Option Trading is one of the most traded instruments in the stock market. Option contracts are contracts traded amongst the seller and buyer on stocks, future contracts, bonds, shares as well as index futures. There are basically two types of option trading.
The two types of option trading in India are the put option and the call option. What’s the difference between these two options? If you study each option closely there is a multitude of differences. The call option gives you the right to buy all the underlying assets within the expiry date for the set price. However, in case of the put option you are free to sell the asset within the expiry date.
In every option trading opportunity you need a buyer and seller and both of them have both options open - the call and put option. You’re legally bounded to sell the asset if you have the call option and you’re obligated to buy if you’ve got the put option.
Specifications of Option contracts
Option trading comes along with certain rules and specifications. The first thing that’s mentioned in the option trading rule book is that stating the type of option trading contract signed between the parties involved – in particular this states whether the buyer has just the buying rights or even selling rights.
Benefits of Option Trading
Option trading has plenty of benefits and you could make huge profits. Using option trading one could easily invest in assets that are worth much more than that they can afford. You deposit a smaller amount and invest in assets of higher market value. The risk factors involved in option trading are far less than any other form of trading and hence this is one of the best trading options for those that don’t have the time to keep track of the markets each and every day. If you let the contract expire you don’t lose anything and hence it’s called a risk free market.
The Option Trading sector is destined to grow rapidly in the coming years as it’s been steady and the future trends show that huge crowds would enter these markets and begin trading using these methods. So, if you’re planning on investing funds in the Indian markets, one of the best places to do so would be via option trading as with time the profits you make would overwhelm the profits you make from other sources - provided you know what you’re doing.