How trading in Stock Option can be very beneficial for all traders

How trading in Stock Option can be very beneficial for all traders

Option is one of the most misunderstood instruments used vividly in the stock trading. The instrument can be significantly used to trade in the Indian Stock Market to ensure a fruitful income. Option trading is fit for both small and big traders. The reason is quite simple. The risk related to Option trading is very limited.

For an instance, when you see that the market is currently trending towards bullishness and the stocks of Reliance Industries will shoot from 850 to 920 within 10 days, you can utilize this opportunity to earn a good return from the market.

OPTION Different ways to trade

There are various ways to grab this above mentioned opportunity via Option Trading.

  1. First, you can buy 100 shares of Reliance Industries Limited and invest. It will cost you INR 85,000 + 1.5% taxes and delivery brokerage. The profit you will earn is INR 7000 or more.
  2. In the second case, you can go for intra-day trading. It will be tough to get 30 points of the total 70 points movement as the market only gives a handsome profit in GAP UP opening. Almost every intra-day trader misses the chance of earning a huge profit. On the other hand, the amount of time and energy wasted plus the brokerage of 0.1% will add up to a significant amount.
  3. The third option is mentioned below.

You can buy 1 call option. For an instance, if the share price or premium is 20 over 900, then your investment will be (INR 20 X 250) = INR 5000. The maximum risk, in this case, is INR -5000 but the profit can be unlimited. The brokerage for every trade you make is INR 50.

How trading in Stock Option

If the direction is not properly clarified, still, when RIL go up or down, you will have the following option to avail.

Buy call for bull trend + buy PUT for bear trend.

Your total investment is around INR 5000 for CALL INR +5000 and for PUT I INR 10,000. At times, we have found a huge profit of around INR 50,000 delivered by this INR 10,000 investment. When NIFTY breaks, the medium-term levels down. You can easily gain INR 5000 from INR 10,000 investment. It is quite clear now that going for a combination of investment in a safe manner will be the ideal way to trade. You can opt for such combinations and then relax for 10 days till the 15th of every month. The CALL/PUT combination should be done only when you have a specific reason. If the market shows abrupt behavior, you can make a huge profit out of it. If the stock comes in a range then both the CALL/PUT premium will decrease causing a loss.