There are many different options for investing and many types of financial instruments that can be used to accomplish your goal of making profits in Indian stock market. One key financial tool that savvy investors and traders use is options. As with stocks, intraday options can make an Indian investor considerable earnings. They are, however, much more versatile and dynamic than stocks. How so? Well, when trading stocks there are really only two ways to make money.
You can go “long” by buying a particular stock and waiting for it to go up in value and if that occurs you can sell it for a profit. The other way to turn a profit is to go “short.” In this case, you sell shares of a company and buy them back later at a lower price.
Options are Good for Beginners
Options trading is much more dynamic with dozens of different ways to make potential profits. Online trading for beginners in India is easy when you trade with a stock broking company. You can trade options not only on stocks but also on currencies, commodities, and various indices.
Many novice investors enter into the stock market without the proper education and experience. These investors are missing out on considerable earnings by not trading options on different positions. Options in India are available today on most stock exchanges and can be purchased through low-cost online brokers. Although trading options needs a well thought out and comprehensive approach, you can certainly make a profit if you are dedicated and committed.
Let us understand in brief intraday tips for call and put options.
What Are Options?
An option is a contract that gives the purchaser the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just like a stock or bond, is a type of security. It is also a binding contract with strictly defined terms and properties. Basically, a stock option contract may be in two forms: call options and put options.
In both cases you have the right, but not the requirement, to either buy or sell the underlying stock for a predetermined price. The predetermined price is also known as the strike price. An important feature of options, regardless of type, is the expiration date—a date when the option expires and becomes worthless. Before the expiration date, investors can hand over the option to someone else during the month in order to make a profit. However, due to time decay as well as other reasons, the option will lose value the closer it gets to the expiration date.
As a hypothetical example, say on March 1, 2019, company ABC is trading for ₹10 per share. You could buy a call option on that stock that would allow you to buy 100 shares at a given time (say August 23, 2019) for ₹12 per share.
Why would you want to do this? Well you may think that company ABC is underpriced and heading upward. So you buy your option and you wait. If 45 days later company ABC is now trading for ₹15 per share, then you can exercise your option to buy the stock at ₹12 and you have made a significant profit. If, however, company ABC is trading below ₹12 then you would not exercise your option and they would expire worthless. You have now lost your initial investment. This is how intraday options functions, to have more such expert tips download trading apps to get educated about Indian stock market.