I have traded only Equities till now. Catching 2% to 3% swings is normal. But in Options the premiums swings like >10% or even 100%. Given the extraordinary returns, why dont many people trade option contracts ? Am I missing something fundamental here (apart from heavy downside)?
Example : Today Adaniports Nov 300CE opened at 4.95 and went to a high of 7.85. That is something like 40% gain…unheard of in equities.
It is a Risk vs Return payoff. Yes returns can be substantial, but so is the risk. Over 90% of all options expire worthless at the end of every expiry. When you buy a stock at 100, chances of it going to 0 is almost impossible. When you buy an option at 100, 90% chance that it will end up in 0.
Suggest you to get started reading options module here: http://zerodha.com/varsity/
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