Options are derivative contracts that offer you the right to buy or sell a stock at a certain price after a certain period. They are different from the regular stock trading done by investors on stock exchanges through brokerage platforms.
How Do I Start Options Trading?
- The first requirement is an options trading account.
- There are various brokerage platforms where you can open your trading account.
- You can buy and sell shares, mutual funds, and derivatives (including options) on the national stock exchange (NSE) and the Bombay stock exchange (BSE) through this account.
- Commodity trading is also available on the multi-commodity exchange (MCX).
Open Trading Account and Start Trading!
Which Exchanges in India Offer Options Trading?
The NSE and BSE are the two recognized exchanges in India where options trading is offered. Both exchanges are regulated by the Securities and Exchange Board of India (SEBI). You can also do commodity options trading through the MCX, which is also regulated by SEBI.
Here are the various alternatives to options trading that these exchanges offer:
- It offers options contracts on indices like the Nifty 50, Bank, Financial, and Midcap. Besides, you can also trade equity options on selected stocks listed here.
- You can visit the NSE website to check the active derivatives contracts available for trading.
- For the various call-and-put options of a stock or index, you can find their respective strike price, last traded price, volume, open interest, and underlying value here.
- You can also check these contracts on your trading platform.
- It offers index options on the Sensex, Bankex, and SX50. Equity options trading on the NSE can be made on all major listed stocks.
- You can check the active options contracts on the BSE's website, too.
- Also, you can select index options or equity options and check the details against different strike prices.
- If you want to invest in commodity options contracts, you have choices such as copper, crude oil, gold, gold mini, natural gas, nickel, silver, silver mini, and zinc.
- The option contract features on the MCX are similar to the equity or index option contracts available on the BSE and NSE.
- An option on the MCX is a derivative contract where you have the right but not the obligation to buy or sell an underlying. You pay an option premium to buy this right. The call option gives you the right to buy, while the put option gives you the right to sell.
- While trading in options contracts on the MCX, you can only buy European-style commodity options.
- The European options allow the right only upon the expiry of the options contract.
What Should I Keep in Mind When Trading Options?
Below are a few ground rules to remember while trading options in India:
- The options contracts are cash-settled, so a DEMAT account is not required. Your trading account linked to your bank account is sufficient for options trading in India.
- Options must be traded in lots; one lot can have multiple shares.
- Brokerage charges are lower on discount broker platforms (typically Rs. 20 per order) but can be higher on full-service brokerage platforms.
- Every stock may have multiple call-and-put options at different strike prices. You must check how liquid and active these contracts are prior to trading.
To sum up, options contracts have been carried out over the counter between private investors too.
However, with the options contracts offered by recognized stock exchanges, you get the regulatory assurance of SEBI along with a fair and transparent trading experience.