakhs. Still people are ready to short at 10 points lower.
So they are informed people who take calculated risk. Hope the India Vix spot price may not cool to 2x. Hi Sundar,Could you please suggest me how to pick right strik price call or put based on market trend and implied volatility for write option.
Hi Hi Sundar,I am very impressed with your comments,could you please guide me how to pick right strik price call or put for write option based on market trend and implied volatility. H, Choosing the right strike price is the skill required by the trader.
You go too long, your return will be very low, if you go too close, your risk will be very high. So this is a game of risk-reward. As you have already mentioned, implied volatility is the most important thing to consider. In addition price movement, time value also to be considered. Option buyers are gamblers, they invest a small amount of money, if they loose, they loose only a little, if they gain though probability is low they get huge profit.
Option sellers are business people, they expect a decent return for their investment. Most option writers have agreement with brokers so that they do not pay exposure margin.
The margin money that you pay for writing an option consists of two margins, one span margin and the other one is exposure margin. So most heavy traders pay only half the money when it comes to selling options, compared to normal retail investors, so their return doubles. Hence they can reduce their risk and yet can get good return. So there is no fixed formula to choose the strike price if there is any, by this time every one would have been following that , there are a number of other factors like doubling your return by making the broker to agree for exposure margin waiver, diversifying not selling options only in one counter, sell in many counters so that your risk is diversified , using the wing strategy For eg, Nifty is trading around , one may sell Put and Call, but what I do, since I invest huge money, I sell , , , Put and , , , Call, I call this wing strategy , etc.
For your kind information, I have made Rs 1 Crore in the month of May, considered to be very difficult month for option traders due to election results uncertainty.
Thanks P R Sundar. Nitin-is it true that Zerodha exempt exposure margin. If yes what should be lot size for selling options on Nifty. Zerodha is a low cost brokerage, they can not afford to waive exposure margin. If you do not know what is the lot size for selling options on Nifty, I would advise you to stay away from selling options. This is a high risk game and only knowledgeable people should enter.
Otherwise you will end up loosing your entire wealth. Mr Kamath a quick question: Yes should drop proportionately, around 3lks https: Could you please explain what is delta hedging in option writing and how to use it practically? Delta hedging is all about creating balance in hedging positions. It is difficult to explain here in the blog everything. We conduct one day workshop to explain all these. Hi,I want to know that the implied volatility which is used in calculating price of nifty options is same as this VIX?
When i use the implied volatility as And when i calculate implied volatility putting call option price as 54 than it comes as I generally write nifty options so this factor to be exact is very much important for me. All options have different volatility…like in your example the option volatility for call option is This will give you further insight in options. It is freely available. Dear Nithin, In Back office, noticed some thing wrong in the options turnover calculation.
Can you just verify? I did 4 option trades in one of my account. It is showing correct. Check this link on how we are calculating turnover. This is the most compliant way of calculating turnover. But, options player would easily reach lakh turnover though they do very less. I am going to eliminate options trading to avoid the auditing. Why there is no trading in India Vix? Is this open for trading for retailers?
Mark it is open for trading, but somehow is not getting any trading activity. The interest has been continuously dropping in this contract. Thanks Nithin for your prompt reply. And thank you for this detailed article on Indiavix. I found it quite helpful. So Is their any index to identify volatility of commodity market? Yes you can look at India VIX and gauge the market expectation of volatility — both for Nifty Index and individual stocks. Have a question with regards to order placing.
Hmm that is your making incorrect statement in General. VJ they are not really Good till cancelled orders, GTC orders ideally have to stay on the exchange servers until they are cancelled. So it is like a hack, and not really GTC. We are also looking at doing something similar to this, but it will not really be a GTC order.
Is India VIX available to trade in the forms of futures only? Secondly it is understood from the comment above that if it reaches 22 level…nifty will lilely to move upwatds so buying call option or selling put option will be the two possible scenarios.
And if VIX reaches around 15, buying put or selling call will be the two ways. Even futures contract has become illiquid. If India VIX is above 22, then markets are likely to go up and down in an unpredictable manner but eventually markets will go down. So selling Call option on every rise should be the right strategy.
If India VIX is below 15, then markets will be stable and likely to move higher slowly. So the right strategy is to sell Put option on every dip. Buying of option is only for very short term traders who can judge the market movement. Usually people who buy options and hold until maturity will loose money most of the time. But risk associated with buying of option is very less and correspondingly the chances of winning is also very low.
Selling of options carry unlimited risk, but if you know how to manage your risk and if you have more capital, you can make decent return. You need more capital to sell options as you are required to pay margin money as well as Marked to Market MtoM losses.
Whereas if you are a buyer of option, then just pay the premium and that is it. But option seller wins most of the time and loose lot of money when loosing if does know how to manage the risk.