Well if you have reached here then you will definitely read the whole blog. This is about how you can follow simple rules in Indian stock market and make decent profit with option trading .
Before we jump into the rules which I follow. Let’s first know what is index and what is option.
A stock market index – it is a statistical source that measures financial market fluctuations. The indices are performance indicators that indicate the performance of a certain market segment or the market as a whole.
Option trading gives the buyer the right but not the obligation to buy (call option) or sell (put option) a certain underlying asset at predefined price within a stipulated period.
- You should know the resistance and support level of Indexes which you want to trade
- You need to do little bit of research for the contracts.
- Whether you think the index F&O will go up or down chose CE or PE (F&O stands for Futures and Options. PE refers to Put Option European Style, which gives the holder the right to sell the underlying asset. CE refers to Call Option European Style, which gives the holder the right to buy the underlying asset).
- Know when to exit the contracts.
- Know the different charges applied on contract purchase and sell.
- Beware of premium required for trading option.
- Don’t be greedy and have thought through strategy to exit the contract with less profit but not without loss.
- If you know what time to trade (Best time is to let the market stable .After 10 a.m IST)
- Indian market volatility depends upon other global markets .So make sure you are tracking global cues and put money on right CE or PE contracts.
- Check volatility factors and cues before market opens. There are different brokers and news channel which helps in this.
- You can’t predict market 100%. So be ready to lose money also some day.
- Don’t go without judgement .70% correctness also could give you great profits.
- if you are doing intraday option trading it will automatically get exited 15 min before market close. So make sure you exit before this time obviously with profit.
- Be aware of SEBI rules on F&O.
- Keep eye on global market news like Foreign investment in Indian markets, wars, elections, company quarterly results etc. These might impact your stocks and indices fluctuate very quickly.
- The market also believes in human sentiments. So traders exit with market fears and seeing the opposite trend which they might not be expecting while initiating the trade.
- There are weekly expiry of options. So be cautious on last day trading. As mostly after 2 p.m many will hit lower circuit of 0.5.
