When you buy or sell assets at a pre-determined rate and date, it is referred to as Options Trading. If you want to do this type of trading, it is important that you understand the options account opening thoroughly. You should learn about the different options trading strategies as if you are not well acquainted with it, there are chances that you might incur a loss. Pursuing stock market courses in gurgaon will help you a lot if you want to be a trader.

Stock options trading is tougher than stock trading. This is because when you are purchasing stocks, you will simply have to decide about the number of shares you want to purchase. When you however want to do Options Trading, there are several factors that you need to take into consideration.

Best Stock Market Classes Helps You Learn about Types of Options Trading

The Options Trading is classified into:

• Put

The buyer can sell the underlying asset in the future at a pre-negotiated rate. To know more, you can take stock market classes Gurgaon.

• Call

The buyer can purchase the underlying asset for the long run at a pre- negotiated rate. This is also referred to as the strike rate.

Pros of Options Trading

1. Option Trading is a combination of flexibility and specificity. Traders have to choose a strike price and an expiration date. This locks the price that they believe that the asset is headed towards over a certain period of time. The good thing is, they also have the option of checking out how things work out during that time period. If they are wrong, they are not bound to execute the trade.

2. The expirations date of Options can range from a few days to several months. This trading interests those traders who want to limit their exposure to an asset within a shorter period of time. It is essential for the Options traders to monitor the price of the underlying asset actively to understand if they are in the money or they want to exercise the option.

3. Options trading is also quite an attractive hedging tool. For example, if you own shares of a particular company, you can buy put options in order to mitigate the losses even if the price of the stocks go down. Thus Options trading is a cost effective way that will help you make a speculative bet with lesser risk and provide you with the potential for higher returns with a strategic approach to investing.

To learn about trading, you can also opt for the best trading courses online.

Cons of Options Trading

1. Options Trading is not for everyone. This is not for specially people who are interested in a hands off investing approach. There are three decisions to be made with options trading and this makes it a complex investing option.

2. To make money from Options Trading, it is essential for you to set price alerts. You will have to keep a close eye on the market to check when the trading becomes profitable. You will also have to be careful about the risks involved and the trading fees. Commissions range from a flat rate to per contract based. So option traders have to take this into account while trading. To learn more about this you should opt for the best trading courses in Gurgaon.

3. The Options Trade are shorter term. So, you can have short term capital gain. Any income that you hold for less than a year is taxed up to 15% by the India government. The tax rate for the long term capital gains is much less.

Options Trading Using 4 Steps

1. Open an Options Trading Account

To start Options Trading, the first thing that you need to have is a trading account. As discussed earlier, options trading has several options as a result of which it is complex. So, it is also essential to have good capitals. In this type of trading, the brokers want to know holistically about the investors to ensure that they are suitable for this type of trading. Once they are sure, they will issue a permission slip.

The broker will interview you and you will have to provide them with all the information that you are looking for. It might be essential for you to tell them about the capital speculation, income growth and also capital. You might also be asked about your knowledge in the field of options trading and investment. You will have to provide your personal details and type those options that you want to choose.

2. Choose The Options That You Want to Buy and Sell

If you want the stock price to stabilize, you might either sell a call or a put option. If you are expecting the stock price to increase, you might sell a put and buy a call. On the other hand if you are anticipating that the stock price will go down, purchase a put but sell a call.

3. Predict The Strike Price of The Option

The purchase of an option is relevant only if the stock price closes within the expiry period of an option. This has to be either below or above the strike price. For example, you assume that the share price of a particular company is Rs. 8,500 and you are expecting it to rise to Rs. 10,000 within a specific date. In such a case it is advisable to buy a call option. It is important to ensure that the strike price of the call option that you purchase is less than Rs. 10,000. If the stock rises above the strike price, your option will in all probability be in the money.

4. Check The Time Frame of The Option

There is a date of expiration for all Options. This means that there is a last day to use the Option. No one can, however, pull out any date. The choice is restricted to the ones that are delivered. Therefore, it is important for the beginners to know more about Options and Futures. The expiration dates might vary from days to months to years. The daily and the weekly options are the riskiest. The experienced investors mostly prefer the monthly and the annual options. It is important for you to remember here that though longer expirations dates can be more expensive, yet it can be very useful. This is because it helps in retaining the time value.

Conclusion

These days, Options Trading is available for all traders. Options trading can be a good option for the beginners as well. It is recommended that you have a good company support you with your trading needs. As a beginner, it is important that you learn about the Options Trading strategies. There are several strategies and most of them are quite straightforward, ideal for the beginners. If you want to become a trader, pursuing a Trading course in Gurgaon, will help you.