Options are worst contract traded on Stock Exchange

Hi,

I was very attracted towards the options around 3-4 months back.

The reason being they were cheaply available and the profit was unlimited but the loss was limited.

This line "Profit unlimited and loss limited" screwed my trading account balance.

I lost almost 21000 rupees in just 3 months after trading in options that too all in options.

Please dont trade this bad contract.

It looks good from far but is very bad and dangerous.

Even if you want to trade it trade only on the last 2 days of expiry. During that time only you can gain profit.

Rest is your decision.

I dont want any newbees to come and end up their Trading account balance.

Option trading is double edged KNIFE.WE must use it mainly for hedging, not for day trading.Very very dangerous method of day trading

Any trading-- be it by way of options, futures or simply intraday stock--if done without clearly understanding the basics and without a having a proper methodology, will end up bad only.

In respect of options, while the amount of possible loss is a known factor, most of the times it is greed for unlimited profit that makes option trading unsuccessful.

I would suggest you to have a thorough understanding of the option trading concepts first. There are enough hidden gems here in this portal by way of sound and practical advises from seniors on how to handle options. Please go through them and enrich yourself.

Hi!

I dis-agree. To start with, here is an example.

One person takes an insurance policy that has money back facility. He keeps getting money at fixed intervals. Other person gets interested, and enquires for the annual premium paid by the first. The other person has no idea about the type of policies available, so he opts for endowment type policy that has exactly the same premium, but is of higher sum insured. He gets nothing back. He blames insurance as being worst thing to be bought.

But what is the real problem? It is the insufficient knowledge of the type of insurance policies available to be chosen from. The second person should have opted to get all his homework done, by getting all the details of various policies, and then choose the best one.

Something similar happens in Option buying, and here too, I shall give example to clarify my point.

Let us say that Spot Nifty is at around 4500 and the trend is expected to be up, so Call Option needs to be bought. The premium for 4500 CE is much higher than 4600, so one decides to buy 4600 CE by investing a small amount.

When the Spot Nifty goes to around 4550 that 4500 CE gets increased much higher than the 4600 CE. Person having bought 4500 CE books the profits but the increase in 4600 CE is NOT sufficient enough to cover the brokerage and other taxes, so it cannot be squared off.

Finally, as the Spot Nifty keeps fluctuating between 4500 and 4600, and the premium for 4600 CE keeps falling and finally, the trader needs to book loss for 4600 CE transactions.

This, in my opinion, is purely due to having opted for 4600CE than 4500 CE, a wrong choice of option being selected. When this fact is accepted that the trader can start taking corrective actions that shall lead him/her to earn profits. Blaming options shall maintain the mindset, and therefore, loss making shall continue.

My opinion and I could be wrong.
Cheers!
SS

Best instrument in the hand of poor technician can not produce great result.
It is important that technician know how to use that instrument. Same goes with options trading.

Options are complex instrument then stocks. Their pricing depends on 4 or 5 factors.
So if someone lacks the understanding of price behaviour / time decay/ basic probability
of the expected move in NIFTY etc then it is very likely that they will end up loosing money in option trading.

Hope readers can see the smile on the face of other option trader who had better understanding and knowledge of option trading and enjoyed collecting the premium from less knowledgeable traders.

Note - I am not advocating option writing /selling.. Without the knowledge of option pricing, that is lot more dangerous then option buying.

So please invest time in gaining the knowledge.

Happy Trading.

Options are great instruments to trade provided one understands them.....the most important is to understand that options are wasting assets....its value diminishes as time passes,most people loose in options because they buy options like any other "investment" and sit on it till expiry and see it expire worthless....option to be bought once move has started and one should get out the moment the move stops....and also if the expected move does not materialise for whatever reason. In options trading one has to be right on start of the move,duration of the move and extent of the move....

Once understood,trading options is profitable and great fun....let us not have a fobia of this great instrument....options can give you combinations limited to nothing but one's own imagination.

Best luck with your next option contract....

Smart_trade

good and educative