Trading index derivatives vs equity derivatives

Dear fellow traders,

Whats your view and stand on trading equity derivative compared to index derivative? Do you trade equity derivative?

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Better trade with index derivative before going to equity.
If you willing to trade in equity derivative means, do short in option or buy pe. but you should hold same stock in stock holding.

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you mean hedging, yes thats right and helpful.
But why not take fresh trade in equity f&o. what are the differences

Due to huge lot size and you cannot follow it’s game.

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It is better to trade index derivatives ( Nifty and Bank nifty) than stock derivatives because :-

  1. Index derivatives contacts are very liquid than stock derivatives, so very less bid-ask spread.
  2. Less manipulative because of high liquidity.
  3. Margin requirements is also less than some stock derivatives.
  4. Weekly options are available for index but not for stocks.
  5. Index derivatives are cash settled but stock derivatives are physically settled…


but whats physically settled? how does it differ than normal online trade…?

Physically settled for stocks means you will have to take or give delivery of shares if itm put or call on expiry day.

Physically means nothing actually physical lol

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suppose hindalco is @360, and i sold 350pe. then at expiry, to settle, what’d happen?

If Hindalco goes below 350 (say 250 :stuck_out_tongue: ), you will have to take delivery at 350.

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ok and if it goes 400, i take delivery at 350 only.

if i buy call 375, i buy at 375 on settlement.

So whatever the price, if call bought or put sold, i sell at my spot price and vice verca?

If you have sold a 350PE, and stock goes above 350, there is no physical settlement obligation. Physical Settlement only happens if Strike is breached (below short put and above short call).

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