Basics of Options Trading FAQs

How are trading stocks different from options ?

Options trading is very different from stocks.

  • Options - Options have an expiration day within which you may trade in them. All options expire at the expiration date. Stocks have no expiration dates and can be held for many years. If you buy or sell the Nifty May 31 Option, it expires on May 31st. However, if your purchase Reliance shares, you can trade it anytime and keep it for many years.
  • Delivery-In choices, there is no delivery. All transactions must be settled in cash. Stocks are delivered to your demat account. If you purchase an Option, and it is profitable on the expiration date, then you will receive the profit amount credited directly to your account. The underlying will not be delivered to you. Stocks: You will receive the traded stock quantity added to your account.
  • Investment Capital:In these options, you only pay a fraction the trade's actual value. This premium is known as the premium. Stock trading requires you to pay the full value of the shares. You might want to trade 100 shares of SBI at Rs 280. Options trading allows you to purchase an SBI option for 100 shares at a premium of Rs 10, or less, depending on the strike price. Your investment capital would then be Rs 10 x 100 shares = Rs 1,000. You will need to pay Rs 2800 x 100 if you trade stocks.

What is the work of Options ?

How many types of Options ?

What is strike price of option ?

When does Options expire?

What is the process for trading options ?

How futures and Options are different ?

How Nifty can be traded ?

What will happen when an option expires out of money ?

Do I have to pay margin in Options ?

How can the Options contracts be settled ?

What do you mean by Covered Options ?

When do you mean by Naked Options ?

What does American Options refers to ?

What does European option mean? ?

In Options , What is the meaning of At-The-Money , Out-of-the-Money (OTM) and In-The-Money ?

How to take decision on either to buy /sell call Option or put Option ?

Is it possible to trade on option of any stock or index?

How Square off and exercise an Option is different ?

What does intrinsic value of an option mean and how to calculate intrinsic value of an option ?

What does time value of an Option mean ?