Indians have taken to online trading like never before. The recent couple of years has seen a massive surge in new investors and record breaking number of people in line to open a demat account. But it is also easy to get carried away in the wave of emotions and assume you will make big bucks all the time. Stock market trading can be lucrative, yes, but it should not be considered easy or simple. It requires discipline, dedication, and lots of research. It also requires the ability to take well measured risks. When you read headlines like a stock turned multibagger, or gave 5x returns, it is not necessarily a fluke or plain good luck. The people who have invested in it, are quite likely to have done immense research before taking the risk.
A large majority of traders prefer intraday trading of stocks and futures to make money in the market. However, options trading is seeing a rise in popularity as it can be more lucrative and rewarding. Options are a contract that gives you the right to buy or sell shares at a specified price till the contract expires. This is not an obligation and you can choose to neither buy nor sell, depending on your strategy and circumstances. Consider the NIFTY index as an example and assume you had made a call at 17,000. NIFTY closed at 17, 550 the previous day and opened at 17,680 today. You would already have made a healthy profit (even after the deduction of your premium for placing the call) by exercising your option at 17,550. However, had you held on for some more time, then you could have potentially made an even higher profit the following day. Whether it be a bearish or a bullish market, to be able to predict its movements requires a sound understanding of the geo-political, socio-economic,, and other underlying macroeconomic factors at play. Surely, this cannot happen overnight and requires a fair amount of hard work from your side. After all, no pain, no gain.
In the excitement of making profits, it is equally important to hedge your trades from risks. Stop Loss is a very important tool, and experts recommend never leaving positions open, no matter how confident you may be of your trade. Self-control is another important trait. Your position sizing and timing can make all the difference. Successful traders who are known to make big gains sell when a security moves downwards from an overbought position. On the other hand, they buy when the move is upwards from an overbought position. To make these timely moves, you need to track and monitor the market movements rigorously.
You too can score big in options trading. But get into it only if you are willing to put in the time and effort. Use the aforementioned helpful tips and avoid overtrading, expiry trading, and carrying trades forward. If you are new to Option Trading, check out OPtions Store on MO Investor app - your one stop solution to free Options Trading strategies with a single click execution! Open your FREE Trading Account with Motilal Oswal today and get access to hundreds of FREE Options Trading strategies.