Know the options trade which delivered 400% profits in a single day | Motilal Oswal

This options trade just delivered 400 percent profits in a single day

It is not uncommon to come across such headlines and wonder what are those traders doing right to be able to book such high profits. Is it just a myth? A ruse created to entice but hardly delivers? Well, let us tell you that is more achievable than you think. But for success in options trading you need to have a revised approach. Trading options the way you trade stocks and futures may be a highly risky path. Let us know more about this.

Take the case of NIFTY 50. While the index is hovering around 17,550, for the ease of calculation let us consider that you picked the trade at a strike price of 17,000 and 17,550 as your target price. Further assumptions are that 17,000 calls are at ₹ 100 each with a lot size of 75. So, with a simple premium calculation of lot size x call price = ₹ 7,500 you can receive a contract exposure of lot size x call = ₹ 12,75,000. This exposure is known as leverage and in this case is a phenomenal 170 times. This can give you an idea of the scale, attraction, and possibility of lucrative rewards associated with options trading. Now if you had picked a strike price of ₹ 17,000 then the option is in the money as the current price is well beyond that. Your current call potential profit will be (Target Price - Strike Price - Premium)/Premium. In the example we have considered, this results in a 450% profit. 

Some people may consider options trading as a high risk activity due to the high contract exposure. Afterall, in the aforementioned example there was the exposure of ₹ 12.75 Lakhs. Well, firstly, it is a well established rule of the stock market that to gain high rewards, you need to take high risks. However, as any successful trader will tell you, these need to be researched and well-calculated risks based upon your risk tolerance and appetite. Whether you make a Call or a Put, you need to pay deep attention to the factors affecting the index’s movements and the possible magnitude of it. 

Furthermore, do not expect to get ‘first time lucky’. While fortune may favour you, it is no substitute for diligence and discipline. More so, than regular stock market trading. Knowing the pulse of the share market today and understanding the trends that can affect its future movement is the key to successful intraday trading in options of indices or individual stocks. 

On the other hand, why do it all on your own when you have a reputed and trustworthy advisor at hand. Motilal Oswal Options Store applies its years of experience and extensive research into providing you with solid strategies to help you predict and trade in options better, while exposing yourself to minimal risk. 

Putting Theory in Practice

Here are some real-life examples of recent trades where you could have made a handsome profit if you would have traded with expert advice. (25th Aug, lot size 50)

  • 17700 Put,  Price: 15 at 1.40 pm. Hit 199 at 3.15 pm

  • 17550 Put,  Price: 4 at 11.45 am. Hit 50 at 3.10 pm

  • 17650 Put,  Price: 7 at 2.15 pm. Hit 149 at 3.15 pm

 

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