Futures vs Options: What's the Difference?

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Futures and options are both financial instruments used to profit on, or hedge against, the price movement of commodities or other investments. The key difference between the two is that futures require the contract holder to buy the underlying asset on a specific date in the future, while options — as the name implies — give the contract holder the option of whether to execute the contract. That difference has an impact on how futures and options are traded and priced and how investors can use them to make money.

Future- When someone refers to "futures," they're really referring to futures contracts. A futures contract says a contract holder will buy the underlying asset on a certain date regardless of the asset's market price at that time. They agree to a price when they purchase the contract. The underlying asset could be a physical commodity like corn or oil or another financial instrument such as stocks. When you buy a futures contract, your broker won't require you to stake the entire value of the contract. Instead, you'll only have to hold a small percentage of the cash needed for the purchase, which is called an initial margin payment. The price of the contract will fluctuate. If you, as the contract holder, are showing too big of a loss, your broker may require you to deposit more money.

Option- The underlying asset is another financial instrument such as a stock, bond, or even a futures contract. A standard stock option is for 100 shares of the underlying stock. Options for commodities futures use the same standard units as the futures.
When you buy an option, you pay a premium for the option. This is usually just a small amount relative to the strike price of the contract. As an options buyer, this is the most you have at risk. An options contract can never be worth less than $0. 

What are Nifty Options?

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Before understanding nifty options, first we need to understand what an option instrument is.

Just like derivatives futures, options too is an derivative product where the buyer holds a right to execute option of either buying or selling of shares or another underlying at a certain pre-determined price (also known as the strike price) during a pre-determined time period. The 2 types of Options are Call Options i.e. The Right to Buy and Put Options i.e. The Right to Sell.A Call option gives buyer an option to “BUY” underlying asset at an agreed upon price with a expiry date on this contract. Likewise Put gives buyer an option to “SELL” at agree upon price with a expiry date on this contract. Hence, Call buyer would want prices of the underlying to go up and put buyers would like to see prices of underlying falling.
Lot size of Nifty Options – 50 (Subject to revision from time to time)

How to find Stock for long run

 

5 step approach for great stock picking

Crisp summary of the Warren Buffet way would act as an important guide to start with.

• Approach stock purchases as buying a business rather than just a stock purchase in the portfolio.
• Evaluate the true worth of the business considering the future earning potential
• The margin of safety is the real risk containment measure and not stop loss
• Turnaround seldom turns and therefore Invest in great businesses that are generating free cash flows
• Invest for the long term to generate inflation-adjusted superior returns.

Basic Day Trading Strategies

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Once you've mastered some of the techniques, developed your own personal trading styles, and determined what your end goals are, you can use a series of strategies to help you in your quest for profits.

Here are some popular techniques you can use. Although some of these have been mentioned above, they are worth going into again:

• Following the trend: Anyone who follows the trend will buy when prices are rising or short sell when they drop. This is done on the assumption that prices that have been rising or falling steadily will continue to do so.
• Contrarian investing: This strategy assumes the rise in prices will reverse and drop. The contrarian buys during the fall or short-sells during the rise, with the express expectation that the trend will change.
• Scalping: This is a style where a speculator exploits small price gaps created by the bid-ask spread. This technique normally involves entering and exiting a position quickly—within minutes or even seconds.
• Trading the news: Investors using this strategy will buy when good news is announced or short sell when there's bad news. This can lead to greater volatility, which can lead to higher profits or losses.

Day trading is difficult to master. It requires time, skill, and discipline. Many of those who try it fail, but the techniques and guidelines described above can help you create a profitable strategy or for more details u can directly contact to our executive on 7772909587 . With enough practice and consistent performance evaluation, you can greatly improve your chances of beating the odds.

HOW TO START TRADE IN NIFTY

 What is Nifty?
A good understanding of how the stock market works is incomplete without knowing about NSE and BSE. These are the most essential pillars that support the Indian stock market and keep it functional.BSE is the bombay stock exchange and NSE is the national stock exchange. Each of these stock exchanges has introduced their own stock index. The stock index of BSE, which is the oldest stock exchange of our country, is Sensex. The major stock exchange that NSE introduced is called Nifty.
How to invest in Nifty?
As we understand now, the nifty is a benchmark of the indian stock market index. Nifty comprises of around 50% of NSE’s complete trade stock. It is an indicator of the performance of NSE as a whole, and by extension, the Indian economy too. If nifty is going upwards, it signifies that the whole market is moving upwards.
Investing in NSE is not the same as making an investment in nifty. If you invest in the nifty index, it gives you the opportunity to enjoy the growth and reap benefits from the entire bunch of 50 stocks. There are numerous ways in which you can invest in nifty.
1. Spot Trading- You can buy the nifty script, which is the most simple and straightforward way of investing in nifty. This is the equivalent of buying the equity shares of various listed companies. Once you become an owner of the stock, you can reap the benefits from various price movements of the index, which result in capital gains.
2. Derivative Trading- Financial contracts that obtain their value from an asset that is underlying are called derivatives. These assets could be anything- indices, stocks, currencies or commodities. The parties involved agree on a future date to settle their contract. Profit is made by speculating on the value the underlying asset will attain in the future. To trade directly in the nifty index two kinds of derivatives are available- futures and options.

• Nifty Futures:In a future contract  the buyer and seller agree to buy or sell the nifty contract on a future date. During the period of the contract, you can sell it and make a profit if you see that the price has gone up. If the price goes down, you can wait it out till the date of settlement.
• Nifty Options: In a contract of this type, the buyer and seller agree upon buying and selling the Nifty stock in the future, at a price they decide upon in the present. The buyer of this contract pays a sum as premium and obtains legal rights to buy or sell the Nifty share in the future. But, this is a right, and not a compulsion, so, the buyer can choose to not take action if the price is not favorable to him.
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HOW TO START TRADING IN EQUITY CASH SEGMENT ?

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There are different ways in which you can do stock market trading. The cash trading is one such method. Cash trading or equity segment trading is the most common form of share trading that is done at the stock market and major portion of the stock investors prefer to do stock trading simply because of the simple ways in which the trading can be done. The cash trading is also referred as the delivery based trading as the stocks in this type of trading are deposited to the DP account of the investor.

Advantage of cash trading – The biggest advantage of cash trading is that there is no set time limit for buying and selling the stocks unlike the margin trading and derivative trading. So when you are trading in cash segment you can hold the stocks for as much time as you want until you get the desired profit. So in cash trading your chance of getting profit from trading is more than other ways of trading in the stock market. In cash trading you have to pay the full price of the stocks that you are buying, though it may seem impractical at times, but it surely restrains one investor from going beyond the limit. As you can not invest more than what your fund permits you can control the loss effectively even if the prices get down.

Disadvantage of cash trading – The biggest disadvantage of cash trading is of course the exuberant brokerage charge and taxes that you have to pay for delivery trading. Mostly the brokerage for the cash trading is 10 times higher than margin trading. But of course you can reduce this brokerage rate by opting for the online stock trading portals where the brokerage rate is significantly lower than the traditional broking houses but then they are still higher than the margin trading brokerage.
But still cash trading is the most hassle free way of trading in stock market that requires hardly any skill for trading and have no complications at all. Therefore, for those who are new to the stock market investment and have little knowledge of the trading procedures at the market cash trading is the most suitable way of trading for them.

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