Archive for the ‘FAQ’ Category

How to learn trading options?

This item was filled under [ FAQ, How-To, Knowledge ]

Where to Start in Options Trading This post is not related to SPREADs but it is my thoughts about learning that one needs to start properly in OPTIONS TRADING. It was in reply to following question – Quote: I want to learn options trading. Do we have to be well versed with the equity trading. […]

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Covered Call v/s Short Put ?

This item was filled under [ FAQ, Option Strategies ]

Many stock investors start in options with covered calls strategy. This options strategy is also sold by many trainers as “collecting rent on your stock portfolio” and generating regular monthly income. But what you rarely find is someone telling you that it is same as selling Naked Put option, with no protection. The benefits of […]

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Margins in futures and options trading

This item was filled under [ FAQ, Knowledge ]

Margin concept, margin requirement, Futures, Options

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How to trade bearish view with options ?

This item was filled under [ FAQ, Option Strategies ]

One of my trader friend asked me following question – Lets say I am bearish for the next 2-3 months. What strategy can I use? The Nifty PE of July 2010 are trading at, 5000PE @156.8 4900PE @124 4800PE@101 Now, If I am expecting levels of 4800 minimum in July, how do I use this […]

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Learning Option Strategies

This item was filled under [ FAQ, Option Strategies ]

Option trading gives trader tremendous flexibility to construct a position by combining 4 basic option strategies (Long Call, Long Put, Short Call, Short Put). It is always difficult to find nice interactive tool to learn all of them in interactive way. Here is the link to interactive strategy scanner on www.888optionsnet.com site. Here you can […]

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6 Most common mistakes made by Option Traders

This item was filled under [ FAQ, Trading Psychology ]

To be successful in any profession, we need to learn from the mistakes of others. There isn’t enough time to make all the mistakes yourself, and specially if they are going to cost you money. Here is list of top 6 mistakes made by option traders. Lets learn them in detail and attempt to avoid […]

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How-to plan an options trade ?

This item was filled under [ FAQ, How-To ]

New options traders are always confused in planning the trade correctly and that leads to confusion at the time of exit. Once in a trade, their typical question is “what do I do now? Shall I take loss or book profit or let the trade run? “. My answer to them is with a question […]

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What parameters to use in Black-Scholes Calculator ?

This item was filled under [ FAQ, Option Pricing ]

For calculating option price, Black-Scholes model is one of the most popular one. This uses following parameters to calculate the premium (or current fair value) of option 1) Price of Underlying 2) Option strike Price 3) Days Until Expiration 4) Risk free Interest Rate 5) Dividend Yield 6) Historical Volatility Users are often confused about […]

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What is the difference in Option Excercise and Square-off ?

This item was filled under [ FAQ, Knowledge ]

Suppose you have bought an option and would like to close the position. You have following 3 choices to close it 1) Exercise it 2) Square off it 3) Let it expire Exercise = Uses the end-of-day settlement process of exchange to close your position. For this, you need to instruct your broker (either thru […]

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Is options trading difficult ?

This item was filled under [ FAQ, Traders zone ]

Recently, I was asked by a trader who is new to options trading – “It seems it is difficult to formulate a proper trading system for options. Firstly one has to establish a view on the the market viz rangebound or trending (up or down). After that, looking at the volatility one has to select […]

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