How does one many money in small value options

#1
Hi,
Perhaps this is a total nincompoop question and I dont know the basics. I have been trading futures for a while and am new to options. Havent had the patience to go through any options FAQ or tutorials. However I need quick explanation about one thing -

As I see options brokerages are are fixed per lot instead of percentage. The straightforward way I see to make profits is buy Call on rising market and buy Put on falling market. Lets assume, I do that right. However, at about Rs 110 charge per lot per transaction, I cannot understand how can one make money on small value options yet I seem them being traded HEAVILY. Ill elaborate, Lets say I bought a Nifty Call or Put at value Rs 10 (so lot of 50 will be Rs 500) and I will pay additional Rs 110 for it. Then I sell it for 30% profit at Rs 13 (so selling lot value will be 650) and I will pay additional Rs 110 on this transaction. So even after a whopping 30% gain, my actual numbers are - Profit Rs 150, Brokerage charges Rs 220. Total Rs 70 loss.
Whereas If I was doing the same for high value options, Rs buying at Rs 100 and selling at Rs 130, I would have still paid same Rs 220 brokerage but my profit would have been Rs 1500.
I dont see, how this works, can anyone please explain this to me.

Also, if I hold the options for a few days, do I get some interest or something or do I pay interest, what is the interest field in options?

Thanks for your patience guys, I will read up the FAQs but I need the answer to this for motivation.
 

TraderRavi

low risk profile
#2
Hi,
Perhaps this is a total nincompoop question and I dont know the basics. I have been trading futures for a while and am new to options. Havent had the patience to go through any options FAQ or tutorials. However I need quick explanation about one thing -
.
........:eek:

:fatigue:

:gun2:
 

sumosanammain

Well-Known Member
#3
........:eek:

:fatigue:

:gun2:
Did you understand his question?

He wants to know, if even a 30 % return wont make your trade a profitable one, why is there so much volume in those low priced options? He si not asking how to trade options.

One explanation may be the gambling spirit. People may be buying at 10 rs to sell at 75 rs..... They may be willing to forego that 10 rs. And sell only if they make tripple or more on their cost. Thats one explanation.

The other explanation is that they may be using brokers like zerodha, but these volumes were there even before zerodha was available
 

SavantGarde

Well-Known Member
#4
Did it occur to You, that you maybe paying too much Brokerage....

Happy & Safer Trading

SavantGarde

Hi,
Perhaps this is a total nincompoop question and I dont know the basics. I have been trading futures for a while and am new to options. Havent had the patience to go through any options FAQ or tutorials. However I need quick explanation about one thing -

As I see options brokerages are are fixed per lot instead of percentage. The straightforward way I see to make profits is buy Call on rising market and buy Put on falling market. Lets assume, I do that right. However, at about Rs 110 charge per lot per transaction, I cannot understand how can one make money on small value options yet I seem them being traded HEAVILY. Ill elaborate, Lets say I bought a Nifty Call or Put at value Rs 10 (so lot of 50 will be Rs 500) and I will pay additional Rs 110 for it. Then I sell it for 30% profit at Rs 13 (so selling lot value will be 650) and I will pay additional Rs 110 on this transaction. So even after a whopping 30% gain, my actual numbers are - Profit Rs 150, Brokerage charges Rs 220. Total Rs 70 loss.
Whereas If I was doing the same for high value options, Rs buying at Rs 100 and selling at Rs 130, I would have still paid same Rs 220 brokerage but my profit would have been Rs 1500.
I dont see, how this works, can anyone please explain this to me.

Also, if I hold the options for a few days, do I get some interest or something or do I pay interest, what is the interest field in options?

Thanks for your patience guys, I will read up the FAQs but I need the answer to this for motivation.
 

TraderRavi

low risk profile
#5
Hi,
Perhaps this is a total nincompoop question and I dont know the basics. I have been trading futures for a while and am new to options. Havent had the patience to go through any options FAQ or tutorials. However I need quick explanation about one thing -

As I see options brokerages are are fixed per lot instead of percentage. The straightforward way I see to make profits is buy Call on rising market and buy Put on falling market. Lets assume, I do that right. However, at about Rs 110 charge per lot per transaction, I cannot understand how can one make money on small value options yet I seem them being traded HEAVILY. Ill elaborate, Lets say I bought a Nifty Call or Put at value Rs 10 (so lot of 50 will be Rs 500) and I will pay additional Rs 110 for it. Then I sell it for 30% profit at Rs 13 (so selling lot value will be 650) and I will pay additional Rs 110 on this transaction. So even after a whopping 30% gain, my actual numbers are - Profit Rs 150, Brokerage charges Rs 220. Total Rs 70 loss.
Whereas If I was doing the same for high value options, Rs buying at Rs 100 and selling at Rs 130, I would have still paid same Rs 220 brokerage but my profit would have been Rs 1500.
I dont see, how this works, can anyone please explain this to me.

Also, if I hold the options for a few days, do I get some interest or something or do I pay interest, what is the interest field in options?

Thanks for your patience guys, I will read up the FAQs but I need the answer to this for motivation.
:eek:


:rolleyes:
 
#7
Trading spirit. Hard to digest, the top trading options are always less than Rs 100 (mostly in the ranges of 30-70), and there are even Rs 2-3 value options in the top 10. All of these with humongous turnover.
Just look at this link for today's (or last working day) values - http://www.nseindia.com/content/fo/fomktwtch_OPTIDXNIFTY.htm

And even if I am paying extra brokerage with my broker, the others provide similar plans, most of them charge Rs 50-100 per trade fixed price per lot.

What is the point on quoting my whole question again and again :), I am still none the wiser.

Someone, please clarify (my original question that is).

Thanks in advance.
 

Taurus1

Well-Known Member
#9
Trading spirit. Hard to digest, the top trading options are always less than Rs 100 (mostly in the ranges of 30-70), and there are even Rs 2-3 value options in the top 10. All of these with humongous turnover.
Just look at this link for today's (or last working day) values - http://www.nseindia.com/content/fo/fomktwtch_OPTIDXNIFTY.htm

And even if I am paying extra brokerage with my broker, the others provide similar plans, most of them charge Rs 50-100 per trade fixed price per lot.

What is the point on quoting my whole question again and again :), I am still none the wiser.

Someone, please clarify (my original question that is).

Thanks in advance.
Do not pay more than 20-25 each way, else throw out the broker. Also consider zerodha as your broker.
Very strongly suggest you do a lot of reading on the options threads before placing any trades.
 

TraderRavi

low risk profile
#10
Trading spirit. Hard to digest, the top trading options are always less than Rs 100 (mostly in the ranges of 30-70), and there are even Rs 2-3 value options in the top 10. All of these with humongous turnover.
Just look at this link for today's (or last working day) values - http://www.nseindia.com/content/fo/fomktwtch_OPTIDXNIFTY.htm

And even if I am paying extra brokerage with my broker, the others provide similar plans, most of them charge Rs 50-100 per trade fixed price per lot.

What is the point on quoting my whole question again and again :), I am still none the wiser.

Someone, please clarify (my original question that is).

Thanks in advance.
:eek:

:!

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