How to trade nifty index in options

I trade only cash market. But say, I want to dip in nifty futures, but don’t really want to put 1 lakh plus and start trading it.

Just for margins sake, how do I go into options and say, bet with the market?

In short, if i bet long on nifty jul, what options should I look? And if my view is short vice versa.

All suggestions are welcome.

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If you are long in nifty fut , u can either buy puts or sell calls (basic strategy)

whether u will buy puts or sell calls depends on ur outlook of market direction, holding period etc

this will help u with the hedge and also give u margin benefit.

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Varsity videos on options (Youtube) might be helpful to u @Celina

Say today morning, view is long. Which put to buy or which to sell?

Yes, varsity might help. But direct community interactions ease things a lot. A lot.

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And considering this is all intraday.

And what are disadvantages of doing options vs direct nifty futures.

Option trading is complex compared to futures where things are quite straightforward.

2 key factors which one should look for whether to buy a put option or sell a call option :

  • Volatility : If u r expecting volatility to be high (if lets say, there is a chance of fall of 200+ points even if its intraday, then call sell will give u less hedge compared to put buy) and vice versa, if volatility is less, put buy will eat your potential profits more than call sell, which infact can add to your profits.

  • Risk appetite : In put buying, you restrict your losses to the extent of premium paid which decreases your profit if you are right, but saves u if u r wrong while in call selling, you restrict your gains (if trade is ryt) and restrict your losses (if you are not too wrong) . If the trade goes completely wrong, your loss will be saved by premium recd on call sell at maximum.

For intraday, most preferred option is At the money strike options followed by ITM

If you are doing intraday

Buy call or put options 3 strikes away from the ATM. With option buying your worst case risk is limited to the premium you paid, no margin and penalty worries, lower transaction cost etc compared to futures.

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Give a scenario for today’s morning. Like at 930, i go with the bet that nifty futures would be long.

What options should I go for?

This answer ll really close things up for me. Thanks again.

16100 nifty call

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For starters, you could just trade synthetic futures. For going long, you could buy ATM CE and sell ATM PE.
And with time, once you see how options move, you’ll be able to trade other strategies.

What’s the thumb rule for going with this numbers? When I open, i am bombarded with all sorts of ce pe’s.

How to know what to trade ?

3 strikes below ATM strike

Trading in nifty index is a game of high level skills . Specially option buying excites the novice because it can be done with small capital but the winning probability in buying is low . The option seller against you is the one who make never- ending profits .
In stock market , the process is quite simple ; FIRST LEARN THEN EARN

Celina Again!!!

Ok after my previous answer you wanna try options i Guess. Not bad, anyway I’ll tell few suggestions from my mistakes which you shouldn’t make which will save you months and as well as your capital.

  1. signup to sensibull, if u have already thats good, why because They have all data from OI to ready made trade setup where you can do paper trading and test different type of strategies, also you can devise your own strategy from sensibull, If you find a better alternative than sensibull also is fine.

  2. I am not going you to advice to read option greeks, it will make you mental. If you are good at math and patience you can else leave it, just go through about time decay,delta and volatility alone. you can get all sorts of explanation from varsity itself, need not google.

  3. have a detailed understanding of what ITM ATM and OTM options are, you have to know what type of option you are going to trade.

  4. 1st do paper trading atleast for 2 weeks and then once you feel comfortable then go for live trading.

  5. start with 1 lot only, I repeat 1 lot, only when you are successful for many days then gradually you can increase the lot size.

  6. You need to device 3 strategies for 3 type of markets bull/bear and flat. same will not work every time.

  7. have a plan before the trade , entry exit Stop loss and profit margin.

before doing all mentioned above don’t enter live trading in options else its suicide, you will never get your money back.

coming to live trading, Index has weekly expiry so don’t have broader view, your view has to be from friday to thursday not monthly or more than that. Every day depends on what happens in US, Europe, RBI, fuel, border, USD vs INR, gold and all factors that could affect index, you have to be upto date before bed and immediately after you wake up.

finally If you are going to be on the buy side don’t take delivery do only intraday as time decay and other factors will eat your profit, If you are on the sell side take delivery only if your entry price is far away from spot( still intraday is preferable here)

on buy side you have to always go with ITM options, say today nifty moved from 16750 to 16950, If you are going to take position when nifty is at 16800 you have to buy 16800CE and vice versa,

If you are on the sell side OTM option is preferable.

at any cost don’t go naked buying or selling, you might be profitable on 5 days in naked options, but 6th day it will not only washout your profits but also your capital. Always have a hedge based on your risk appetite and strategy.

finally have an eye on EOD OI data , PCR value and the same data next day morning, this will give you an idea of market direction.

whatever I have mentioned above are the outcomes of my mistakes from the last 2 years.

further doubts are welcome.

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Thank you so much for your time. Let me digest whatever you wrote here.

I ll definitely come with doubts. Please don’t run away.

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basic concept. Intraday future mimics the underlying. The ATM option mimics intraday future. Just remember this thoroughly. All you need to do is look at index chart or the future chart(for future chart only look at intra day) for going long or short.

well let me simplify, you are looking at nearest ATM option nearest strike price.

price is at 17,045.70

If you want to go long:-

buy 17100 CE option or
buy 17150 CE option
(both nearest to 17,045.70)
if you want to go short

buy 17100 PE option or
buy 17150 PE option
(both nearest to 17,045.70)

Essentially the ATM option mimics the spot nifty futures which is same as the nifty index. Basically you are trading on the premiums of options.

Here use the option Greek delta. It represents the change of option price when underlying future /security changes price.

For example:-

price moves another 50 pips

index price is at 17,045.70
buy 17150 CE option premium : 113
option delta :- 0.4

then index price :- 17,045 + 50 = 17,095
buy 17150 CE option premium : 113 + (50 *0.4) = 113 + 20 = 133

*amount of change in ATM option change with respect to future/ underlying = +/- delta * amount of pips underlying/future has changed.

Remember above formula.

price 50 pips down

index price is at 17,045.70
buy 17150 CE option premium : 113
option delta :- 0.4

then index price :- 17,045 - 50 = 16995
buy 17150 CE option premium : 113 - (50 *0.4) = 113 - 20 = 93

If you understood above then you can figure out how to put stoploss and take profit

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Hi
As option buyers don bet against the market . The probability of option buyers to win is jus 30 percent . So simple analysis out of 10 trades u win 3.

If u r lucky enough u win 3 trades of 30k and end up loosing capital if u don have a idea on market with ananlusis and experience . The markets have bec so unpredictable taking technical analysis and everything to consideration Option buyers might end up wrong . Please make a better study and take it slow .
As per today morning view it might be bullish and market ends up consolidating . So theta decay comes in to the role u ll loose the premium u paid

Let’s say u bought a call of X for premium of 100 . For u to make money the premium must cross the X value + 100 . That’s d break even for a call buyer .
Same plays in futures . PR has a statement . U play futures u won’t have a future . So options are better u play it careful and u can do lots of adjustments to minimise losses and maximise profits .

Please make a better study and take some paper trades and do d real trade
Thanks

Not really. You just need momentum towards the target. My win rate with option buying is over 50%.

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  1. Option time value decays to zero only on expiry. If someone is trying to capture intraday trends and working with ITM options nothing to worry about. If some one is trying to capture momentum pops nothing to worry about.
  2. Accuracy should be seen along with risk - reward. Accuracy alone is a handicapped method to analyse option buying and in general trading systems.
  3. Lower accuracy of a trading system can be used to turn time value in your favour.

Option selling win rate is 66 percent depending on the strategy and adjustments .pop would be like 80-93 % . we follow European way of trading in options . Sellers always win . New buyers like them will be in trouble .

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