Options Trading

[coolAbhi]

Hi
I am new to options trading and want to know about it in detail
Can anybody tell me how to trade in options with example, how we make profit, its related question nd much more

 

[rkkarnani]

Hi
I am new to options trading and want to know about it in detail
Can anybody tell me how to trade in options with example, how we make profit, its related question nd much more

There is a lot of material on this forum for u to read, also....
Try this link :
http://www.sharekhan.com/SSKICMT/Upload/Drv_Upload/DerivativesDigest.pdf

 

[coolAbhi]

There is a lot of material on this forum for u to read, also....
Try this link :
http://www.sharekhan.com/SSKICMT/Upload/Drv_Upload/DerivativesDigest.pdf

Thanks for the file

 

[marcus]

this is a very large topic, you will have to read some books as all we can say in short is you make profits by similar to the way you would do in futures, which is basically by speculating whether the underlying asset will rise or fall in value within a certain time frame, one of the main reasons ppl are attracted to options is because they are cheaper than futures.

They are also far better risk management tools than futures and most institutions use them to hedge rather than for speculative purposes.

 

[aca_trader]

in short is you make profits by similar to the way you would do in futures, which is basically by speculating whether the underlying asset will rise or fall in value within a certain time frame

There are ways to make money from options even without speculating on market direction.

Best Regards,
--Ashish

 

[marcus]

There are ways to make money from options even without speculating on market direction.

Best Regards,
--Ashish

Ashsih please share these methods, I assume you aren't referring to bull bear spreads, butterflies, condors etc etc... which mostly limit your profits in comparision to a naked call or put

 

[ucalegon]

Spreads and the related strategies - condors, butterflies, straddles, etc. make a lot of sense. Talking about them "limiting" your profits is sensible, but they also limit your risk. Buying options may sound sensible since it limits risk but leaves option open, but that's just theory - in practise it is as difficult to make money buying options as it is from futures (and of course, has a lot more risk if you consider capital employed)

Options are also extremely illiquid and this can work against you. Plus the implied volatilities nowadays makes them extremely expensive, which is why this is an enormous amount of writing happening and the buyers tend to hedge using a future.

 

[marcus]

naked position can show u the hell /QUOTE]

How do they show you hell? If you buy options you know exactly what you've lost no matter what ...... your premium.

Not so in futures, in futures if there a gap up or down you may lose not only your shirt but your chaddi as well.

Ayway I trade futures myself, haven't brought myself to exclusively trade options although I know they have a lot more advantages.

 

[marcus]

Buying options may sound sensible since it limits risk but leaves option open, but that's just theory - in practise it is as difficult to make money buying options as it is from futures (and of course, has a lot more risk if you consider capital employed)

Not really its a fallacy, money and good money can be made buying options in practice, many options traders I know make triple digit returns a year simply buying options.

Please go through the following two threads, one is of a trader who turned 6k to 70k in three months, which is about an 850% roi, simply buying options with good spreads (here spreads does not mean 'spread trading')

http://www.elitetrader.com/vb/showthread.php?threadid=87977&perpage=6&pagenumber=39

The other link is of somone who aimed at turning 76k to 500k in a year trading, I have been following his progress and most of his profitable trades come from buying options, he won't meet his target by 31st dec but is 200% up which is not bad

http://www.elitetrader.com/vb/showthread.php?s=&threadid=87977&perpage=6&pagenumber=1

Options are also extremely illiquid and this can work against you.

I agree but not completely, options score over futures here in that in illiquid markets you can always exercise, you're not necessarily left with a worthless position as you would in futures. Options make better sense in illiquid markets if at all you do trade illiquid markets

Plus the implied volatilities nowadays makes them extremely expensive, which is why this is an enormous amount of writing happening and the buyers tend to hedge using a future.

Once again not really they are a little on the expensive side but still much cheaper than futures or stocks, actually big players hedge with options and not the other way around.

 

[aca_trader]

Ashsih please share these methods, I assume you aren't referring to bull bear spreads, butterflies, condors etc etc... which mostly limit your profits in comparision to a naked call or put

Hi Marcus!

I am of course referring to these publicly available methods only.
No doubt, they limit profits in comparision to a Naked Call or Put Purchase in a strong-trending market but in not so strong trends, directional Long Option Strategies will always make one loose money.

Regards,
--Ashish