Trading in options nse - What is Options Trading | Kotak Securities®
For order matching, the best buy order is the one with highest price and the best sell order is the one with lowest price.
This is because the computer views all buy orders available from the point of view of a seller and all sell orders from the point of view of the buyers in the market. So, of all buy orders available in the market at any point of time, a seller would obviously like to sell at the highest possible buy price that is offered. Hence, the options futures strategies buy order is the order trading in options nse highest price and vice-versa.
Members can pro actively enter orders in the system which will be displayed in the system till the full quantity is matched by one or more of counter-orders and result into trade s. Alternatively members may be reactive and put in orders that match with existing trading in options nse in the tradinf.
Orders lying unmatched in the system are 'passive' orders and orders that come in to match the existing orders are called 'active' orders. Orders are always matched at the passive order price.
trading in options nse This ensures that the earlier orders get priority over the orders that come in later. These conditions are broadly classified into 2 categories: DAY - A Day order, as the name suggests, is an order which is valid for the day on which it is entered.
If the rrading is not matched during the day, the order gets cancelled automatically at the end of the trading day.
IOC - An Immediate or Cancel IOC order allows a Trading Member to buy or sell a security as soon as the order is released into trading in options nse market, questrade select options level which the order will be removed from the market. Partial match is possible for the order, and the unmatched portion of the order is cancelled immediately.
Until then the order does not enter the market. A sell order in the Stop Loss book gets trading in options nse when the last traded price in the normal market reaches or falls below the trigger price of the order.
The seller is obligated to sell you shares at the strike price even though it means making a loss. The premium payable is optilns small amount that is also market-driven.
As a trader, you would choose to purchase an index call option if you expect the price movement of the index to rise in the near future, rather than that of a particular share. Suppose the Nifty is quoting around 6, points today.
If you are bullish about the market and foresee this index reaching trading in options nse 6, mark within the next one month, you may buy a one month Nifty Call option at 6, Let's say that this call is available at a premium of Rs 30 per share. Since the current contract or lot size of the Nifty is 50 units, you will have to pay a total premium of Rs 3, to purchase two lots of call option on the index.
If the index remains below 6, points for the whole of the next month until the contract expires, you would certainly not want to exercise your option and purchase at 6, levels. And you have no obligation to purchase it either. trading in options nse
You could simply ignore the contract. All you have lost, then, is your premium of Rs 3, If, on the other hand, the mse does cross 6, points as you expected, you have the right trading in options nse buy at 6, levels. Naturally, you would want to exercise your call option.
That said, remember that you will start making profits only once the Nifty crosses trading in options nse, levels, since you must add the cost incurred due to payment of the premium to the cost of frading index.
This is called your breakeven point — a point where you make no profits and no losses.
When the index is anywhere between 6, and 6, points, you merely begin to recover your premium cost. So, it makes sense to exercise your option at these otions, only if you do not expect the index to rise further, or the contract reaches trading in options nse expiry date at these levels.
optionns As long as the index does not cross 6,he benefits from the option premium he received from you. Once the index is above 6,his losses are equal in proportion to your gains and both depend upon how much the index rises. In a nutshell, the option writer has taken on the risk of trading in options nse rise in the index for a sum of Rs 30 per share.
Further, while your losses are limited to the premium that you pay and your profit potential is unlimited, the writer's profits are limited trading in options nse the premium and his losses could be unlimited. In the Indian market, nsw cannot be sold or purchased on any and every stock.
SEBI has permitted options trading on only certain stocks that meet its stringent criteria. These stocks binary option trading account chosen from amongst options nse in trading top stocks keeping in mind factors like the average daily market capitalization and average daily traded value in the previous six months. While the share is currently quoting at Rsyou trading in options nse that this announcement will drive the price upwards, beyond Rs However, you are reluctant to purchase Reliance in the cash market as it involves too large an investment, teading you would rather not purchase it in the futures market as futures leave you open to an unlimited risk.
Yet, you do not want to lose the opportunity to benefit from this rise in price due to the announcement and you are ready to stake trading in options nse small sum of money to rid yourself of the uncertainty. A call option is ideal for you.
trading in options nse Depending on the availability in the options market, you may be able to buy optiobs call option of Reliance at a strike price of at a time when the spot price is Rs And that call option was quoting Rs.
You start making profits once the price of Reliance in the cash market crosses Rs per share i.
If the AGM does not result in any spectacular announcements and the share price remains static at Rs or drifts nse options trading in to Rs because market players are disappointed, you could allow the call option to lapse. In this case, your maximum loss would be the groupon stock options paid of Rs 10 per share, amounting to a total of Rs 6, However, things could have been worse if you had purchased the same shares in the cash market or in the futures segment.
On the other hand, if the company makes an important announcement, it would result in a good amount of buying and the share price may move to Rs 1, You would stand to gain Trading in options nse 20 per share, i.
Timing is of great essence in the stock market. Same applies to the derivatives market too, especially since you have multiple options.
So when do you buy a call option? To maximize profits, you buy at lows and sell at highs. A call option helps you fix the buying price.
This indicates you are expecting a possible rise in the trading in options nse of the underlying assets. So, you would rather protect yourself by paying a small premium than make losses by shelling a greater amount in the future.
tradong As we read earlier, the buyer of an option has to pay the seller a small amount as premium. Seller of call option has to pay margin money to create position. In addition to this, you have to maintain a minimum amount in your account to meet exchange requirements.
trading in options nse
Margin requirements are often measured as a percentage of the total value of your open positions. Let us look at the margin payments when you are buyer and a seller:.
Remember, while the buyer of an option has a liability that is limited to the premium he must pay, the seller has a limited gain. However, his potential losses are unlimited.
The margins are levied on trading in options nse contract value and the amount in percentage terms that the seller has to deposit is dictated by the exchange. It is largely dependent on the volatility in the price of the option.
Higher the volatility, greater is the margin requirement.
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