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How to Start Future and Options Trading?Future and option trading are popular investment strategies in the world of finance. Both involve making investments in financial instruments with the expectation of making a profit. While the two types of trading have their similarities, they are also quite different in terms of their structure and the risks involved. Before you start trading in the Future and Options segment, you need to understand the basics of F&O first. So, let’s understand its basics first. What are futures? Futures are financial contracts that allow traders to buy or sell an asset at a predetermined price and date in the future. The price of the asset in the future is agreed upon at the time the contract is made. Futures trading can involve a wide range of assets, such as stocks, commodities, currencies, and bonds. The main advantage of futures trading is that it allows traders to make investments in assets that they may not otherwise have access to. It also provides a way for traders to hedge their existing investments. For example , if a trader owns a stock that they expect to decrease in value, they can sell a futures contract for that stock and lock in the current market price. If the stock does decrease in value, the trader can buy back the futures contract at a lower price and make a profit. What are the options? Options are contracts that give traders the right, but not the obligation, to buy or sell an asset at a predetermined price and date in the future. The price of the asset in the future is agreed upon at the time the contract is made, but the trader is not obligated to follow through with the trade. Options trading can also involve a wide range of assets. The main advantage of options trading is that it provides traders with flexibility. They can choose to buy or sell an option, depending on their investment goals. Options also provide traders with a way to limit their losses. For example , if a trader owns a stock that they expect to decrease in value, they can buy a put option for that stock. If the stock does decrease in value, the trader can exercise the option and sell the stock at the predetermined price, limiting their losses. Lot Size: In the context of Futures and Options (F&O) trading, lot size refers to the standardized quantity of the underlying asset specified in the contract. It represents the minimum number of units of the underlying asset that can be bought or sold in a single F&O transaction. For example , if the lot size of a stock in the F&O market is 500, then a trader has to buy or sell a minimum of 500 units of that stock in a single transaction. The lot size is determined by the stock exchange and is specified in the contract specifications for each F&O instrument. The lot size is an important factor in F&O trading as it determines the margin required for trading, the minimum quantity that can be traded, and the maximum loss that can be incurred in a single transaction. Traders need to be aware of the lot size of the F&O contract they wish to trade to ensure they have sufficient capital to cover the margin requirements and to avoid inadvertently taking a larger position than intended. It is also worth noting that the lot size of F&O contracts can change over time. Stock exchanges may adjust the lot size based on factors such as the liquidity of the underlying asset, market conditions, and regulatory requirements. Traders should regularly check the contract specifications of the F&O instruments they are interested in trading to ensure they have the most up-to-date information on lot sizes. Differences between futures and options: While futures and options have some similarities, they also have some key differences. One of the main differences is that futures contracts are binding, while options contracts are not. This means that traders who buy futures contracts are obligated to follow through with the trade, while traders who buy options contracts have the flexibility to choose whether or not to follow through with the trade. Another difference is the level of risk involved. Futures trading is generally considered to be riskier than options trading because traders are obligated to follow through with the trade, even if the market conditions are not favourable. Options trading, on the other hand, provides traders with more flexibility to limit their losses. Future and option trading can be complex, and it is important for traders to understand the risks involved before making any investments. It is also important for traders to have a clear understanding of their investment goals and to choose the trading strategy that best aligns with those goals. Steps to start future and option trading: Here are some steps to help you get started with F&O trading: Learn the basics of F&O trading: F&O trading involves complex financial instruments and can be risky if you do not understand how it works. You should educate yourself about the basics of F&O trading, including concepts such as lot size, margin, expiry, and strike price. Develop a Trading Plan: Before you start trading, it is important to have a well-defined trading plan that includes your investment goals, risk tolerance, trading strategy, and money management rules. You should also decide on the F&O instruments you want to trade, based on factors such as liquidity, volatility, and your level of expertise. Start with a small investment: F&O trading involves high leverage and can result in significant profits or losses. It is advisable to start with a small investment and gradually increase your exposure as you gain experience and confidence. Monitor your positions: F&O trading requires active monitoring of your positions as the market can move quickly and your profit or loss can change rapidly. You must use tools such as stop-loss orders and trailing stop-loss orders to manage your risk. In conclusion: F&O trading can be a profitable investment opportunity for traders who are willing to put in the time and effort to learn and develop a trading plan. However, it is important to understand the risks involved and to trade with caution. ___________________________ 💻📞☎️ always do your research. 💌📫📃 If you have any questions, you can write me in the comments below, and I will answer them. 📊📌❤️And please don't forget to support this idea with your likes and comment
NSE:NIFTYEducation
by khushaljain023
A pattern to PUT during weak marketI try to research and develop some pattern when the market is weak: In this case I try 3 patterns below: var int cnt_out_up = 0 Pattern #1: Big drop wma_11 = ta.wma(close, 11) wma11 = request.security(symbol=syminfo.tickerid, timeframe="13", expression=wma_11, lookahead=barmerge.lookahead_on) wma_48 = ta.wma(close, 48) wma48 = request.security(symbol=syminfo.tickerid, timeframe="13", expression=wma_48, lookahead=barmerge.lookahead_on) rsi = ta.rsi(close, 9) bigdrop = rsi + 8 < rsi and close > wma48 if bigdrop cnt_out_up := cnt_out_up + 1 Pattern #2 var int cnt_put = 0 gain1 = math.abs(close-close ) gain2 = math.abs(close -close ) pattern_put = close >close and close >close and high<=high and close <= close and (gain1-gain2)/gain2 <= -0.5 or ((high-low)-(high-close)) / (high-low) < 0.25 and wma11 close and ochl < 0.1 and (low < low and low < low ) If pattern #1, #2 and #3 occur then I set a PUT trigger. Try this one and enjoy!
CME_MINI:NQ1!Education
by binancash
Options flow predicting moves on Derivatives (Futures)Options have been and are an important instrument on the financial market for a trader trading Intraday Futures. Therefore, while exploring the mechanics of the option market over the last several months, as a result of work, indicators were created that load data from Quandl and then look for patterns that may herald a change of direction on the derivative market - in this case Futures Contracts. There are two main types of Options: CALL - allow their owner to buy a given product in the future at a predetermined price (Strike Price) PUT - allow you to sell this product at a predetermined price (Strike Price) By observing the market volumes of both types of Options, we can observe the sentiment of investors. The key factors are which volume (call or put) prevail in the volume and the dynamics of the volume - what is the trend on volume, whether the difference between them increases or decreases. In addition, the Put / Call Ratio analysis allows you to confirm or negate the signals from the Option volume. The Ratio indicator behaves inversely to the price movement - in the case of a bearish sentiment, we expect the ratio to increase, and in the case of bullish sentiment - the indicator should decrease. If the Ratio follows the price in the same direction, it is an anomaly. Of course, the mere observation of the Option volumes and the Put / Call ratio is not sufficient, as the Options Market is a much more complicated activity. It is worth including in the calculations such factors as Expiration Date, Bonus Amount, option type (In the Money, Out of Money or At the Money). Not each of the factors is equally important, therefore the key is additionally the appropriate selection of the weighting factors. For this purpose, due to the multitude of data, it is worth using Machine Learning, which I also do by saving the resulting data in a dataset in Quandl and displaying the data in TradingView using Pine Script. Below are some additional examples from recent sessions on ES showing the predictive nature of the Option sentiment, often preceding major movements in the ES index (during the spot session): First, from the left, the session from November 15 is shown and an opportunity to play Short. On the right, the session from November 16 and an opportunity to play the Long position this time. Session from November 10, where we first got the Bull's signal, and at the top we got a warning signal of traffic reversal and the possibility of entering Short: And one of my favorite moves on November 3:
CME_MINI:ES1!Education
by skyline-trader
The Put/Call Ratio in a NutshellWhat is the put/call ratio? The put/call ratio (PCE) is a popular barometer of market sentiment, which shows the ratio of trading volumes of Put vs Call options. However, with distortions in the current price of nearly every instrument off the back of "free money," and persistent market intervention by policy makers, we're not quite seeing the price discovery we're used to, which has made it more difficult to make sense of the Put-Call, and other technical indicators as well. What is a derivative? To understand the value of the put/call ratio, we must first understand the derivatives market. A derivative is a (leveraged) instrument, which gives the holder a right to either buy (call) or sell (put) a specific amount of a stock (or other instrument), at a specified price, and timeframe. If your'e holding a put, you're likely expecting the price of the stock to fall, while holders of calls are expecting the price to rise. Puts are usually used as a solid hedging tool, while calls are more often related to speculative behaviour. How to use the put-call ratio? When the put/call rises above 1, it indicates that market sentient is shifting more bearish. At the moment, we're looking at a put/call of around 0.46, which indicates that market sentiment is very bullish, and actually, it's been bullish for quite some time as you can see in the chart. When we see a massive shift in the put/call back above 1, naturally it would be showing that investors and traders are becoming more defensive.
USI:PCEEducation
by Hedge_Of_The_World
32
Options buying and sellingI decided that before explaining complex strategies, I need to explain call options and put options and differences between buying and selling. (I'm adding down calls chart) The term "the option is worthless" meaning that the stock price didn’t finish above the strike price in calls or finish below in-puts. Buy Calls – Bullish “strategy”, you need to select a stock that will go up in price in a reasonable time. Limited loss (The maximum loss is what you paid for the option), theoretically unlimited profit. Buy Puts – Berish “strategy”, you need to select a stock that will go down in price in a reasonable time. Limited loss, theoretically unlimited profit. Selling Naked means that you only sell the option contract without owning the shares. 1 option contract equals 100 shares. Sell Calls (Naked) – In general, this a Berish “strategy”, but it depends. The seller wants the option to expire worthless, meaning all the value of the option will go to zero, the price of the stock needs to be at the expiration date under the strike price of the option. Theoretically unlimited loss, limited profit. Example: XYZ worth at the beginning $100 per share. The seller sold 1 option - Different calls: In the money option strike $95 worth - $6 ($5 intrinsic value + $1 time premium) At the money option strike $100 worth - $3 Out of the money option strike $105 worth - $1 In the money call sold – The seller sold a call at the strike price of $95 If the stock will finish anywhere below 95$ The call seller will profit $600 The stock has to go down at least $5 At the money call sold - The seller sold a call at the strike price of $100 If the stock will finish anywhere below 100$ The call seller will profit $300 The stock can be neutral or go down slightly. Out of the money call sold - The seller sold a call at the strike price of $105 If the stock will finish anywhere below 105$ The call seller will profit $100 The stock can be neutral or go down slightly or even go up in price and the seller will still profit. You should notice if the stock will go up in price large loss could happen. In theory, this loss is unlimited, in practice, the loss is limited by time. The stock cannot rise to infinity. Naked call selling is not the same as a short sale of stocks. While both have large potential risks, the short sale has much higher reward potential, but the call selling will do better if the stock remains at the same price. You can see from the example that the call seller can make money in situations when the short seller would have lost money. Covered call writing (selling) – I won’t go deep here, this means the seller of the option own 100 shares, the cover call writer is mildly bullish or neutral. People do this to decrease the risk of owning a stock or don’t believe the stock will go very high in price and they want extra profit. This limits the profit potential. Sell Puts (Naked) – In general, this a Bullish “strategy”, but it depends. The seller wants the option to expire worthless, meaning all the value of the option will go to zero, the price of the stock needs to be at the expiration date above the strike price of the option. Theoretically unlimited loss, limited profit. An example of selling puts is exactly the opposite of selling calls. The seller wants the stock price to be above the strike price of the option he sold. (Will show you down with another chart) What happens in the buyer and seller portfolio after expiration, several cases We will examine calls buy and sell if the stock finishes above the strike price of the option, for example, the strike price is 100 the stock finish at 105. The buyer needs to buy from the seller 100 shares ( 1 option contract) at the strike price, meaning he will need to have $10,000, but the stock is at 105. The buyer portfolio will be with 100 shares long at $100 with an unrealized profit of $500 minus the premium paid for the option minus commissions. The seller needs to provide those stocks, so he will be short 100 shares at $100, with a loss of (-$500) plus the premium he received from the buyer for the option, minus commissions. If the stock finish below the strike of the call option, the option is worthless and the buyer lost the debit he paid for the option, the seller received all the credit. No stock transaction is happening. Time – The more we get closer to expiration the greater the time decay, this is good for the seller and bad for the buyer, remember the seller wants the option price to go to zero, receive all the credit. Volatility – Raise in volatility is good for the buyer and bad for the seller, when volatility raises the option gets more expensive. If the option that was bought now worth more because of the rise in volatility the buyer profit from it. There is a lot more to say about this subject, every strategy has a different consideration that needs to be taken into account. Note: Naked option selling is usually a strategy for professional traders. Chart: Buy put – option price -> 129.4 , stock price -> 3286.33 , strike -> 3045, days -> 52 , implied volatility -> 47.4% (0.474), date-> 27/10/2020 Sell put – option price -> 127.25 , stock price -> 3286.33 , strike -> 3045, days -> 52 , implied volatility -> 47.4% (0.474), date-> 27/10/2020 Delta 0.3
NASDAQ:AMZNEducation
by ZoharCho
1