Dear Sharan
If you want to go into options and have never traded them before, you can do it at begin only on paper and if not on paper but with real money, do test trades only with
one lot long far otm options which are at least 30 to 60 days away from expiry, so your loss will be minimized in case they fall to zero. Do not try short option strategies at the begin of your option trading, as they contain a high/er risk compare to what I just told about long options.
Your comment:
Max losses are defined depend deeply on how you define your stop loss, on how you handle your stop loss and if a stop loss is set in the market if it is triggered when needed. Other wise you can also lose your shirt and pen in a short time with options in the worst case scenario. This specially with short option. To avoid such moments in any way you go, as told at the begin of this post, only for long far otm options, as there the risk is very low but profit potential can under certain circumstances be high. Here you even can do test with real money if you want. If you do test's with real money already at the begin you will learn to deal with the broker, you will get to know the real feeling when you have real money in the market, you will get to know your order possibilities with the broker and you will get a
real feeling about trading and not just some kind of artificial feeling about doing a paper trade. I was thrown into the water from the begin I started option trading, even I did not understand in dept what options are. I was thrown into the water so quick because of the above mentioned reasons.
Now I will give you an example of a low risk trade you can start trading now. The option is at the under limit of the time frame from 30 to 60 days far away from expiry. You could buy the Sept 8400 call, which is far out of the money and cost only 6.70 Rs at the moment. If market moves 100 point up, your call will be at 13.00 Rs and if market falls down 100 point your call will be 3.70 Rs. This calculation is valid today and will look different in two weeks. Your maximal loss would be 6.70 Rs and your profit potential could be a 100% if lucky, as you have to consider the option greeks as your enemies. And they are called Vega and Theta. Here in this trade your stop loss is your investment of 6.70 Rs plus commission you pay to the broker. This trade you execute when ever you want as it is just a test drive to get the real feeling. You can do such test drives for quit a while and beside that you read or inform your self about how options can be traded. So you do two things at the same time and you surely will have more fun by doing so, as you already did your fist bay steps in the real market with real money.
Still: The above is just to give you one little, absolute simple idea about how you could start with real money in option trading. I not can and will take any response for what you do nor does any body else here in the forum. So all is your choice and I only can tell you about my experience and nothing more and nothing less.
By the way: There is a lot of stuff in the forum about options, as
I am not a spoon feeder. It will take time to read through that. There are whole threads who spot at options as one topic and there are threads which do more or less spot on one or two strategies.
Threads who spot on them as one topic:
http://www.traderji.com/options/92743-options-my-way-looking.html#post941872
http://www.traderji.com/options/305...ading-strategy-option-spreads.html#post333541
http://www.traderji.com/options/66266-option-trading-danpickup.html#post639903
Threads who spot specific on some option strategies:
http://www.traderji.com/derivatives/95164-options-all-seasons.html#post994329
http://www.traderji.com/trading-diary/88670-nifty-options-trading-raj.html#post834078
http://www.traderji.com/options/94802-nifty-calender-spread-calls-puts.html#post985892
http://www.traderji.com/options/74905-advanced-nifty-option-strategies.html#post733503
There is more stuff from many good members here, so could just post some of the many threads you can find here. But as longer as you are in the forum as more you will know where to find all those threads.
Take care / Dan