What Are Options Trades 2020 | Call Options And Put Options |
Hello friends, today I will explain to you what are options trades? Call options or the put options that we often hear in the share market, today we will consider it fundamentally. In this blog, I will tell you important things like what are options trades in the stock market? Options trading for beginners blog will tell you all the basics of options.
What are Options trades?
Often, people invest money on increasing the price of a share. But in options trading, you can also invest money on decreasing the value of a stock. In options trading, you get two options,
1. What is Call Options:
where you can invest money on increasing the price of the stock. If you think that the market is going to gain momentum and the market is going to increase, then if you want to buy a fast position, then we call it a call option. And if the market really accelerates, then the faster the market, then the profits you will get.
2. What is Put Options:
you can also invest money on the falling price of a share. If you think that the market is going to fall and you have to buy a drop position, then it is called a put option. If the market really falls, the more the market falls, the more profit you will make.
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Like the stock market, here is also trading in shares, index, commodities and currency. You do not get one share in it like a stock market. There is a bundle of stock in which there are many stocks, which we call Lot. Whenever you choose options trading of a company, you have to buy all the shares of one lot.
The lot sizes of different products are also different, such as the lot size of Nifty is 75, the lot size of SBI is 3000 and the lot size of TCS is 250.
These 4 words are taken into consideration when purchasing a call option.  Any position on which the share is bought is called a strike.  If the position on which the market is, you are buying strike in the same position, then we call it At The Money Position.  If you want to buy an upper position or strike than the current market position, we call it Out The Money Position.  If you want to buy a lower position or strike than the current market position, we call it In The Money Position.
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Suppose Nifty is running at 9000 right now and we feel that the market is going to boom and it may go up to 1000 price after some time, then we have to need Call Buy on Out The Money Position. The amount of money that a buyer pays to a seller for Call Buy is called the premium just like to insurance premiums.
What are the benefits of options trading?
Suppose we bought a Call for 9100 rupees by paying a premium of 100 rupees and after a few days, the nifty rapidly increases to 9400 rupees. Then here our actual profit is 9400 – 9100 – 100 = 200 rupees per quantities. In Option Trading, the deal is always in lot and the lot size of nifty is 75, so my total profit is 75 × 200 = 15000 rupees.
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But what happens if the market falls below instead of being increment from 9100 rupees? Suppose the market fell from 9100 rupees to 5000 rupees, then we do not need to calculate the loss because we Suppose the market fell from 9100 rupees to 5000 rupees, then we do not need to calculate the loss because we will lose as much as the premium. Here our total loss will 100 × 75 = 7500 rupees only. No matter how much the market goes down, you will not lose more than this.
If you think that the recession is going to come or the market is going to fall, then at that time you have to Put buy on Out The Money Position.
Suppose the market is currently running at 9000 rupees and we think that the market is going to be down in the future and we put buy by 8900 rupees on Out The Money Position. After this, as much the market will go down, you will get the same profit. But if instead of dropping the market, it started being increased, then we only have a total loss, 75 × 100 = 7500 rupees only.