Reliance Money - Derivative Trading

[shanky]

Hey guys,
Greetings.
Actually I have a RM demat account, and it has Derivative segment, for which I am completely new. Completely new to F&O as well.
I tried recently placing some orders but due to some discrepancy, it showed some errors. Hence fearing some mishappening, I resigned from blindly pelting arrows in dark.

Please guide me peoples. How to proceed with it?

 

[bunny]

When the orders were rejected by the system, did it give any error message? May be you did not have enough funds to open a futures contract? The minimum funds required to start the smallest futures contract(mininifty and nifty) are apprimately 10K and 25K.

PS: If you don''t know what derivatives and how p/l work out, then better you stay here for sometime and then get into it. In futures, the scope for profit is very high, but similar for losses. You can quickly run into losses without having time to reduce the losses.

Compared to futures, buying options is much safer because the maximum risk is always known when opening the contract. Short-selling options is riskier, though it has some advantages, but not suggested for you.

 

[shanky]

Hey bunny, thanks for reply.
Well actually funds in my account were higher than 10 K or 25 K, around 92K margin. So that shouldn't be the error.
So What should I do now? Only visit forums and see the traders minting money or something else.

Thanks again

 

[bunny]

Hey bunny, thanks for reply.
Well actually funds in my account were higher than 10 K or 25 K, around 92K margin. So that shouldn't be the error.
So What should I do now? Only visit forums and see the traders minting money or something else.

Thanks again

Not much can be done apart from contacting their support desk.
Did it specifically throw any error? or just says 'orders rejected'?

 

[shanky]

Hey bunny,

Let me put this straight!

I am confused on strike price and order term.

What is STRIKE PRICE?

e.g. I tried placing an order for Nifty, in optidx (options index)

Opttype - CE ( Calls options!! Do correct me if required! )

Expirey date - 2 months - 28 Jan

Strike Price - confused! How to decide

Upon clicking get Strike Price - It shows a list of prices ranging from 4100 to 6000
Doubt 1. If I am putting Calls option on current levels then why lower prices are being shown???


And what does 28 Jan expirey means, will I have to square off before or on 28th or it will auto square off.

And how to decide whether I am in profit or loss

Sorry for asking idiotic ques!!! Please Help

 

[rituparna]

hi shanky,

I guess i can help you in clearing your doubt abt Strike prices. In options you have something called Spot price which is the price quoted for immediate settlement of the underlying securites, commodities or currencies Or in simpler term its the current price goin on in the market.
Now coming to Strike price. It is the price at which your option contract can be excerised.

FOR EXAMPLE:
you buy a call option (If you are bullish abt the market with a strike price of 5000 with a premium of Rs 100...and in future say nifty goes to 5300, you can always go to the call seller and ask him to sell you nifty at your strike price i.e 5000. So this means you straight away making a profit of {(5300-5000)- 100premium that you paid for the call option}.

But as a suggestion dont get into option trading if you dont have much idea abt the derivative market and the strategies.

cheers.
Ritu.

 

[shanky]

hi shanky,

FOR EXAMPLE:
you buy a call option (If you are bullish abt the market with a strike price of 5000 with a premium of Rs 100...and in future say nifty goes to 5300, you can always go to the call seller and ask him to sell you nifty at your strike price i.e 5000. So this means you straight away making a profit of {(5300-5000)- 100premium that you paid for the call option}.

But as a suggestion dont get into option trading if you dont have much idea abt the derivative market and the strategies.

cheers.
Ritu.

Hey Ritu, thankx for explanation.

but doubt 1 is still to be answered

Any way as far as your suggestion goes, on a lighter side, I have spare money of which I ain't having idea what to do?? Thats why I thought to give it a shot:lol:

 

[rituparna]

hey shanky,

if you really have no idea what to do with ur spare money then put it in FD atleast you wont have the risk to losing it all....and if u still think option is a place where u can mint money then go ahead with rite strategies.
expiry date is if on or before that date you dont exercise your option then it will become worthless.
Regarding your doubt abt 'lower prices being shown' are you talking abt the Premium?
see there are 3 kind of strike prices..'in the money', 'at the money' and 'out of the money'.
For example you want to buy a nifty call option and lets assume the spot price of nifty is 5100...If your strike price is same as the spot price its called 'at the money'.
IF your strike price is below this spot price say for e.g 4900 then its called 'In The money' call.....for this you pay a higher premium becoz you can exercise the option at that instant and make a profit of Rs 200 (5100-4900)...So the option seller charges u with a higher premium.
But if you go for an 'out of the money' call ie if nifty is at 5100 and your strike price is higher than 5100 say for eg 5200 then you get at a cheaper price BECOZ u have no chance to exercise ur option on the seller (as the strike price is above spot price N obviously u r not a fool to ask ur seller to sale u at 5200 when market is at 5100)...

BTW exactly the opposite happens with put.

SO if you r buying a call or put then its btr 2 go for 'in the money' call or put.

Hope it helps or else plz be lil more specific abt ur doubt.

Cheerz

Ritu.

 

[shanky]

hey shanky,

if you really have no idea what to do with ur spare money then put it in FD atleast you wont have the risk to losing it all....

C'mon, FDs are for old aged and retirees, whats the point earning 2-3000 rs/year? Better than that I would donate it all

Regarding your doubt abt 'lower prices being shown' are you talking abt the Premium?

No Actually, its a rather simple one. I was saying that if I am buying call options at spot price of say 5100, then why lower prices were in the drop down menu.
DID my broker want to see me broke by lowering the spot price to 4100 even if its clear I am buying a call option (I am positive, that Nifty will be up!!)

Small, Simple and plainly Foolish Doubt, you see

Thanks
Shanky

 

[RAJ222]

dont do options