Nifty And Bank Nifty as a Option starter

Hi Guys,

I m a trader in the stock market and learnt everything through youtube and Varsity

I am wanting to try my hands on Options and have been learning from Varsity and doing paper trading and really want to start my hands in Nifty and Bank Nifty but have a bunch of questions, Would love to learn from you guys

  1. I m intially wanting to start trading in the Nifty and Bank Nifty Domain, so is Rs 50,000 enough to start and make a good income in it?

  2. Please correct me but as per my knowledge we don’t have to take physical deliveries of the indices so I wont be liable to pay more the margin requirement in the worst case scenior I forgot to close positions

  3. Only on the day of expiry or last week of expiry I will need higher margin? Right
    On other days I m good with the premium*Lot amount?

  4. Can I take multiple trades in Nifty in a day
    For example: 9:20 I take a Call option (Buy) and square it of by selling the call option by 12:00 in nifty and take another Put(Buy) option in Nifty and square it by selling Put(Sell) at the end of the day?

  5. I will never be liable to pay lakhs of rupees in Indices right? Either I have to close my postion before expiry or my broker will do it on that day

  6. If I do intraday, and make a profit will the profit amount be credited the same day, I understand loss wil be deduceted from my margin requirement? In case of Buy I am talking here

  1. I’d say no. The notional value of 1 Nifty contract is about 8.5 lacs (17,000 x 50). Even though the premium paid may be much lesser than your total capital, your exposure to the market is many times more than your capital. For example, the delta of an ATM call option is 0.5. So, even if you buy one lot of ATM CE, your exposure to the market is 0.5 x 8.5 lacs, which is about 4.25 lacs. That’s a leverage of 8x and too high in my opinion.

  2. No physical deliveries for index options. So, you will only have to pay the premium for buying options.

  3. No. Since, no delivery is possible in index options, you will not need additional margin even on expiry days.

  4. Yes.

  5. Even if the option expires in the money, you will not have pay any extra amount. The option will be settled as per the index closing price. If you were long 17000 CE and the index closes at 17030 on expiry day, you will receive (30 x total qty) in your ledger.

  6. Intraday F&O profits are credited on next day. Losses will be deducted as soon as you close your position.

Thanks Suyash for your answer, I really appreciate it and honestly solved my doubts

I just want to understand the first answer, I understand the leverage part and exposure to the market,
But as mentioned in the second point there are no physcial deliveries for index options so its purely trading the premium, isn’t it? At no point I have to pay 8.5 lakhs and lets say my trade gets to zero I will only loose the premium amount that I invested, lets say premium is 150 and lot size is 50 so that is Rs. 7500 (My question is just related to buying of call or put and not selling where I will have unlimited risk)
This is just one thing I want to understand about it, I have learnt and practised and I want to execute with the min amount risk that I m willing to loose in the worst case scenrio
if not 50K, whats the amount one should start trading according to you?

Yes, you’re right about the premium. You will only have to pay the premium and in the worst case scenario, it will just go to 0 but at no point you’ll be expected to pay anything more.

My only point was that even if the premium paid is 7500, your exposure to the market is much more. Let’s assume that you have a stop loss of 50% of premium paid, i.e., 3750. Now, this 3750 is 7.5% of your total capital, which is quite a large risk, in my opinion. But, perhaps if you’re just starting out, it does make sense to start off with a small account.

I will definetely keep the risk factor in my mind, Thanks Suyash, your answers were really helpful, Thankyou once again

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