A Beginner's way to trade options.

[bkb]

Hi AW10/ST,

Can we explore the opportunity to re-activate this thread and have seniors share their knowledge on Options.
With the help of recent/current market data, it will be of great value to aspiring/new options traders.
I am sure there will be good number of such traders, as this thread was started ~ 3 years back; and with latest data, learners will be able to relate to point/strategies in much better way.

Request your opinion on the same.

Regards,

 

[prst]

Hi AW10/ST,

Can we explore the opportunity to re-activate this thread and have seniors share their knowledge on Options.
With the help of recent/current market data, it will be of great value to aspiring/new options traders.
I am sure there will be good number of such traders, as this thread was started ~ 3 years back; and with latest data, learners will be able to relate to point/strategies in much better way.

Request your opinion on the same.

Regards,

yes,
such an initiate may bring back the ppl (like me) who got scared away from options due to our early loss making option trades

 

[hotguy_nextdoor]

options are dangerous for the financial and mental well being

yes,
such an initiate may bring back the ppl (like me) who got scared away from options due to our early loss making option trades

 

[ashutosh.krsrivastava]

I have no idea about options... I don't know difference between call and put... But want to trade in options... What to do... How to study options...?

 

[a1b1trader]

I have no idea about options... I don't know difference between call and put... But want to trade in options... What to do... How to study options...?

Hi Ashutosh

I am also a new entrant in options and started option trading only from this september series. And I find option trading to be very liquid and easier than future and more I like about options is, limited loss and unlimited profit (provided the trend is in your favour) and not like futures where you have unlimited loss and unlimited profit and before you enter in option trading you know what is your maximum loss, if the trend is against your trade (only in case of buying call/put option and not in case of selling call/put which can give you unlimited loss like futures)

As far as call and put is concerned, buy a call is like long and buy a put is like short, as in futures and sell a call is like short and sell a put is like long, In buying a call or put you just have to pay the premium and no margin money and no headache of paying MTM like in future, moreover though brokerage is more or less similar to futures but the other charges are much lesser as compared to futures (it may be high if you choose high premium call/put)

For basic knowledge of Options (call and put just go through this thread completely and I assure you that you will a good knowledge of this type of derivative.

Or before going through this thread completely, you may go through the following web page
http://www.tradersedgeindia.com/faqsFO.htm
and I hope that you will find it very useful. (just one reading may not be enough)

You may ask if you have any questions and I will try to answer using my limited knowledge of options or some reader may help, both of us.

 

[ashutosh.krsrivastava]

Hi Ashutosh

I am also a new entrant in options and started option trading only from this september series. And I find option trading to be very liquid and easier than future and more I like about options is, limited loss and unlimited profit (provided the trend is in your favour) and not like futures where you have unlimited loss and unlimited profit and before you enter in option trading you know what is your maximum loss, if the trend is against your trade (only in case of buying call/put option and not in case of selling call/put which can give you unlimited loss like futures)

As far as call and put is concerned, buy a call is like long and buy a put is like short, as in futures and sell a call is like short and sell a put is like long, In buying a call or put you just have to pay the premium and no margin money and no headache of paying MTM like in future, moreover though brokerage is more or less similar to futures but the other charges are much lesser as compared to futures (it may be high if you choose high premium call/put)

For basic knowledge of Options (call and put just go through this thread completely and I assure you that you will a good knowledge of this type of derivative.

Or before going through this thread completely, you may go through the following web page
http://www.tradersedgeindia.com/faqsFO.htm
and I hope that you will find it very useful. (just one reading may not be enough)

You may ask if you have any questions and I will try to answer using my limited knowledge of options or some reader may help, both of us.

Thanks a1b1 for help.. Now that I have read the page you provided in the link.. What should be my next step... I am trying to trade MINIFTY.. The details as per nse site is at...

http://www.nseindia.com/live_market...t=OPTIDX&date=-&segmentLink=17&segmentLink=17


Now what should be my first step..

And what about this strategy :-
http://imageshack.us/photo/my-images/593/option1e.jpg/

 

[blackpearl]

Hello,

Nice to see u are discussing option strategies.. I posted this message yesterday in another forum.. since you are discussing on the same lines, I am posting the same here..


with the fluid political scenario, Will the following strategy work, in the current situation.. Pls give your views..

Long 5600PE 48
Long 5700CE 21

ofcourse, nifty should close beyond these levels to make any profit by the end of the series.. Is it advisable to take such a position..?Your views pls.

Here I have taken both long . One leg or both legs can lose value depending on the situtation unless there is some drastic move on either side..

what strategy should be selected for the current situtaion??

BP

 

[a1b1trader]

Thanks a1b1 for help.. Now that I have read the page you provided in the link.. What should be my next step... I am trying to trade MINIFTY.. The details as per nse site is at...

http://www.nseindia.com/live_market...t=OPTIDX&date=-&segmentLink=17&segmentLink=17

Now what should be my first step..

And what about this strategy :-
http://imageshack.us/photo/my-images/593/option1e.jpg/

Hi Ashutosh
First of all, I want to know:
Do you know how to trade in future derivatives. If no then you should not enter in options without knowing how to trade derivatives. Just take more time in study derivatives and observing the price movement and making strategies in the evening and correcting/finalizing it in the morning after 9,30 and checking or paper trading during day, how successful/failure is your strategy.

However if you know how to trade in future, then are you a day trader or a positional trader. And options are traded on similar lines to that of future. To take a long position buy a call option and for short buy a put option. Which price strike, that you have to decide yourself, as per your thinking/decision which way market will move as per you (similar to as you take position/trade in future) and as per your risk appetite. In buying options a good thing is that you know beforehand, about your maximum loss that you are to bear before entering a trade. (Normally* the maximum loss in buying an option is the premium you pay for per lot plus taxes etc) (*there are certain conditions in which your loss could be more than this)

I think you should not enter in options from sep expiry and that too in minifty (MNF). As MNF is very thinly traded and there are no volumes in MNF (almost nil as compared to Nifty) you can get trapped after a buy and will not be in a position to exit at right time. Trade in Nifty options instead. Further as only 6 sessions are left in sep expiry and the trading weather/volatility is high, because of political uncertainties/problems, no one knows which way market may move.

You being a first time entrant in option should wait till the trend is clear, so, in my opinion, it will be better to trade after that. It will be better to enter when the market/trend starts moving in one side, either way, up or down, only then you will be able to earn better.

I do not know much about strategies, as I myself is in the learning stage, though up one stage, has to go through the process of learning them, so can not comment on it. But do check the calculation of strategy yourself after opening of market because the prices may not be the same as mentioned in the strategy and it can be possible that the strategy with you may not work because of change of trend or major price difference like gap up/gap down. By the way from where you get this bear put spread. Can you post the link here or may pm me, so that it may help in learning/understanding, as well

 

[ashutosh.krsrivastava]

Hi Ashutosh
First of all, I want to know:
Do you know how to trade in future derivatives. If no then you should not enter in options without knowing how to trade derivatives. Just take more time in study derivatives and observing the price movement and making strategies in the evening and correcting/finalizing it in the morning after 9,30 and checking or paper trading during day, how successful/failure is your strategy.

However if you know how to trade in future, then are you a day trader or a positional trader. And options are traded on similar lines to that of future. To take a long position buy a call option and for short buy a put option. Which price strike, that you have to decide yourself, as per your thinking/decision which way market will move as per you (similar to as you take position/trade in future) and as per your risk appetite. In buying options a good thing is that you know beforehand, about your maximum loss that you are to bear before entering a trade. (Normally* the maximum loss in buying an option is the premium you pay for per lot plus taxes etc) (*there are certain conditions in which your loss could be more than this)

I think you should not enter in options from sep expiry and that too in minifty (MNF). As MNF is very thinly traded and there are no volumes in MNF (almost nil as compared to Nifty) you can get trapped after a buy and will not be in a position to exit at right time. Trade in Nifty options instead. Further as only 6 sessions are left in sep expiry and the trading weather/volatility is high, because of political uncertainties/problems, no one knows which way market may move.

You being a first time entrant in option should wait till the trend is clear, so, in my opinion, it will be better to trade after that. It will be better to enter when the market/trend starts moving in one side, either way, up or down, only then you will be able to earn better.

I do not know much about strategies, as I myself is in the learning stage, though up one stage, has to go through the process of learning them, so can not comment on it. But do check the calculation of strategy yourself after opening of market because the prices may not be the same as mentioned in the strategy and it can be possible that the strategy with you may not work because of change of trend or major price difference like gap up/gap down. By the way from where you get this bear put spread. Can you post the link here or may pm me, so that it may help in learning/understanding, as well

I am trading in MInifty futures by using SH's 315 system.. and i m doing ok.. I just take 1 minifty position as I m learning rt now....
Now about the bear put spread that I posted, I got it from icicidirect site which i use to trade.... If you want to know about any specific spread, pls post it.. will try to keep you updated..
And I will close my eyes and jump into options from 1st october
hahaha

regards

 

[a1b1trader]

Hello,

Nice to see u are discussing option strategies.. I posted this message yesterday in another forum.. since you are discussing on the same lines, I am posting the same here..

with the fluid political scenario, Will the following strategy work, in the current situation.. Pls give your views..

Long 5600PE 48
Long 5700CE 21

ofcourse, nifty should close beyond these levels to make any profit by the end of the series.. Is it advisable to take such a position..?Your views pls.

Here I have taken both long . One leg or both legs can lose value depending on the situtation unless there is some drastic move on either side..

what strategy should be selected for the current situtaion??

BP

Hello BP
I am sorry I do not know much about option strategies and so not in a position to comment on it. I started trading in options, just recently, 10-12 days before. Till now I have traded only naked call options and earned good profit.

But just at a glance, in your strategy, what will happen, if market just moves sideways (5550-5650 range) in the rest of sep expiry period. You can earn only if trend reversal is there (downtrend) and nifty moves below 5550 or over 5750. Isn't it. Correct me if I am wrong