10 Things You Need to Know Before You Trade Options

If you’re someone who has been researching, exploring or reading about trading or how trading is done, you have probably heard of “Options Trading”. In today’s fast-paced society, Options Trading is one such way of earning profit without reaching the master of expert level in the trading industry.

Also Read | The Ultimate Guide to Option Trading

What is options trading?

Options Trading in generic terms entails buying or selling an underlying asset at a pre-agreed or pre-negotiated price by a specified future date.

If you know to trade, that’s good, but if you’re planning to try your luck in Options Trading, you need to thoroughly understand that it can be quite challenging and complex at times. It isn’t like you’re regularly trading wherein you select a stock, buy it and consult your broker to fill its order accordingly. For options, you need to understand, unfold and know many different procedures and tactics and for that, you can download the Bigul App, the best options trading app.

Within our app and even on our platform, you will be learning almost everything related to trading, options trading, types of trading, what works best for you and whatnot… our platform answers all your questions and that is the primary reason why we are known as the best option trading platform in India.

Despite being one of the most beneficial trading strategies, Options Trading has its severe risks as well, and all of those are quite speculative. Not everyone can become a successful options trader, but with Bigul, you can learn everything about trading. Like any other business or venture, becoming a successful options trader requires a certain skill set, understanding and expertise.

Let’s discuss 10 essential things that you must know before you trade options…

Number 1 

The main thing about options is that they come in a variety of maturities. Options with 1-, 2-, and 3-month expirations are also available in the market. In the case of indices, there are also long-term options available, and on different platforms as well, you can choose from varied options like weekly options.

Grow with Bigul, the best trading platform in India.

Number 2

With call-and-put options, you can buy and sell options, respectively. In almost all kinds of situations, the option buyer normally has the potential right to buy or sell, without any responsibility or stress. The buyer of the option pays a premium amount to the option seller in exchange for this privilege, which is not obligated and will not be obliged even in the future. However, the option buyer has already paid for this premium and that’s the reason why the buyer can enjoy the benefits of the option.

Number 3

You’re only expected to pay the premium margin upfront initially because the premium you paid for a call or put option essentially becomes your maximum loss, which usually affects an overall growth rate and MTM margins, which are owed in the case of futures, are not a concern for option buyers. You can invest and earn big by choosing Bigul, the best trading platform in India.

Number 4

Each option acquisition and the entire process involves a trade-off which in other words means, your options will be offered at a reduced premium if they have a shorter remaining maturity and this is only possible before the expiration date. However, the smaller outstanding maturity also implies that your chances of profiting from the options are diminished and considered null. Start trading with us and find out why Bigul is the best choice as an options trading platform.

Number 5

Volatility is the most important element that influences and pushes the value of an option. The link between call and put is often favorable and in trader’s favor and you’ll be surprised to know that both calls and puts gain in value when market volatility fluctuates which makes it the right time to trade and invest. You can start your trading journey with Bigul, the best options trading platform in India.

Number 6

Among the primary advantages of using options in India is that the Securities Transaction Tax (STT) is calculated on the premium value compared to the notional value of the option. Compared to futures, where the STT is based on the notional value, options possess this advantage.

This means: The notional value of one lot in the case of RIL will be Rs. 850,000 (500*1700) while the premium value will be Rs. 5,000 (500*10) if you purchase a 1700 strike call. The fact that the STT is applied on the premium value rather than the notional value is one of the primary causes for the significant growth of options trading in India.

Get the best trading services at Bigul, the best options trading platform in India.

Number 7

Keep in mind that the option price for a specific strike on a stock includes two parts: the value of the stock itself and the time value. Any options trader has to have an adequate understanding of these two ideas and if you wish to invest in options trading, make sure when you start trading, that you only choose the best in the market and without a doubt Bigul is the best option trading platform in India.

Number 8

Understanding the immediate value and intrinsic value is crucial for successfully trading options in today’s time. Before anything else, let us remind you that an option is a wasting asset and It is necessary to understand why the time value of the option decreases as the maturity date comes closer, virtually reaching zero at that point can work in many ways. It therefore always makes more sense for anyone who is working as an option buyer, to purchase options before the start of the contract because doing so will provide you more time value and volatility prospects to work with and to understand the market better.

Start your trading journey in options with the best options trading platform in India, Bigul.

Number 9

Options are extremely versatile and dynamic goods which makes them quite interesting and very easy to utilise whenever needed. You can use a call option to speculate on the stock if you believe RIL’s stock will increase, yes you can easily do that. Want to know how? Let Bigul, the best options trading platform in India guide you. Similar to this, you can speculate by purchasing put options if you anticipate a decline in SBI’s stock price.

Number 10

The last, but extremely important point to remember here is that options can be bundled to accommodate a variety of market circumstances that can be favorable and unfavorable at times, but once you invest and trade with a reputed and reliable company like Bigul, your stocks are probably more secure than ever. The only thing to note from here is that you mustn’t invest or trade with a fishy or unreliable company ever.

Get ready to start your trading journey with the best options trading platform in India, Bigul.

Also Read | Understanding the Iron Condor Strategy in Options Trading