How to make money in option trading in india

So, a call option gives the option holder the right to buy shares at the strike price within a determined period of time. A put option gives the option holder the right to sell shares at the strike price within a set period of time. So, in the simplest terms, an investor thinks the value of the shares will rise, they buy call options.

If they think the value will fall, they buy put options. Want to learn how to make money trading call options? Once the investor has purchased this call option, there are a few different ways things could play out. As with most trading, there is some risk involved when it comes to purchasing call options.

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When thinking over your call option strategy, consider that the potential for gain is much greater than the potential for loss. There is certainly money to be made in this practice. Understanding options trading is the only way you can make more money with this type of market play. Can more money be made with options trading than traditionally trading shares? That depends on your strategy. This is the time to get in the game. But, could that return be even higher?

You are not, however, obligated to purchase those shares. So, can you receive greater returns with options compared to simply buying shares? Yes, yes you can.

Not only can you make more money with options trading, but you can also put less capital at risk. Simply put, you can never lose more than what you originally paid for the call option contract, no matter how far the value of the stock may drop. Standard equity and index option contracts in the United States expire on the third Friday of that month. As the stock market continues to adapt to the popularity of these contracts, though, more stocks are offering options contracts with weekly expiration dates for a quicker turn-around.

These contracts expire on Friday each week. So, while the profit potential on a bought call is theoretically unlimited to the upside, downside risk is capped out of the gate. Investors hoping to make money trading options might need a little encouragement before jumping in. Success stories from other traders can give you the boost of confidence you need to get started with options trading. One trader was able to make a 1, percent return on their money in a matter of minutes in one trading scenario. One day, trading on the shares of animal health firm Zoetis was put on hold due to a report in the Wall Street Journal that said a Canadian pharmaceutical company might be about to buy out Zoetis.

Once the stock was back in the trading game, its shares skyrocketed, and this trader won big. Call volume on Zoetis shares was twice the amount of put volume.

Once Zoetis shares were back in action, they saw a huge spike in value. Paying close attention to takeover reports can lead to big payouts for smart traders.

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This is a good strategy when played well. Although, you do want to be careful when it comes to buying calls through rumors. The best way to make money with options trading is to move carefully and try to avoid the common pitfalls traders face when starting out. Trading options offer savvy investors an opportunity to keep a good handle on their risks and leverage assets when needed.

Even though options trading can seem like a smart play, you still want to move cautiously. Mistakes can turn into a loss quite easily. When beginning your adventure in options trading, start with a basic strategy and do thorough research. Let yourself learn with experience and then branch out into more complicated strategies, as you feel ready.

While researching and formulating your strategy, you should also learn about the errors that traders frequently make when options trading. Here are some of the most common mistakes. Commit these to memory, so you can help yourself avoid losses and bad decisions:.

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When positioned right, options can help you make money during volatile or non-volatile times in the market. There is almost always an options strategy to align with your outlook. Broadly, there are two types of options viz. Stock options, as the name suggests, are the options on a particular stock. Here, you can have the right to buy a stock call option or the right to sell a stock put option.

Understanding a call option: How you can make money off of it Let us look at the case of the Tata Motors call option with a strike price of Rs when the market price is Rs in the example below.

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