The futures and options market is more diverse than the foreign exchange market, so it provides more opportunities. It requires professionalism, but it gives a deeper understanding of trading strategies and experience that you can successfully apply later in the foreign exchange market. The first thing you should learn about trading is the derivatives that include Nifty future and Nifty option strategies.
Futures and options are a type of derivatives, derivative financial instruments. A derivative is a written contract for some actions about the underlying assets.
Options and Futures Trading
By choosing this type of trading, you can master all the features of the stock exchange game. When buying and selling futures and options, traders try to predict how the prices of the underlying assets will change. Due to this, make a profit.
Trading on the rise
If you expect futures or options prices to rise, it is profitable for you to buy them for further resale at a new price. Waiting for a period of rapid price increases, you can get multiple profits from the game increase. The risk here is that options and futures have expiration dates. And within these terms, price growth cannot wait.
Short Trading
Anticipating a fall in prices, it is profitable to engage in the sale of futures and options. There are risks here, too. First, you could expect prices to rise, and they begin to fall, and you have to sell at a price lower than you bought. Second, you can sell everything and prices will go up. Then you will lose the possible profit.
Nifty option strategies
If you happen to meet with an options trader, his conversation may be full of complex and incomprehensible jargon. You can hear turns like "butterflies and boxes, jam rolls and conversions" in particular. Despite the incomprehensibility, here we describe Nifty option strategies, and if you internalize the four main types of options trades, you will be able to make sense of more complex transactions.
Let's first consider the attributes and risk factors of the four simple basic methods of applying options.
Buying a call option
- Motivation: "Bullish"; Sale options when investors do not expect the prices of options assets to rise.
- Risk: Unlimited.
– Remuneration: Limited by the amount of the premium received.
Selling a Call Option
- Motivation: "Bear"; Bring options in anticipation of the increase in the prices of options assets.
Risk: Limited by the amount of premium paid.
- Reward: Potentially unlimited.
Buying a put option
- Motivation: "Bear"; Bring options in anticipation of a fall in the prices of the relevant assets.
– Risk: Limited to the premium paid.
- Remuneration: Almost unlimited. Achieve the maximum profit when asset prices fall to zero.
Selling a put option
- Motivation: "Bullish"; Sell the option when the investor does not expect asset prices to fall.
- Risk: Almost unlimited. You can get the maximum loss when the prices of the corresponding asset fall to zero.
– Remuneration: Limited by the amount of the premium received.
How to Trade Options?
Options trading provides a whole new psychology of trading, as there is an extra-value that is beyond price shifts – that's time.
Have price targets
When we talk about price, we usually think of the stock price. But you can also have a price target for the option as well. With a lot of analytics software available today, it's not that difficult.
Have temporary goals
Options have a time component, which is a critical variable that most young traders bypass when planning trades. Suppose you opened a 5-hit bullish put of 1.00. This means that your maximum reward will be 1.00 and your maximum risk will be 4.00. Expiration is 45 days.
Install Deltas
Options do not have a constant directional position. There's a gamma there that shows changes in the price rate of an option (delta) versus a change in the underlying price. Calculating your deltas is an important aspect of trade management.
Convert to option spreads
Options trading offers you many ways to reduce risk, increase your premium and calculate the likely opportunities in trading. You can do this by "developing" trading.
Nifty future strategies
Futures Spreads
Also, build Spreads in the futures markets. There are two types of futures spreads – Inter market and Intra market spreads.
Inter market spreads are futures trades in which futures with a specific delivery month are bought and sold in the delivery month under a contract for a related asset.
One of the important Nifty future strategies is Studying the history of price dynamics for related products, it is often possible to find the relationship of prices, i.e. the price of crude oil is in a certain way related to the prices of petroleum products.
Intra market spreads are futures trades in which futures with one delivery month is bought and sold the same futures with another delivery month. The price of a future with some months of delivery exceeds its justified value.
Hope this article will help you to understand the details about the Nifty option and Nifty future strategies. Stay tuned with us to know more about trading.
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