A COMPLETE GUIDE TO BECOME AN OPTION MASTER

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OPTION TRADING

THE GOAL OF A SUCCESSFUL TRADER IS TO MAKE THE BEST TRADES

MONEY IS SECONDARY


-ALEXANDER ELDER

WHAT IS AN OPTION TRADING?

Options trading is all about financial trading or we can say buying or selling of the contracts. Now the question is what are contracts?

Well, contracts are a type of agreement between two parties to buy or sell at a particular strike price in a fixed time because every contract comes with an expiry date. Most importantly you do not need a huge capital to enter options trading. Only a premium for the particular strike price you have to pay. Let’s say for example the strike price of 19000 for NIFTY is 150/-INR per share and you buy a lot of 50 shares where the premium of only 7500/-INR has to be paid instead of 19000 x 50 = 950000/-INR per lot isn’t it cost-effective?

With this cost-effectiveness, it has the potential to give higher returns as well. Where it could be 10%-1000% depending upon how effectively the trade has been taken. But with higher return potential it comes with some cons as well.

Before entering options trading keep in mind if options can rise up to 1000%. Then they can go to zero as well. With every contract you purchase time decay begins and if at a certain time market does not reach the strike price or above then all your premiums will be zero. Before entering any trade keep yourself ready for calculated loss. The stock market is a gamble if you do not have the right knowledge and experience to understand it.

OPTION TRADING

“RULE NO.1 IS NEVER LOSING MONEY

RULE NO.2 IS NEVER FORGET RULE NO.1 .”

— WARREN BUFFET,

Now, let’s understand how options work.

Options trading is based on CALL & PUT where all contracts work on a weekly basis or monthly basis. The longer the timeframe you choose more premium you have to pay for your contract. Now what is that?

CALL OPTION

Let’s say for example on the basis of technical analysis you come to the point that the market will rise and the strike price of 19000 for NIFTY will go to 19100 today then you will buy a CALL OPTION at whatever the premium is running for weekly basis or monthly.


PUT OPTION

Let’s say for example on the basis of technical analysis you come to the point that the market will fall and the strike price of 19000 for NIFTY will go to 18900 today then you will buy a PUT OPTION at whatever the premium is running for weekly basis or monthly.


TECHNICAL ANALYSIS

It is a method of analysing and evaluating stocks by evaluating the previous price, volume and data to identify the patterns, trends and future actions of a graph. In fundamental analysis, we evaluate a company’s financials but in technical analysis, it is a complete focus on charts, patterns and trends.

Now the question raised

  1. What are charts and patterns?

CANDLESTICK CHARTS

stock market

The candlestick pattern shows the open, high, low and closing prices of the stock. There are various candlestick patterns that form throughout the graph. What matters is to understand and spot it. Because with every pattern we are able to predict in what direction the market will go.

THE ULTIMATE GUIDE FOR CANDLESTICK PATTERNS

Candlestick patterns every trader should learn before entering into the market…


stock market

“MANIFESTATION IS UNBELIEVABLE IF YOU ARE A HARD WORKER.”

— DAILYMORSEL

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