Before starting trading in Nifty Option, Bank nifty option, or stock option, a trader must have the knowledge of derivatives like what are derivatives and how they work. We can say derivatives are financial assets whose price are derived from underlying assets , underlying assets can be bonds, stocks etc. Equity derivatives prices are derived by underlying stocks and index derivatives prices are derived by indexes like nifty or bank nifty.
Options are one type of derivative . through option trading a trader or investor can buy or sell shares of a company a predetermined price which is called strike price. The contract of option can be for Buy as well as to sell also. It is not necessary for the option trader to get or deliver the stocks.The option trader pays the premium which is called price of the option and the trader is entitle to get the underlying share as a predetermined price which is called strike price. Suppose the price of reliance is Rs.2,000/- and a trader is of the opinion that price of reliance would be increased till expiry date. In this case the investor/trader will buy the Call option of Reliance strike price 2,000/- in Rs.50/- in this case the investment will be Rs.12,500/- only (we assume lot size or reliance 250) . suppose at the time of expiry the price of reliance is 2,200 then trader will get profit of 50,000 less premium paid or price of call option paid which was 12,500. Net profit would be 50,000-12500= 37,500. This is the benefit of option trading a trader got profit of Rs.37,500 by investment of Rs.12,500/- only. if a trader does trade by buying equity shares he has to invest Rs.5,00,000/- . For Proper bank Nifty option tips, you can just register for our website and make good profit on daily basis.
One more benefit of option trading is that a trader can earn through selling of shares which he actually don’t have. For example if a trader/investor has of the opinion that price of reliance would be decline till expiry and current market price of reliance is 2000 and lot size is 250. In this scenario the investor/trader will buy a PUT option of reliance for strike price of 2000. If at the time of expiry price of underlying means reliance goes down to rs.1800/- . in this case the price of reliance 2000 put would be 200. And he will get profit as the calculation already done for call option. In nutshell a person can do bullish as well bearish trade in underlying stock by small capital.
Futures. In future trading there is a contract between buyer or seller at a prefixed price which is called future contract price which may be up or down from the current market price of the underlying stock. If buyer agrees to buy a stock in future above the current market price it can be said future is trading on premium and vice versa if future price is below the current market price of underlying stock we will say future is trading on discount. In future trading a trader/ investor has to pay large amount of margin as per the norms of the stock exchange. All of the above a trader or investor who buys or sells of a future contract has to pay “mark to market” payment daily. Market to market means suppose the value of contract is 5,00,000/- and price of the contract decreased up to 4,75,000 at the end of trading session , in this case a trader must have to pay Rs.25,000/- . These Rs.25,000/- is the amount which is called “Mark to Market”
In futures trading a investor needs large amount for margin and “mark to market” and in option trading a trader has to pay very less amount in comparison of future or equity trading.