HELLO SIR @nithin
What are the step to be safe in Option Buying.
Does option buying Need margin.
If option buyer gets hidden margin or any type of margin.-- How to stay away from that.
What are the difference between MIS and NRML in Option Buying, does they need margin.
How to stay away from all types of penalty.
How to avoid Margin in option buying.
HOW TO STAY SAFE IN STOCK MARKET FROM ANY AND ALL KIND OF PENALTY.
If one has enough cash balance worth option premium, that should be enough for option buying in general.
But, if one is trading in stock F&O, one needs to maintain additional margins in the last week for ITM options due to the possibility of physical delivery.
No difference as there is no extra leverage for F&O now. Only difference is MIS is for day trading where one has to exit before 3.25 pm and NRML product, one can carry overnight as well.
More reading on Option buying and margin penalties in general:
Means,
The conclusion is in “OPTION BUYING”(Nifty , Bank Nifty, Fin nifty) we no need margin, So if there no margin there no need to pay penalty??
Is that exactly???
But in expiry day( Nifty, Bank Nifty , FinNifty) we have to exit or square off or sell the buying position before 3:30 pm.
Otherwise penalty.???
Is anything left that I forgot to mention.???
So option buying is limited risk trading because of no margin ???
Sir in the last post you mentioned that option buying have leverage.
But now option buying does not have margin /levarge.
The leverage or Margin concept was in past for option buying.
F&O by design is leveraged trading. Theoretically speaking, you would require 50 (lot size) *19700 (CMP) = 985000 rs to trade in Nifty. But as you can trade with lesser amounts (margin of 112k approximately for buying/selling future and selling options) and much lesser in options (equivalent to premium paid) - Theoretically speaking, it is a leveraged trade.
If you’ve sold an option and if the market moves against your position big time, you may have to bring in funds to make good the losses.
Now coming to option buying, you are correct. The maximum loss is the premium paid so you can say your capital is the maximum amount you can lose. This holds true for index option buying as they are cash-settled but for stock options that expire ITM, physical delivery is mandatory and that’s where the concept of leverage comes into the picture.
Check this out
In short, if you are only an option buyer, you need not worry about any margin penalties as long as you are trading in index options and stock options that are not in the money(ITM).
You should be careful about maintaining adequate margins for stock options that are ITM starting from one week before expiry as explained here
Thank you for solving my questions.
Besides this.
I want to do only option buying in Index(NIFTY, BANK NIFTY, FINNIFTY).
So I don’t need to worry about ANY KIND OF margin penalty.
But in weekly expiry I have to close/exit/square off/sell my trade before 3:30 or market close…
Is that.?
If I forget to sell/square off/exit/close my trade in expiry day and that was in ITM.
THEN ONLY WE HAVE TO GIVE MARGIN PENALTY
Otherwise there are no margin penalty or any kind of penalty in INDEX OPTION BUYING (NIFTY, BANK NIFTY, FINNIFTY).
IS THAT ?
Conclusion/ Inshort
Option Buying does not need margin.If there are no margin there no need to worry about penalty.
But keep in mind we have to exit before market closes in weekly/monthly expiry day.
Sir,
One thing more I will buy only ITM BECAUSE OF LESS TIME DECAY .
IS THERE WILL BE ANY PROBLEM???
It means that you should not forget to exit before the market closes
and
even if you forget and the time of the market is over then the position cannot be ITM (when market closes in the money) then only penalty will be charged
and
there is no problem if it is OTM(when the market closes out of the money or far).
Is it okay if I can answer this?
In short, if you are not an option seller or spread trader but a naked index option buyer, you have nothing to worry about about margins, penalties, or leverage.
There is nothing to worry about having to close your open position either. Its all about seeing profit and booking it.
What is naked index option buying???
It’s buying options without any hedge position. i.e. you either buy a put or call option.
naked option buying example
19000 ce long
spread trade ex.
19000 ce long
19200 ce short
naked option seller ex.
19000 ce short
There are a lot of things, so you should get a book about futures and options trading. Market is a place where learning is earning , don’t ever think you will leant the concept and you start to make money next day. That’s not how it works! You have to learn every day, every second so that you stay ahead than other people.
