NSE Options Trading - Is it really betting? No, its not!

Options trading has earned several names among the traders community.

Some find it amazing, some call it as nothing more than betting, etc. Well, the latter is accepted more widely.  

In this post, we are going to talk about options trading and how it is good if done carefully. And more specifically options in the Nifty 50 index.

Choosing the best options to trade is a challenge

Many traders have different styles and strategies to choose the best options for trade.  There are in-the-money options, out of the money options. Searching for the best options is often a challenging task as one has to browse a few websites (especially NSE website).  Most traders keep the options pre-selected in their trading platforms and watch as the index moves to make their moves.

Needless to say, the best options to trade are those which are closer to the spot price, have the highest volume with the lowest spread.  At the same time, if the index is volatile then one can select the options which are possible candidates to come nearer to the spot price of the index in due time.  

How many contracts? Whats the lot size? How much to invest? Pick up the calculator..do it fast!

Most traders go through this during intraday trading.  Almost all the platforms out there leave it to the traders to do the calculations and then enter into the trade.  This increases your trade time. At times, when the market is highly volatile, you know fate, you want to enter, you miss the bus because calculation took a longer time.  

Excel comes in handy but still, the time to trade takes a toll on the profitability.

Tricky when the index is volatile

When the index is highly volatile, the trade volume moves equally quickly.  And many traders get stuck with their purchases.  Those who plan to hold their trades are often at high risk because of nearing to the expiry date. 

Tricky when the index falls or rises sharply making the highest volume options obsolete

This is where most traders feel that options trading is betting.  Because when the index moves sharply, your positions are stuck.  The bid and ask will have higher spreads because both sides are willing to move out quickly.

So when the index is volatile or moves sharply, one must quickly move out of the existing trade and take an entry again with the right options.  This rule is good whether you are in loss or profit.  In both conditions, the loss or short, it may be small but good for the long term.

Scalping versus hodling

My personal opinion is that scalping is a lifesaver in options trading.  Here are the reasons - 

  • Scalping for 1% in each trade, keeps me away from risks.
  • Moving in and out is fast.
  • Can do multiple trades during the market hours.
  • Can easily aim for 3-4% during a day. 

What if... #1?

The best scenario for intraday trading or high-frequency trading would be - 

  • Watching a list where PE/CE options in Nifty50 are displayed based on the volume, spread, bid, or ask price.
  • List containing the nearest 10 or 15 options dynamically coming as per the spot price of index.
  • List also showing the movement of CE/PE options in the last 5 minutes, 10 minutes or 30 minutes.
  • The facility to sort the list based on volume, spread, bid price, ask price, bid quantity, ask quantity.
  • And facility to trade directly from that list.

Life would be easy, trades will be smarter and everyday will be rainbow (profitable).  Offcourse based on your strategy.

What if.. #2?

Ah, what if there is no need to watch the list of options, keep track of spreads etc. What if, a facility where you can set your preferences like - 

  • The index you wish to track.
  • Select the options with weekly or monthly expiry.
  • Options with weekly or monthly expiry.
  • Select the week or month.
  • The investment a percentage or amount.
  • Let the system calculate contracts automatically or set a fixed quantity.
  • Set the target profit and/stop-loss
  • Set the options selection as highest volume, nearest to the spot price, or between a price range. 
  • Choose in-the-money, out-of-the-money or best 
  • And let the system select best based on the index movement whenever you want to trade.

What if.. #3?

What if you could see what the applicable taxes and fees you are going to pay in real-time?  This again is not available on any platform.  You have to live while speculating on how much did you actually make.  

Too many wishes, for easy and profitable trading, but is there something out there like this?  

All the problems listed above, pointers to reduce trade time, real-time tracking has been addressed by veterans in the trading industry working closely with tech experts. 

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