How Much Money Need for Options Trading in India 2023?

Money need for Options Trading in India: Options trades are the much popular trading option for those who wants to earn quick profits. But it is also the quickest way to loss money also. People are got trapped in the hype that they could easily earn a got profits in a quick time. So they enter into this market. Now let’s know how it works and how much you can earn and most important that how much money is required for options trade.

There are many small traders and beginners who wants to come into the option trading market. But they are not able to find that how much money need for options trading is needed. So they couldn’t figure out it. Remember it is a volatile market and you might get in to the situation that one could resist his emotions and makes a wrong decision. That one decision can lead you to loss all your money.

This article is for those who wants to come in the option trading market and they have such small capital, such as students beginners or the new traders. So this article is for them to and hope fully it will be helpful for you and you might get all the answers of your questions. So before entering this market keep in mind some attentions.

Understanding Options Trading

Before entering into the deep of the topic you need to know what is trading and does it works. To do any kind of trading you a demat account. You can open a demat account on zerodha, angel one etc. You can choose the best broker for your self.

Now let come into the topic about the options trading. Option trading is derivative instrument tool that allows the “option buyers” to buy a underlying asset with pre fixed price by the “option sellers”. The trade should be executed within the marginal date, called as expiry date. The expiry dates are counted on every Thursday in every week and every last Thursday.

If you take an example that a stock price is now 1000 RS and they expect that it will go up to 1500 RS then they will enter into the contract and deals a contract for a month till the month’s expiry. The option seller set a price for the positions. You have to buy at the executed level. You have to buy at a certain position as per your predicted movement of the stock maybe it should be up or down, then you will buy the position according to it.

The option trading in stocks or either in indexes both have similarity that you need to buy that particular derivate in lots. You can’t buy any single in number. The lot size is depends on the option sellers. For an example the most popular index option Nifty, it contains 50 in number and Bank Nifty has 25 lot size. For the stocks it depends the share price or market cp. For an example SBI has 1500 lot size.

The price of the option depends on its lot size and the CMP (Current market price). If we take the Nifty it’s lot size is 50 and one position suppose 17000 PE its CMP is 40 RS, the total cost of one lot will be 50*40=2000 RS. It is similar to other options too.

Basically option trading has two directions of trading. If you predict that the stock price will go up then you have to buy the CE option. If the price goes down then you have to buy the PE option. The same position of a script has CE or PE options.

Money Need for Options Trading

Starting option trading is the quickest way to earn profits or loss money too. So be careful before engaging in this segment. So people suppose to know that how much Money Need for Options Trading? It depends on which stock or derivates you are investing. There are multiple sector for options trading. You can invest in stocks for options trade or in indexes. Both has it different trading strategies. Now lets find out the answer of Money Need for Options Trading.

For example if you trade in indexes then the two most popular and most traded indexes ae Nifty and Bank Nifty. When you buy a level in Nifty and it’s CMP is 40 and you have to buy minimum 1 lot then you have to incest at least 40*50=2000 RS. So you can start with a minimum amount of capital. There is no minimum capital requires for option trading. The capital requirement depends on the lot size and the current market price of the derivatives or stock. One can star investing in option starting with a at least capital of 5000 RS.

Option trading doesn’t requires a huge amount of capital like in stocks. But if you do option trading in stocks then you have invest a huge capital. To get a good profit you need to invest at least 2 lakh rupees. The best option for the beginner or the small traders to invest in the index. There they can trade with the small capital.

Before investing in option trading keep some safety points in your mind. The points are mentioned below.

Things to Remember Before Investing in Options

Options trading are considered as the most volatile trading segment. People often loss their all money in option trading. So there are some safety tips for option traders before entering in this segment. We have discussed all the details of things to remember before investing in options.

Keep the Volume Low

Trading the options is mentioned as the highest volatile sector. So investing a small amount on the options try to keep the volume of you r lot size in low. Keeping in low volume helps you from huge loss or from the market reverse directional movement.

Capital Investment

Option trading is the most riskiest way to invest in. So you shouldn’t invest all capital in one segment. The safest way to invest in options is to use your 3%-5% of capital in the options.

Always Use Stoploss

Stoploss is the key to save you from any disaster or reverse movement of the stock or derivatives. When you put the stoploss it helps you from the quick market fall. Otherwise you may loss all your money when the stock or the market moves in the opposite direction of your predicted direction.

Use Right Indicator

Indicators are the best tool that provides you the right call of the market direction. If you follow any indicator then invest according to its prediction.

Margins in Options Buyers and Sellers

The important thing in option trading is the marginal factors. There are different margins in the options in different positions. The margins are curtail factor for the traders as they invest their money. If you want become the option seller or buyer then you have know both this margins.

Margin for Seller

For the option seller in Nifty you need to invest at least 1 lakh rupees. The is is the basic requirement for one lot selling.

Margin for Buyers

The margin for the buyers is simple. The total investment depends on the premium amount and multiple by the lot size.

Option Trading Views

There are two views of option trading. The investors can make profits from the both side movements of the market. It means that if the goes up or down you can earn both from the directions. The up side movement signed as the CE, which knows as the CALL option. The other for the down side movement it signed as PE, which knows as PUT option. Now let’s know how you can invest and earn profits from both of this.

We will take the Nifty index for detailing the option trading. Because this is the most traded index.

Option Trade in CE

This CE option defines the bearish view of the market. It means that the market will go upside. If you are predicting the market price will go up then you can buy the CE option. Lert’s make this easier with an example.

In Nifty currently trading within 18000 points and you are predicting that the future price will go up, suppose you think the price may goes up to 18500 the you can buy the 18400 CE or 18500 CE option. When the price hit the predicted you will earn the profits.

The profits will be calculated by the moving points. If you the position with premium of 60 points and you sell it in 110 points and the you buy only 1 lot then the profits will be this-

Buying amount 60*50=3000 RS

Selling amount 110*50=5500 RS

So total profit will be 5500 – 3000= 2500 RS.

Option Trade in PE

If you think the market will go down that means you are viewing a bullish view of the market. Then you will buy the PE option. Let’s analyse this with an example.

In the Nifty currently trading with 18500 points and you are predicting that the market will go down. If you are targeting that the points will hit 18000 points. Then you can but the 18000 PE option or 18200 PE option too. When the market hits the targeted points you will earn the profit.

The profits will be calculated by the moving points. If you the position with premium of 60 points and you sell it in 110 points and the you buy only 1 lot then the profits will be this-

Buying amount 60*50=3000 RS

Selling amount 110*50=5500 RS

So total profit will be 5500 – 3000= 2500 RS.

How to do Option Trading?

Investing in option trading is not so difficult. There are few steps to follow and you will be able to trade in the options.

First you have to open a demat account with any broker through online.
After opening the demat account successfully you need to active the FNO option from you your demat account.
When you submit the request for the options trading you need to upload your income proof for an example you 6 months bank statement, salary slip etc.
The broker will examine it and with 48 hours they will send the confirmation that your account has been activated.
When you account will be activated add money in your funds.
Then predict the market and choose a position and invest in it.
If you get to earn profits then it will be added to your account after you sell it.

Best Way to do Option Trading

Option trading is the most volatile segment of trading. Here you will be able to earn profits quickly also you can loss money also too quickly. Before investing in the options you need follow some ways. Here are the best ways to do option trading.

Technical Analysis

Technical analysis for option trading is the best way. It helps you to take short position and gives you the accurate prediction. Technical analysis has some methods to follow. Try to accumulate the technical knowledge and then trade in options.

Option Chain Analysis

For option trading, option Chain data analysis also a great tool to get the trading view. This helps to know you that how many traders are wanting to buy this and how they bid for it.

News and Events

The most impactful thing in the market is the current news and events. It creates the ways that how could the market can be predicted. So keep an eye always on the news and the global markets go get the early alert of the market prediction.

Key Words

As earlier we have mentioned that option trading is the most volatile trading segment. It needs lots of knowledge of the market the technical skills. The most important part of the option trading is the funding. You must be doing it for the quick earning source. Definitely it is the quickest way to earn a good profit but remember this can also lead you to lose all your money too. So be careful before investing and try teach your self before get in to this market.

FAQs

1. Can I do option trading?

Yes, if you are 18 years above and has a trading account then you can do option trading.

2. Can I start option trading with 10,000 Rs?

Yes, you can trade with only 10,000 Rs. But it would be good to invest in index options with this small amount.

3. Is option trading profitable?

If your trade goes in your way then it is the quickest and best way to earn good profit within a quick time.