Futures & Options (F&O) is a leveraged product inherently, what this means is that to buy Rs 2lk exposure to stocks/index, you will need only a small portion in your trading account - say for example 10% which is Rs 20000. The issue with trading with leverage is that, you can make and lose money quite fast.
Leverage also effects psycologically, because a person is buying for Rs 2lks with only Rs 20,000, he is scared, and typical reaction would be to book profit very fast and if there is a loss panic and do nothing causing a big dent to the trading account.
That said, F&O has a lot of +'s, ability to make money when markets are going down, abillity to take arbitrage strategies, and so on. If you are starting trading F&O, most important thing is to start trading with only the money you can afford to lose .
FNO trading itself means HIGH RISK HIGH REWARD… Normally trading in FNO involves high risk of capital loss if not traded with appropraite and correct stops. Sometimes it happens that stops are too high or too low or at times price hits the stop and moves in the direction of the trade taken. But useless now since the STOP ( whether its stop loss or trailing stop) has been kissed and traded… In a moment a traders capital can be eroded and multiplied in FNO trading So a person having high risk appitude/ good understandng of market movements/ its swings/ stock price history/ perefct TF should look in trading in FNO segments
The main risk in F&O is high losses inherent from high leverage. But nowadays it is quite possible to limit your risks to what you can afford to loose, by means of various F&O strategies (hedging, calendar spreads, multi-leg orders, credit-debit spreads etc.,)
In addition to what is already stated here by others (like the risk of F&O because of high leverage), another thing about F&O is the expiry date. If you invest in Equity and you have some loss, you have the option of holding the position as long you want, so that you can exit when the price rise and give you profit. But in case of F&O, you are forced to close the the position,if you are in loss on the day of expiry. A person who is holding an Equity position, can receive the benefits of share holders, like receiving the dividents and bonus. This is also not available for F&O position.
Please Answer Sir If have paid premium for call option Ex 10*500 =5000 premium.if stock not met strike price within expiry if it loss how much loss i have to book . premium 5000 or will take losses money from trading account like in equity exposure?
The option will expire out of money. You will lose all the money you paid as premiums. The amount of premium paid will be your loss. No money will be deducted again from your account.
Ok Sir thanks your quick answer. most of the time i raised query here most of the expert share link. but you given accurate answer thank you so much:heart_eyes: really sir i have raised query other plotfarm also more than 15-20 no one given like answer.
When infratel was 168.70 Premium was 9.40 for INFRATEL MAY 180CE.
Now Infratel is at 173.50 but Premium is showing 9.20. How is this?
If it reach strike price within expire .Is it increase premium
if it reach strike price within expiry how much would be my profit. i though premium will raise till 12.45 if it reach premium initially paid amount will deduct or with initial premium also count as profit?
The pace at which the call options increases in value when the underlying stock goes up depends on lot of factors. There are a bunch of numbers called “Option Greeks”. You should read up on that. It will be confusing in beginning but eventually you will understand it. I suggest you not to play with options till you completely understand these option Greeks.
Regarding Infratel, it’s the same. Basically what would have happened is that Delta (one of option Greeks) gain of option price would have been offset by another. You will understand when you read about option Greeks.
