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What is Nifty Options? How to trade in Nifty weekly and monthly call and put options?

The main segments of our Indian Stock Market are Equity , Nifty Future, Nifty Options, Banknifty Future, Banknifty options, Stock Future, Stock Options. A Newcomer always wants to know about these segment. Number of questions aries in his mind like what is Nifty Future ? What is options ? How to buy call and put ? What is call options ? What is Put options ? what is option writing ? etc. etc.

We are going to share here some information about Nifty options with you in very simple language. There are two type of options in Nifty known as CALL and PUT. These are basically, contracts which expired on last thursday of the month known as expiry day.

What is Call options ?

Let us first explain CALL. In general word we can say CALL means up and PUT means down. Suppose currently Nifty Spot trading on 11480, Nifty Future Sep Contract trading on 11500. Then there are call options available for Nifty Future like there will be 11400 call option, 11500 call option, ........, 11800 call option, 11900 call, 12000 call ....... 12200 call or more may be available. Call option prices move up or down as Nifty Future move up or down. Let us take one example for call option, If Nifty Future at 11500 and Nifty 11500 call available at Rs. 100 so when Nifty Future will move towards 11600, Nifty 11500 call price will go up, same when Nifty Future will go towards 11400, Nifty 11500 call price will come down. Lot of other factor also impact on options prices, like if it is the starting of fresh expiry then call option will be less volatile and as the expiry date will come closure option becomes very volatile.

What is Put options ?

As we said PUT means down. Suppose currently Nifty Spot trading on 11480, Nifty Future Sep Contract trading on 11500. Then there are PUT options available for Nifty Future like there will be 11600 put option, 11500 put option, ........, 11400 put option, 11300 put , 11200 put ....... 1100 put or more may be available. Put option prices move up or down as Nifty Future move up or down. Let us take one example for PUT option, If Nifty Future at 11500 and Nifty 11500 Put available at Rs. 100 so when Nifty Future will move towards 11450 or lower then Nifty 11500 put price will go up, same when Nifty Future will go towards 11600, Nifty 11500 put price will come down. Lot of other factor also impact on options prices, like if it is the starting of fresh expiry then call option will be less volatile and as the expiry date will come closure option becomes very volatile.

What is Option Writing?

To sell any call option or put option without having position in our account is know as option writing. Suppose Nifty Future is around 11500 and we think that till expiry it will not cross 11800. And Nifty 11800 call available at suppose 20 rs. Then we can sell it. We can sell one lot or more lot as per our capacity. If we are selling this option then we will get Rs. 1500 [ lot size 75 x call price Rs. 20 ] same time and on expiry day or before expiry we will have to cover it. If we are not covering it , means we are not buying it then there is the provision of some penalty. So it is advice to cover your position before settlement. If in any case, Nifty moved to 11900 after your option writing then the value of Nifty 11800 call will be 100 rs and as you sold it at 20 rs , so your current loss will be Rs. 6000 cause you will have to buy that option at 100 rs. So in simple lagunage your buying price 100 rs and sell price 20 rs.

How to calculate Profit / Loss in Nifty options trading?

Let us take more example :-

Suppose you bought today one lot Nifty Monthly 11500 call at Rs. 100 and sold out next day at 120, it means you gained 20 points and your profit will be

75 ( lot size ) x 20 ( Gained Point) = Rs. 1500 (Profit)

Suppose you bought today Nifty Monthly 11700 put at 70 rs and sold out same day at 100 , it means you gained 30 points and your profit will be

75 ( lot size ) x 30 ( Gained Point) = Rs. 2250 (Profit)

Suppose you bought 10 lot Nifty 11800 call at 30 rs and sold same day at 40 rs, it means your total profit will be

75 ( lot size ) x 10 ( Gained Point ) X 10 = Rs. 7500 (Profit)

Recently exchange started trading in weekly Nifty options also, it means now you can buy or sell weekly call and put options. These options will be available at very low premium as they will expire every week on Thursday. Suppose you bought 10 lot (75 quantity) Nifty 11700 call at 30 rs and sold same day at 45 rs, it means your total profit will be

75 ( lot size ) x 10 (No. of Lot) x 15 ( Gained Point ) = Rs. 11250 (Profit)

We have not added the brokerage in these calculation.

Now I hope that Nifty Options trading concept is clear to you. If you want to share your view with us or having any kind of query and want to ask any question then you can post it here, as soon as possible, you will get the reply.You can directly write to us to email id "stocknifty@yahoo.com" or call at +919981722011.

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