Difference between USA options trading and India

Zerodha
1

Hi,

I have recently moved from US to India and trying to dabble into NSE/BSE. I am trying to understand the difference between the two exchange rules when it comes to options trading. Although Zerodha is pretty great I don’t find it as intuitive as Robinhood or TD Ameritrade.

  1. In US, you buy calls and puts for any stock. Is this true for India too? I have seen people doing this only for BANKNIFTY. Can I buy a call for say, RELIANCE?

  2. A contract is 100 shares like US or is this different?

  3. When contracts expire is it safe to assume that they are sold, or do they become worthless? For eg, is there any difference between selling a contract 30 seconds before expiry or letting it expire provided the stock price remains same?

  4. Am I allowed to write naked calls or do they have to be covered?

  5. How does the margin work? Say I own shares worth Rs. 10,00,000/- and funds worth Rs. 100,000/-. How much margin do I get?

Thanks in advance! This looks like avery helpful community.

Happy trading,
Chin

2

Stock F&O are available in India as well. Though, these are not available on all the stocks, but only on the stocks which meet regulators criteria, you can learn more on this here.

There are a total of 156 stocks in F&O segment, the list for the same is available here.

No, the lot size for each security is different, SEBI mandates that the contract value of all F&O contracts should be more than 5 lakhs and less then 10 Lakhs.

Upon expiry, if your position is OTM, it’ll expire worthless.

If your position is ITM there are couple of scenarios here:

Index Options are cash settled, your ITM Index Option position will be settled at intrinsic value.

While, the Stock Options are physically settled. If your Option position is ITM, upon expiry, you’ll have to take delivery of underlying shares. You can read more on this in detail here.

You can write naked calls.

You can pledge the shares you own for collateral margin, which can be used for trading F&O. You can learn more about pledging here.

For buying options, you’ll need to pay full premium (Price * Lot Size). While, for Short Options or trading Futures, you’ll need SPAN + Exposure margin. You can learn more about SPAN + Exposure margin here, and check margin requirements here.

To learn more about Options trading, would suggest you read this module on Varsity:

2 Likes
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@ShubhS9 thanks a lot! That was very helpful!

4

@chinmayd how can i trade in nasdaq index options?