POWERGRID OPTION STRATEGY FOR AUG 2021

BUY 1 LOT POWERGRID 180 CALL @ 1.8-1.9 TARGET 3.5

HINDALCO OPTION STRANGLE STARTEGY ROCKSSSS

 HINDALCO STRANGLE STRATEGY GIVEN IN 23 JUNE POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2021/06/hindalco-option-strangle-strategy-for.html

HINDALCO 420 CALL BOOK PROFIT 23 BUY GIVEN @ 6 PROFIT OF 36765

HINDALCO JUL 350 PUT LOSS OF 14835

NET PROFIT 21930

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IRCTC FUTURE ON FIREEE BOOKED PROFIT 30875

IRCTC GIVEN IN TODAY'S POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2021/07/blog-post_59.html

IRCTC FUTURE ROCKSSS ACHIEVED BOTH THE TARGET 2430/2465 BUY GIVEN 2400

PROFIT @ 1ST TARGET 9750

PROFIT @ 2ND TARGET 21125

NET PROFIT 30875

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IRCTC FUTURE LEVEL FOR 16 JUL 2021

 BUY IRCTC FUTURE 2 LOTS ABOVE 2400 TARGET  2430-2465 STOPLOSS 2375

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HDFCLIFE STRANGLE STRATEGY BOOKED IN PROFIT OF 3520

STRATEGY GIVEN IN 30 JUN 2021 POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2021/06/hdfclife-option-strategy-for-july-2021.html

HDFCLIFE 680 PUT BOOKED PROFIT NEAR 13.2 BUY GIVEN @ 8 PROFIT OF 5720

HDFCLIFE 720 CALL BOOKED @ 7 BUY GIVEN @ 9 LOSS OF 2200

NET PROFIT 3520

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ACC ACHIEVED 1ST TARGET IN PROFIT OF 7500

ACC LEVELS GIVEN IN TODAY'S POST TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2021/07/blog-post.html 

ACC FUTURE ACHIEVED 1ST TARGET 2120 BUY GIVEN @ 2105

ACC FUTURE LEVEL FOR 15 JULY 2021

 BUY ACC FUTURE 2 LOTS ABOVE 2105 TARGET 2120-2140 STOPLOSS 2106

INDEX & STOCK OPTION CALLPUT ROCKSSS BOOKED PROFIT OF 10300

TIPS GIVEN IN TODAY MORNING POST 👇TO CHECK VISIT http://optioncallputtradingtips.blogspot.com/2021/07/buy-1-lot-bandhanbk-300-put-7.html

BANDHANBK 300 PUT ROCKS ACHIEVED TARGET 10 BUY GIVEN @ 7 PROFIT OF 5400 (INVESTMENT 12600)

BANKNIFTY 34800 15 JUL PUT ACHIEVED TARGET 300 BUY GIVEN @ 240 PROFIT OF 1500 (INVESTMENT 6000)

TATASTEEL 1260 CALL ROCKS ACHIEVED TARGET 23 BUY GIVEN @ 19 PROFIT OF 3400 (INVESTMENT 16150) (TOP GAINER 1.87% UP )

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INDEX & STOCK OPTION CALLPUT TIPS FOR 9 JULY 2021

BUY 1 LOT BANDHANBK 300 PUT @ 7 TARGET 10

BUY 1 LOT BANKNIFTY 34800 15 JUL PUT @ 240 TARGET 300/370

BUY 1 LOT TATASTEEL 1260 CALL @ 19 TARGET 23

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FUTURES VS OPTIONS: WHICH IS BETTER?

In the past few years, futures and options have become very popular with investors, especially in the stock market. This is because of the many advantages that they offer – lower risk, leverage, and high liquidity.

Futures and options are a type of derivative, which is an instrument whose value derives from the value of an underlying asset. There are many types of assets in which derivatives are available, like stocks, indices, currency, gold, silver, wheat, cotton, petroleum, etc. In short, any financial instrument or commodity that can be sold or bought can have a derivative.

Futures and options are used for two purposes – hedging and speculation. Prices can be volatile, and can cause losses for producers, traders and investors. So, these derivatives can come in handy to hedge against such volatility. Speculators use derivatives to cash in on price movements. If they can predict price movements accurately, they can make money through such derivatives.

Difference between futures and options

Futures are a contract that the holders the right to buy or sell a certain asset at a specific price on a specified future date. Options give the right, but not the obligation, to buy or sell a certain asset at a specific price on a specified date. This is the main difference between futures and options.

An illustration would help you figure it out. First, let’s look at futures. Suppose you think that the share price of RELIANCE, currently at Rs 100, is going to go up. You want to use the opportunity to make some money. So, you buy 1,000 futures contracts of RELIANCE at a price (`strike price’) of Rs 100. When the price of RELIANCE goes up to Rs 150, you will be able to exercise your right, and sell your futures at Rs 100 each and make a profit of 50×1000, or Rs 50,000. Let’s assume that you got it wrong, and prices move in the opposite direction, and RELIANCE share prices fall to Rs 50. In that case, you would have made a loss of Rs 50,000!

Remember that options give you the right, but not the obligation, to buy or sell. If you have bought the same amount of options on RELIANCE, you would have been able to exercise your right to sell options at Rs 150, and make a profit of Rs 50,000, just like the futures contract. However, if the share price fell to Rs 50, you would have the choice of not exercising your right, thus avoiding a loss of Rs 50,000. The only loss you will incur is the premium you would have paid to buy the contract from the seller (called `writer’).

So, this should help you understand the difference between futures and options.

In the stock market, futures and options are available for indices, and stocks. However, these derivatives are not available for all securities, but only for a specified list of around 200 stocks. Futures and options are available in lots, so you cannot trade in a single share. The stock exchange determines the size of the lots, which differ from share to share. Futures contracts are available for periods of one, two, and three months.

Types of options

As far as futures contracts go, there is only one primary type. However, you have more choices when it comes to options contracts. There are two types:

Call option: This gives you the right to buy an asset at a specific price at a fixed date.

Put option: This gives you the right to sell an asset at a fixed price at a future date.

Call and put options are used in different situations. A call option is preferred when prices are expected to increase. A put option is often chosen when prices are expected to fall.

Margins and premiums

An important thing you should consider in the futures vs options debate is margins and premiums. You have to pay a margin while entering into a futures contract, and a premium while buying options.

Margin is the amount you have to pay your broker when you buy futures. Margins vary according to the asset, and are generally a percentage of the total transactions that you make in futures. This is used by the broker as protection against any losses that you may incur while making futures transactions.

Both margins, and premiums can be used for leverage, that is, make large volumes of transactions, in a multiple of the amount paid to the broker or writer. An example should help illustrate this better. Let’s say you want to purchase futures worth Rs 1 crore. If the margin is 10 percent, you only have to pay Rs 10 lakh to the broker. So by paying just Rs 10 lakh, you will be able to enter into transactions worth Rs 1 crore. This increased exposure will increase your chances of making profits.

You can see how advantageous this is when compared to buying stocks. If stock prices rise by 10 percent, you would have made Rs 10 lakh by investing in futures. On the other hand, if you had invested in stocks directly the same investment of Rs 10 lakh would have fetched you only Rs 1 lakh. However, the risks are higher for futures too. If prices fall by 10 percent, your futures investment will stand to lose Rs 10 lakh. If you had invested in stocks, the losses would have been just Rs 1 lakh.

When prices fall, you will get a margin call to deposit more money so that you meet the margin requirements. This is because gains on futures are marked-to-market every day. This means that changes in the value of the futures, whether up or down, are transferred to the account of the futures holder at the end of every trading day. If you don’t pay up the margin call, the broker can sell your position, and this could lead to huge losses for you.

As far as options go, your risks will be considerably less, since you have the choice of not exercising your contract when prices don’t go your way. In that case, the only loss will be the premium that you have paid. So while trading futures vs options, you could say options involve less risk.

In the case of options, while the buyer bears limited risk, the seller’s risk is unlimited. However, the writer does have the option of squaring off the transaction by buying an identical options contract. But the writer will have to pay a higher premium since the options contract will be in-the-money, that is, the holder of the options will make a profit if they are sold at that moment. For the writer though, the options would be out-of-the-money, that is, he will stand to lose if the contract is exercised. Generally, options writing is best done by experienced people who can gauge the amount of risk involved, and avoid getting their fingers burnt.

Settlement

There are two ways of settling futures and options. One is to do it on the expiry date, either through the physical delivery of shares, or in cash. You can also do it before the expiry date by squaring off the transaction. For example, you can square off a futures contract by buying another identical contract. This can be done for options contracts as well.

Conclusion

We’ve seen options vs futures advantages and disadvantages. You have to make your choices, depending on your risk appetite, and investment objectives. As we have seen above, futures involve more risk since you have to bear the brunt of any changes in price. In options, in the event of unfavorable changes in price, your losses are limited to the premium that you have paid. But having said that, the chances of making money from futures are higher than in options. Most options contracts tend to expire worthlessly, that is, no profits are booked.