Low volumes in many stock options make trading in them very difficult and such stocks must be avoided. However, normally traders prefer executing intra-day trades on derivatives Futures and Options over stocks, this is primarily because of two reasons:. Having further strategies is like betting against yourself for protecting your likely loss while restricting the profits very drastically. The reason being both are highly liquid, represent the best of the listed cos in India, are traded by many professionals, difficult to manipulate, and more resilient to shocks. Limited profits are not necessarily bad. National Thermal Power Corporation Ltd.
A different kind of trading. A new kind of opportunity.
Financial Securities used for Intraday Trades:
Hence, higher the daily volatility — the more would be the price fluctuations. Although some traders with huge risk appetite prefer trading in stocks with high daily volatility, we would recommend that selecting a stock whose daily volatility is less than 3.
You can find the daily volatility of stock by: Search the stock on nseindia. Now, let me outline four stocks which I consider for intraday derivatives trading: Once you get an idea, start small and gradually increase your trading amount. What is pledging of shares and how does it impact price of stock? They have larger premiums and the potential for profit is actually higher than hedged trades.
Whereas unlimited profits are self explanatory. They also contain risk. Lastly, you can select strategies based on whether you have a credit or debit. The wide variety of options available for traders to choose from is incredibly useful. Once you have arrived at your chosen strategy, the rest is easy. The strategy is explained and you can enter your preferred strike prices and price to get results and pay off graph.
This way, you can trade even the most complex strategies using our Options Strategies tool. Just to reiterate, the best strategy depends on the circumstance, it is not universal. A simple strategy is to trade an index option , either Nifty or BankNifty. The reason being both are highly liquid, represent the best of the listed cos in India, are traded by many professionals, difficult to manipulate, and more resilient to shocks.
For them also you have to follow markets everyday, but rather than focusing on different stock every day or every week given different stocks have different technical and fundamental drivers , you are only analysing how Nifty or BankNifty is going to behave today or this week.
Follow news and learn simple technical analysis like trendlines, support resistance, channeling and moving averages. Apart from the simple technical methods I described, to understand the context you can use tools such as Bollinger Bands which I have explained in the following post.
Jay Shah's answer to What are Bollinger Bands? On any day, Nifty moves withing 50 points range at least, and BankNifty moves minimum points. Also this type of movement on a smaller scale goes through day with opening two hours and closing one hour seeing more movement.
Now Nifty option lot is So to make , you are eyeing only 8 points movement to cover your profit target as well brokerage and other expenses. Same math can be applied to BankNifty which has an option lot of One more advantage of option is its inbuilt stop-loss.
So for the Nifty example, our total investment was and that is the maximum amount you can lose in case prices go to zero never happens. This strategy is as simple as it sounds. With some practice you can do this. I regularly like to discuss my views on markets and my trades on my blog. Confessions of a Trader. I mostly trade Option based on Open Interest Analysis.
It generally confirms the market trend whether its rising, falling or sideways when used in conjunction with other parameters like volume and price. It also measures the flow of money in the market. There is a very tight co-relation between Open Interest, Price and Volume. It helps to interpret the trend of Market very effectively.
An increase in open interest along with an increase in price is said to confirm an upward trend. Similarly, an increase in open interest along with a decrease in price confirms a downward trend. An increase or decrease in prices while open interest remains flat or declining may indicate a possible trend reversal.
Following restrictions are to be acknowledged and dealt with before talking of a strategy. NIFTY long term options even though available are not very liquid and pricing is not real. Halfway through the current month, next month Options may become available. But those are very thinly traded and pricing is just random.
All Options are cash settled, there is no exercising of Options in the real sense. Hence all the American Markets Options strategies need to be tinkered accordingly. Some good stocks for options trading that I and my mentoring students regularly employ include: These stocks can all be used for both directional and non-directional option trading strategies.
I am consistently gotten some information about how to locate the best stocks for choices exchanging and in The procedure beneath is for finding an appropriate rundown of stock to have on my center rundown which Ive been utilizing for a long time. Lets additionally concur that you don't have to take a gander at each stock as some simply are not worth the time or exertion. Gratefully there are numerous product instruments and online devices both free and paid that will enable you to make an appropriate universe of stocks for you to attract from your everyday exchanging.
Step by step instructions to locate the best stocks for choices exchanging This short check list is something that I gone through on more than one occasion for every year to guarantee I have a fluid pool of stocks that can possibly move and do intriguing things with which to draw my day by day stock choices from.
What to do next after you have a universe of the best stocks for options trading? What I do with this list is use this as my core universe of stocks. I no longer need to trawl through every possible stock that is available to trade.
Neither do I need to check if it is worth trading. All this has been done in advance. This list of stocks is what I will scan on a daily basis to draw my trades from.
Wealth buildup financial services. To trade in option you should have good knowledge in derivative market and risk associated in it. Better do Technical analysis on your own to know trend.
Nifty trend, Bank nifty trend with support and resistance and news are updated daily. This page may be out of date. Save your draft before refreshing this page. Submit any pending changes before refreshing this page. Ask New Question Sign In. What are the best stocks for option trading in Indian market?
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