How to choose stocks for options trading india?

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Vince Marvin asked a question: How to choose stocks for options trading india?
Asked By: Vince Marvin
Date created: Mon, Jun 28, 2021 4:05 PM
Date updated: Sat, Jul 23, 2022 10:17 AM

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Top best answers to the question «How to choose stocks for options trading india»

  • You need to have a trading account with one of the brokers (For example, Zerodha, Angel broking, 5Paisa, etc.)…
  • We need to have a margin in our trading to be able to trade options. Based on the position taken by the investor, the margin requirement varies…
  • Next, we need to understand as to what is our view on the underlying asset…

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Here’s how it works. - Say you own the stock of a company in the spot market. - You hedge this position by selling a call option of that stock. - The strike price of the call option should be higher than the price at which you purchased the stock.

Which stocks to choose for option trading would depend upon trader risk profile. Option premium is calculated mainly by implied volatility, beta and time to expiry of stock so higher the beta higher would be premium and accordingly lower the beta lower would be the premium on option. Beta and Iv are available at public domain.

Create a watchlist of stocks that you have been tracking for a long time and stick to only those stocks for options trading as you are more familiar with the movements and behaviors of these stocks. An even better option would be to stick to only those stocks on which you were able to make correct predictions in the past. This is especially recommended if you are not much experienced. Keep track of the volatility. Volatility is an important factor in options trading.

The steps to trade options in India are almost same in any trading platform you chose. Step 2: We need to have a margin in our trading to be able to trade options. Based on the position taken by the investor, the margin requirement varies. Option buyer needs margin to pay for the premium required to trade options.

Choose the Liquidity Factor. Before selecting any stocks in options trading, make sure that the stocks you choose are highly liquid. This is because liquidity allows you to enter the trade and exit from the trade more easily that too without paying heavy slippages.

One of the most commonly used strategies is trading using the momentum of stocks. Such stocks should be chosen whose momentum is quite good for intraday trading purposes. Then, the other kinds of stocks that can be chosen are the ones which are showing gaps in the stock prices in either of the directions.

Upstox gives more margin benefits than Zerodha and Alice. We have tested with Long Calander Spread in all the brokers. It was taking near 80K in Upstox, 86K in Alice and 92K in Zerodha. Upstox allows Market Execution in the stock options if there is liquidity based on bid-ask.

There are six basic steps to evaluate and identify the right option, beginning with an investment objective and culminating with a trade. Define your objective, evaluate the risk/reward, consider...

Choose Medium to Higher Priced Stocks With a wide Daily Range. Medium or higher priced stocks usually offers a good range of movement which can have a greater impact on your options trading strategy. Look to trade reasonably volatile stocks that offer a wide daily range for you to profit more easily.

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