How Much Risky Is Options Trading?
Options are much Low-risk trading and Investment options. You can benefit from market volatility and also Protect your funds from heavy losses. Options allow you to invest in any company (SBI, Reliance, any...) by not even paying the full price.
You just pay a price called a 'premium' amount, which is 10% or even lesser than the individual stock price. There are a few interesting terms you should be aware of with Options Trading.
What Is 'Call' & 'Put' In Options Trading?
There are 2 choices available in Options trading: You can buy 'Call options' & 'Put options'. You must be very clear before buying shares that the desired result is for you. Will you benefit if the Price of the stock goes up or if it goes down? Yes, you can make money in both scenarios with options trading.For example, the price of HDFC is Rs. 500 and you think it will go to 600 in a few days' time. Then you will buy it through 'Call options'. But if you think the price will go down to 450 in a few days' time and want to earn profit from that - Then you can buy through 'Put options'.
Experts recommend trying the best automated trading app India that allows you to buy through Call & Put Options. Algo trading apps are much more efficient with options trading. They can really help generate much more profitable results.
What Is 'Premium' In Options Trading?
Example: The price of Tata Telecom is 1000. You are expecting the price to reach 1,100 in a few days or weeks. So you will buy the Call options. Instead of paying the full 1,000 rupees, you will have to premium amount of 50 rupees.
By paying this 50 rupees premium, you have officially purchased the call options. 1,100 will be called a 'Strike price'. When Tata's price reaches 1,100 - you can close the position and exit with All the Profit.
When You Should BUY In Options Trading?
If you buy the Call options - The price has to go up in order to make a profit. If you buy the put options - The price of the stock has to go down for you to make a profit. So, whichever Buy you make, nicely follow your Options trading strategy.
When You Should SELL In Options Trading?There are 2 types of Sells. You can Sell Call Options or Put Options. It is a little bit different from Buying logic. In the selling, you are predicting the price of the stock to not go above or below a specific limit. That's where your profit is in Selling the Option.
For example, L&T's current price is 2,000 rupees. If you are selling a Call option, then the price of l&T has to increase but not cross a certain level. If L&T's price goes above that upper limit, then you'll have to face the Loss. If you are selling PUT options - The price has to go down for you to make a profit. But it also must not go down below a certain price. Always research well & use smart insights provided within the Options Trading App. They are always very helpful.
Biggest Benefits of Options Trading :
Limited Loss and Unlimited Profit
These are some of the biggest benefits of choosing Options trading. As discussed earlier, your investment is only the ‘premium’ you pay. Not the whole price. Here’s the catch: If the trade goes your way, you can book unlimited profits.Just in case the market moves the other way, you can still exit with a minimal Loss amount. This also widely depends upon your options trading strategy. It should be prepared thoroughly and It will guide you to Better profits.
Advanced technology drive insights are being proven To secure strong profits & protect from bigger Losses. AI (artificial intelligence), machine learning-based trading inputs provide much accurate predictions. Picking an Options trading app with the latest techs can be a really good idea.
PRO TIP: Always Put a Stop-LossPick the best of the Algo trading app, and prepare the Best Options trading strategy you can. But, always put a Stop Loss on every options trade. Most successful the Traders like Warren Buffet’s prediction can Go wrong sometimes.
So better put a Stop loss with Every trade you do. It’s not Harmful. It protects your money. Some good feature-loaded Options trading app now also Provides Algorithm based Stoploss protection. The advanced designed algorithm picks up market signals much earlier & protects your Fund throughout.