What is Uncovered or Naked Options Trading?
Naked or Uncovered Option trading is a type of trading/speculating where a Call or Put option is bought or sold by different individuals at the same time expecting different price direction movements. Naked Option trading is a Zero-Sum game which means that the Profit for one is a Loss for the other individual.
Why is Options Trading considered risky?
Options trading is different from traditional share trading in many ways. Trading in options includes multiple factors like high leverage, delivery obligation on the date of expiry, unlimited loss potential, etc. All these factors make trading in options riskier.
How much money is required for Options trading?
Options trading involves two aspects. One is options buying and the other is options selling. To buy an ATM option you will require around Rs 10,000 to Rs 25,000 per lot for an Index or stock option. On the other hand, you will require close to Rs 95,000 to Rs 1,50,000 for selling 1 lot of index option. These amounts change with respect to the time remaining to expiry and other market conditions.
Can I trade in US Options from India?
Yes, individuals can trade US options from India. There are many platforms as well which allows the individuals to trade internationally, it just depends on them what they are comfortable the most with and prefer trading from.
Why is Options Trading more risky on the expiry day?
Options trading involves many factors such as Options Greeks. Options Greeks like Delta, Theta, and Gamma have the most impact on Option prices towards the end of the expiry. The option premiums are impacted highly by Gamma and Delta on the day of expiry. Learn more about Options greeks and how they impact option premiums.
Are puts riskier than calls? Risks to Consider
Puts are Calls are both risky in their own terms. For calls it is necessary to make decisions well as there are chances that you make loose the premium. In case of puts it is important to strategize the the options well.
What is difference between Long Call vs. Short Call?
Short call and long call are the call option strategies and individuals buy or sell the shares. There are various differences between them and are important to be known. The elaborated version is described below.
Which Options Greeks should you know about before Trading Options?
Options Premiums are primarily made up of two values. Intrinsic Value and Time Value. Whereas the change in the price of the Option premiums is dependent on five factors called Option Greeks. These are Delta, Gamma, Theta, Vega, and Rho. Know more about options greeks and which Greeks should a trader keep an eye on while trading Options.
What is the minimum amount required for Options Trading in India?
Options are of two types- call option and put option. You need quite an amount of money to trade in options because it has costs such as premium, brokerage. etc. To know more about the topic, read the detailed version.
What is an Iron Condor trade in options?
An Iron Condor is a 4 legged hedged option strategy that includes selling 1 slightly OTM (Out of The Money) Call as well as 1 Put option and, buying 1 Slightly Far OTM Put & 1 Call options in order to cover the risk of the Naked short positions. This strategy is implemented when the overall outlook of the underlying asset is neutral or rangebound and no major moves in any direction are anticipated. The maximum profit and loss are capped in this strategy, and by hedging, margin benefits can be enjoyed.