Options Trading has taken a significant part of the trading market but is still a complex term for beginners. TradingBells helps beginners to understand options trading and have a wide range of option trading services. It offers multiple strategies to help investors in the buying and selling of underlying securities over a specific period at a rooted price and yield big profits.

 

What is Options Trading?

 

Options Trading is about buying and selling options. Options are contracts that permit (do not necessitate) to buy assets at a certain price for a specific period.

 

Options Trading requires a 3-4% cost of investment as stock trading.

 

Important characteristics of options trading

 

Options have a few important characteristics that are as follows:-

 

• Strike Price: It’s the price that has been fixed for the buying or selling of any particular asset or stock.

 

• Expiration date:  Options have a fixed lifetime and the expiration date is the date when an option expires and becomes worthless.
   
• Option Premium: Option premium is the price of the option at which it’s been purchased.

 

Bearish or Bullish?

 

When trading options, you wager on the direction of stock prices. Therefore, the alternative you choose will depend on whether you anticipate a rise in prices or a decrease. 

 

Options come in two varieties: call and put. With a call option, you have the choice—but not the commitment—to purchase a specific stock at a specific price. With a put option, you have the opportunity to sell a stock. A call option should be your first preference if you anticipate an increase in stock prices. A put option would be a better alternative if prices were declining.

 

Difference between Options Trading and other instruments

 

Options trading is quite different from other traditional futures contracts used in stocks, index, and commodity trading. Here is a list of differences between options trading and other instruments:-

 

Options Trading	Other Instruments
Less risky	Comparatively more risky
Easy withdrawal	Can’t withdraw anytime
Doesn’t requires ownership	Requires ownership

 

How to Begin with Options Trading?

 

Now we know what options trading is and how’s it different from other trading instruments, let’s know how to begin the options trading journey:

1. Set your options trading goals: You have to be clear with the goals that made you get into options trading. It can be of making profits or to protect underlying instruments. 
    
2. Decide your Trading Strategy: Once you are clear with your goals you have to choose the right strategy that will help you in accomplishing your goals.
    
3. Choose a brokerage firm: Usually, traders begin with share trading and then get into options trading. If you are already connected with any brokerage service, check with them that is your current trading account suitable for options trading and if you are looking for any brokerage firm to assist you nothing can beat the services of TradingBells!
    
4. Prerequisites to invest in options: Options trading is a lot like stock trading and to begin your options trading journey you only require:

 

• A trading account
• Margin Maintenance

 

When you purchase an option you have to pay a percentage of options value that is called Premium. 

 

Similarly, when we sell an option you need to maintain a margin that is marked in your market account. These margins in Options trading involve:

 

1. Initial margin
2. Exposure Margin

 

Along with these margins, the following margins are also collected:

 

1. Premium Margin
2. Assignment Margin

 

Every margin amount is decided by the exchange and you will be informed about it while buying the options. Failure in the maintenance of these margins in your account can lead to penalties. So, do have a track on your margin money.

 

  

How to trade Options in India

 

You can start trading options now that you know how to do it. Options and futures are examples of derivatives that were first offered on the Indian stock exchanges about 20 years ago. On nine key indexes, over 100 equities, and futures and options contracts are traded on the National Stock Exchange.

 

There are advanced options trading methods in India, such as a straddle, strangle, butterfly, and collar, that you may employ to maximise returns when you are well-versed in how to trade options.

 

TradingBells offers Options Trading services to make your trading journey convenient and smooth going.  

 

Advantages and Disadvantages of options trading 

 

Every coin has two faces, one is positive and one is negative, so it is in your trading journey that you go through certain advantages and disadvantages. Here are some of them:-

 

Advantages

 

• It is flexible in nature where traders can choose a certain price and expiration date.
• It is an attractive hedging tool.
• Buying an initial option is less expensive as compared to buying a stock.
• It is cost-efficient and less risky with high potential profits.
• With the added income, leverage, and protection options trading improves the trader's investment portfolio. 
• It can be used as a recurring source of income.
• Options can be sold at a higher rate to any other investor before their expiration and maturity.

 

Disadvantages

 

• Options trading isn’t for everyone, especially those who use a hands-off investing approach
• It is a complex process.
• You have to keep an eye on the market to know when it’s profitable and set a price alert.
• Since options are short-term in nature, they lead to short-term capital gains. 

 

Multiple option trading services by TradingBells:-

 

We provide you with a variety of option trading techniques that may be used depending on the market and the goals of the investor. Here are a few typical option trading tactics:-

 

1. Long Call:- You can purchse a call option in order to gain from an increase in the value of the underlying asset.

 

1. Long Put:- Purchasing a put option in order to benefit from a drop in the value of the underlying asset.

 

1. Long Combo:- Long Combo is a bullish trading strategy where a trader holds onto the stock expecting a rise in price. This strategy involves selling an OTM put and buying an OTM call. This strategy requires less capital.

 

1. Long Condor:- A Long Condor is a neutral market strategy with limited risk and limited profit and is good for investors who are looking for less movement. It is a four-leg strategy with 2 ITM calls and 2 OTM calls.

 

1. Covered Call:- Owning the underlying asset and generating money by selling a call option against it is known as a covered call.

 

1. Protective Put:- Owning the underlying asset and purchasing a put option as protection against a potential drop is known as a protective put.

 

1. Bull Call Spread:- Aiming for a constrained upward potential at a lower cost by simultaneously purchasing a call option with a lower strike price and selling a call option with a higher strike price.

 

1. Bear Put Spread:- Buying a put option with a higher strike price and simultaneously selling a put option with a lower strike price is known as a bear put spread. This strategy aims to provide limited downside protection at a lower price.

 

1. Long Straddle:- Buying a call option and a put option at the same time with the same strike price and expiration in anticipation of high price volatility is known as a long straddle.

 

1. Long Strangle:- This strategy targets high volatility without anticipating a large move, and is similar to a straddle but uses different strike prices for the call and put options.

 

1. Iron Condor:- Iron Condor is about combining a bull put spread and a bear call spread by selling both out-of-the-money put and call options, seeking limited profit within a range-bound market.

 

1. Butterfly Spread:- Using a butterfly spread, one can profit from a limited price range of the underlying asset by combining a bull call spread and a bear call spread.

 

1. Calendar Spread:- Selling a short-term option and purchasing a longer-term option with the same strike price in the hope that time decay will favor the position is known as a calendar spread.

 

1. Ratio Spread:-  Aiming for a higher potential reward-to-risk ratio by purchasing a different number of options contracts than those sold.

 

1. Collar:- A strategy for limiting potential losses on a long stock position that combines a long put and a short call with the same expiration but different strike prices.

 

1. Diagonal Spread:- It creates a variety of possible outcomes by combining options with various strike prices and expiration dates known as the diagonal spread.

 

Why choose TradingBells for Options Trading Services?

 

We offer Option Trading services that benefit our traders in  various ways, It gives you the:-

 

Higher Leverage:- You can create Higher Leverage by trading options with TradingBells, which implies there is a chance for greater gains with less capital.

 

Excellent Hedging tools:-  Options are one of the good hedging tools. Traders can reduce their downside risk in equities by using options in the right way. 

 

Trading up, down, and sideways:-  Options provide you extra scope to make money. It’ll assure you gains whether the stock market is down, up, or moving sideways.

 

Less Brokerage:- There is a lot of competition in the market, TradingBells online brokerage gives you discounts to deal with that, which makes the options trading cost low. The brokerage amount is very less as compared to the trade stock and has no hidden costs.

 

Limited Downside:- We assure you with complete exposure to risk, options will provide you with limited risk and high probabilities of success or gain.  

 

You’ll always make a good move:- Options trading gives you an opportunity to make positions that’ll help you in earning money whether the market moves up, down, or stays in range. While investing in stocks allows you to gain only, it rises.

 

Income:- You receive a premium through an option by giving someone else the right to purchase your stock at a predetermined price; this premium can be thought of as a special dividend. However, you must exercise extreme caution when selling options because, should things not go your way, there is no limit to your risk. 

 

Indexing:- We have choices on all the major indices, such as Nifty, Bank-nifty, etc., if you want to trade a diversified portfolio rather than just shares.

 

Opportunity:- Options come in a variety of instruments, including stocks, currencies, interest rates, and index products. TradingBells  opens up a lot of potential for trading opportunities in options at just about any time.

 

Liquidity:- Options trading with us will allow you easy transactions and your money won’t be tied for a long period as in trading shares with any other broker. You can re-invest your money numerous times at once, this increases the chances of making you profits. 

 

FAQs

 

Q-1) What is options trading?

Ans:- Options trading is about buying or selling stocks, ETFs, etc at a fixed price within a fixed date. It allows flexibility for buyers to not buy securities at a certain price or date. It is more complex than stock trading but helps you with larger profits.

 

Q-2) Minimum capital required for options trading?

Ans:- You don’t need any considerable amount for options trading. You can even begin with a small capital of less than Rs. 2 lakhs.

 

Q-3) How can I make maximum profits with options trading?

Ans:- To make maximum profit with Options trading you can follow the strategy:-

 

1. Focus on profit targets, stop loss, and trade management
2.  Long Call
3.  Look after the important elements of trade
4.  Call Ratio Back Spread
5. Synthetic Put 

 

Q-4)Which are the best options for trading in 2023?

Ans:-  Best stocks for options trading 2023

 

Company	Industry
Adani Enterprises	Conglomerate
Apollo Tyres	Tyre Manufacturing
Bajaj Auto	Automotive
Dalmia Bharat	Conglomerate
HDFC Bank	Banking

 

Q-5) Is options trading better than stocks?

Ans:-  Options are comparatively less risky for investors, as they require less financial investment than equities. Options are a dependable form of hedge that makes it safe as compared to stocks. 

 

Q-6) Can You Trade Options for Free?

Ans:- To make money, first you have to spend money. Options trading involves some fixed and some variable charges.