WHAT IS CALL OPTION & PUT OPTION ?

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OPTION:- Call option and Put option are the two main types of options available in the derivatives market. A Call option is used when you expect the prices to increase/rise. A Put option is used when you expect the prices to decrease/fall. Options are derivative contracts which have no value of their own and derive their value from the value of the underlying asset. The underlying asset can be shares, currencies, commodities etc. An options contract gives the buyer the right but not the obligation to buy or sell the underlying asset within a specified date (known as the expiration date) and at a specific price (known as the strike price). In options, the buyer of the option has the right of exercising the option or cancelling it. The loss for the option buyer is limited to the premium paid. 

TYPE OF OPTION
1- CALL OPTION
2- PUT OPTION

CALL OPTION-A call option gives the buyer the right but not the obligation to buy the underlying asset at a particular price (strike price) on or before the expiration date. 

PUT OPTION - A put option gives the buyer the right but not the obligation to sell the underlying asset at a particular price (strike price) on or before the expiration date. 

Basic terms relating to call and put options👇

1.       Strike Price: Strike price is the price at which buyers and sellers decide to buy or sell the underlying asset after a specified period. 

2.   Spot Price: Spot price is the current price of the underlying asset in the stock market.  

3.   Option Expiry: Options contracts expire on the last Thursday of the month. 

4.   Option Premium: Option premium is the non-refundable amount paid upfront by the option buyer to the option seller (also known as option writer). 

5.   Settlement: Option contracts are cash settled in India.

What is the Difference Between Call Option & Put Option?

Parameters Call Option Put Option Meaning Call option gives the buyer the right but not the obligation to Buy Put option gives the buyer the right but not the obligation to sell Investor’s expectation A call option buyer believes the stock prices will rise / increase A put option buyer believes the stock prices will fall / decrease Gains  For a call option buyer, the gains are unlimited.  For a put option buyer, the gains are limited as the stock prices will not become zero.  Loss For a call option buyer, the loss is limited to the premium paid.  For a put option seller,  maximum loss is strike price minus premium Reaction to dividend Calls lose value as the dividend date nears.  Puts increase in value close to the dividend dates.

INTRADAY TRADING STRATEGIES 👍👍👍

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Intraday trading involves taking long or short positions in securities and squaring off the positions before the end of the trading day. The tools and techniques used for intraday trading are fundamentally different from those used for long-term investing. Intraday trading involves taking long or short positions in securities and squaring off the positions before the end of the trading day. Intraday trading requires two parties for a trade, one to sell and the other to buy the stocks. The market is very volatile, and profits do not depend only on the market going up. You can make a profit even when the market is moving downtrend. A day trader can make money irrespective of whether the market is going up or down.In this article, we will discuss some of the disciplines that a day trader should get used to before taking up intraday trading.

👉  Trade with money you can afford to lose: It's vital to set aside a certain amount of money for day trading. But it is important for a trader to first focus on how much loss he is willing to take overall, and on a per trade basis.

👉  Follow strict stop loss: One of the biggest traits that set apart winning and losing traders is discipline. Make it a habit to use ‘stop-loss’. A stop loss order is an automatic order to buy or sell a stock when its price reaches a specified  ..
👉 Entry and exit strategies: Sometimes a trader might get fascinated by a particular stock, but we should not forget that one has rely on specific strategies to make a profit from it. One should stick to certain set guidelines religiously in intraday trading.

👉  Choose liquid stocks: Liquid stocks tend to have high volumes and this can allows for purchase or sale of larger quantities without significantly impacting the price. This can help grab any potential gain that may  arise from large price movements on any given day. Since intraday trading strategies are dependent on speed and precise timing, a high degree of volume makes it easier to get into and out of a trade.
👉  Keep business and emotions separate: The intraday market is very volatile, and we may experience great profits or losses within a short span of time. Hence, it is important to have tight controls over one’s emotions. One should not get too excited by the profits he makes, and not get disheartened by losses. A day trader has to have a very alert mind to be able take quick decisions. For this, one has to have a mind free of emotions.

👉 Do not over trade: This is the golden rule of intraday trading. The share market may not always trend, or trend in a predictable manner. Trading only in a handful of stocks at a time is the best way to go about with your day trading. If we continue to ignore the market response, that can be a sure-shot recipe for losing your money.
These rules are really important for intraday margin trading. It is essentially an activity that calls for discipline and risk management and can only be perfected over time. It would not be wrong if we say that intraday trading requires bringing a certain of uniformity to the trader’s lives.
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