What is Options Trading?

What you want from trading is the main thinking that you should know before taking any investment. The option derivatives are the special kind of stocks. We can understand by this example: When you make a plan to purchase a property, then you have to submit deposit money for the property, it is some part of the calculated amount of the price of the property. This process is the same as the process of the purchasing stock option. The options contract is the special contract that provides the right of purchasing stock on definite value with before the definite time. Some of the traders feel it is a good investment process. Every trader should know about Share Market Basics.

In options trading, you can trade and make profits on the stock price without giving the whole amount of the stocks. It provides sufficient control on stocks on the minimum amount as compare to stock price. The option is very naturally risky investment process, it is right to do of experienced investors, they are always ready to market ups or downs, option uses for making profits and decreases loss.

There are two kinds of options

1. Call Option
2. Put Option

In contrast, put options provide the right to sell the underlying shares to the holder at the strike price on or before the expiration date. The value of the put option increases when the value of the underlying means is low. The put option is one where a person can ensure a stock for later fall. If your stock price is low, then you can take your put option and sell it at a set price level earlier. If the stock price goes up, then you are simply the loss of the premium amount paid. Before investing in the stock market, you should Learn Stock Market.

Case 1:

Rajesh buys 1 lot of Infosys Technologies May 3000 Put and gives 250 premia, this contract allows Rajesh to buy 100 shares of 3000 rupees from the current date till the end of May. To avail this, Rajesh has to pay a premium of Rs. 25000 only (250 rupees for a stock of 100 shares).

Buyer has bought the right to sell. Put's owner has the right to sell.

Case 2:

If you think that a particular stock such as "Ray Technologies" has a higher value in the month of February, and values in the future may improve. However, you do not want to take any risk in the price increase. Then you will have to take a put option on the best option stock.

Let's say the prices for the stock are under:

Spot Rs 1040

May Put on 1050 rupees 10

May Put on 1070 rupees 30