What is option trading?
Options trading is the exchange of financial instruments that grants you the right to buy or sell a particular security at a particular price and on a particular date.
An option is a contract that is connected to an underlying asset, such as a stock or other security. Options contracts are valid for a predetermined amount of time, which could be as little as one day or as much as a few years.
How option trading differs from long-term investments?
- Time period : In long-term investments, one keeps their investments for a considerable amount of time, typically five years or longer. Whereas, in options trading, contracts expire after a week or a month, and one must close the position before the expiration date.
- Risk and return : Options trading is highly risky. One can lose all of their money in a matter of minutes, but options trading offers very high returns. Whereas in long-term trading, there is less risk and returns are also low.
- Analysis : Options trading requires technical analysis like charts and historical patterns. Whereas long-term investment requires fundamental analysis of financial metrics and earnings reports.
Why best broker is required for Option Trading?
- Options trading is extremely volatile, so a smooth trading platform with extra features like stop loss and bucket orders is necessary.
- Traders make multiple trades in a day to maximize their profit; therefore, the broker should have fewer per-order charges.
Key Factors to Select the Best Broker for Options Trading
These qualities are necessary in order to select the best broker for option trading.
- Minimum amount per execution
- Simple User Interface
- Features like Stop loss, bucket order
- Tools for technical analysis
- Price alert
- Smooth and sophisticated
Which is the Best Broker in India for Option Trading?
Based on these parameters, we have selected Zerodha as the best broker in India for option trading.
Features in Zerodha Kite
- Available for both Android and IOS users.
- Android Rating: 4.3/5 stars
- Chart with 100+ indicators
- Advance options for placing orders, like brackets and cover orders.
- Rs. 20 or 0.03% (whichever is lower) for Trading in options
- Option for Price alerts based on conditions like OHLC, volumes, open interest (OI), and more
Best Broker in India for Option Trading
Zerodha is undoubtedly the best broker in India for options trading because it has almost all the features needed for smooth option trading. Do you have any other stock broker name to add? Feel free to share your experiences and feedback on any of the best discount brokers in India.