Is NSE Option Trading Still Relevant?
Options trading allows you to buy or sell stocks, ETFs etc. at a specific price within a specific date. This type of trading also gives buyers the flexibility to not buy the security at the specified price or date. … The right to buy a security is known as ‘Call’, while the right to sell is called ‘Put’.
It is still relevant since it can be used as:
1. Leverage: Options trading help you profit from changes in share prices without putting down the full price of the share. You get control over the shares without buying them outright.
2. Hedging They can also be used to protect yourself from fluctuations in the price of a share and letting you buy or sell the shares at a pre-determined price for a specified period.
The seller of an options contract is called the ‘options writer’. Unlike the buyer in an options contract, the seller has no rights and must sell the assets at the agreed price if the buyer chooses to execute the options contract on or before the agreed date, in exchange for an upfront payment from the buyer. There is no physical exchange of documents at the time of entering into an options contract. The transactions are merely recorded in the stock exchange through which they are routed. Strike Price Intervals are the different strike prices at which an options contract can be traded. These are determined by the exchange on which the assets are traded.here are typically at least 11 strike prices declared for every type of option in a given month – 5 prices above the spot price, 5prices below the spot price and one price equivalent to the spot price. The lot size refers to a fixed number of units of the underlying asset that form part of a single F&O contract. The standard lot size is different for each stock and is decided by the exchange on which the stock is traded. Open Interest refers to the total number of outstanding positions on a particular options contract across all participants in the market at any given point of time.
Open Interest becomes nil past the expiration date for a particular contract.