What is Options Trading? || Futures and Options Series || Anish Singh Thakur || Booming Bulls
Finally, the video is posted for which everybody waited so long- Options. Have to do Option trading, Option trading. Everybody wants to do Option trading but Option trading is highly risky and highly rewarding. Doing it after understanding it completely is a better judgement.
So, today in this video we will see What are Options? What is the concept of In The Money, At The Money, and Out Of The Money? Why do we get some strike prices at lower rates and the others at higher rates? Why is the term selling and buying into existence? What do we need to do about it? There are a lot of things and that’s why, I haven’t made a single video but a series of videos. Welcome back to the second video guys. My name is Anish Singh Thakur and today we will get to know about Options, we will dive deep into it. So in this video, you will have a lot of fun. That's why I request you to watch it comfortably, you can pause it. Pause and leave it.
Watch it on a big screen and make notes. This will help you a lot. So now I will meet you in the outro video. Hello guys, Welcome back to this Options trading video.
I know this is the most awaited video because most of you are already trading but most of the people don’t know that what it is, how to trade, what strike price to choose what is it in reality? which strike price showed in the Option chain should be chosen, why choose in buying, what to do in selling, there are lots of things. So, this is Option’s basic video. After this, 2-3 more videos will come.
So, let’s begin. As I have told you in the last video, if we want to learn at an advanced level about something then obviously you have to clear out the basics. Let’s start. We will start the class We will start this video What are Options? Not options Options Trading So Options are also contracts that give the bearer the right, but not the obligation, to either buy or sell an amount if underlying.
So Again that theory knowledge you know that I don’t talk about. I will directly bring you to my chart So when we will see in this chart after coming then let’s say if we write Bajaj Finance here Then see, you know the Bajaj finance’s Futures, you know what are these 3. But after this, what is all of it coming to Bajaj Finance July 3400 CE, 3500 CE, 3600 CE, 3700 CE, there are a lot of things What is it, CE, what is written? What is written, what is the meaning of this thing? If we write Bajaj finance here entirely and open the chart here of Bajaj Finance, then see. Here we open the chart then what do we understand? We can see 5997 here.
That 5997 5997 Means it is close to 6000 so if I write 6000 here then see it is coming to the same thing again. After 6000, 6000 CE, 6000 PE, and then August. And then September.
As I told you don’t go for all these things because here we have liquidity issues. We can always sell and come back. Anyway, all of it doesn’t apply on Options If you want to do Swing Trade in Options then I think applying in the future is better because it has something called Theta Decay it has some Transic value We will discuss this deeply, let’s start. So now leave this. We will catch up on this. Let's write CE
and Bajaj Finance 6000 PE we will write. So what is this Bajaj Finance 600 CE and PE? If I go to buy this then I, this is again a simple thing See what is written here I will take it to regular order then it is asking me for ₹27,500 Why? Because see 125, Bajaj Finance’s future also comes in a quantity of 125 That's why everyone’s has different. SBI has different, Reliance has different, Nifty has different, Bank Nifty has different this has different.
So if it comes in 125 125* the current price is 220 If you multiply then it will come to ₹27,500 So, I have to give this much money which we call it premium So, it’s okay, it doesn't matter. We can give this much. So, If the rate of PE is ₹205 then we can get it at lower rates. We will get it in ₹25000 or we are getting this ₹27000 But what is it? Let’s begin Let’s start studying first then we will understand. In this Intraday, we have the same rate.
There are no margins since we are already getting it at cheaper rates. So, now we will start What is an Option? What is the Option, What is the Option, to study for it initially we will come to our i pad and we will see that whenever we see Options then Option were write something like this, Bajaj Finance, the time is written July. Now you know July means the last Thursday of July, it will end. And number is written 6000, number can be any and then CE or PE is written So, see how many things are there, one is this segment, Stock name One is done Second segment is that expiry- time, and one is called Strike Price, okay? This is called what we have chosen as strike price and this is CE PE.
We have American Option and European option I tell you There are two types of options, American and European. We use European that’s why this is Call European. If there would be PE that is Put European. CE, PE, that is what we call.
So, now you have got to know totally that there are 4 broader categories, Name, expiry, strike price and type. You have learnt how to write. If I have to write Nifty. If I have to write Nifty, Nifty Nifty has a weekly expiry that’s why we will take it as the last example. If we have to write SBI then SBI SBI JULY 400 CE. This is how we write.
This is how we write. It’s good. Now you have learned how to write it. Now let’s do one thing, now we will learn a different concept. Now we will go back again on laptop and study about Bajaj finance. What are Options? Right now we will just study about CE Okay? CE What is it? Now you got to know the name of Bajaj Finance.
Got to know about JULY There is a strike price of ₹6000, you don't know how to use it. I will let you know. What is CE and PE? C means the Call Options P means the Put Options CE means when your point of view is bullish then you do Call Buy. When your point of view, study and analysis is bearish, downward, then you do Put Buy.
For the upward direction in the market, you have to Call buy and for the downward direction, you have to Put buy . This you should understand first. and we think it will go in the upward direction that’s why we buy 6000 CE.
Now since it is of a lot of type, so If I write Bajaj Finance and 5800 5900 no There is no 5950 CE. It is available in the multiples of 100. Everything has different. Nifty comes in the multiple of 50 and 100. Bank Nifty comes in the multiple of 100 only. Okay? SBI comes in the multiple of 20.
This is how multiple strike prices are available. I will tell you the meaning. I’ll do one thing now will write Bajaj Finance 5900 CE and put it at the top and let’s pick one more, Bajaj Finance Bajaj Finance 6100 CE. We have picked out 3. Wherever the price is, I have picked up 3 around it. 5900 Call, and 6100 Call I have picked out 3 here. Okay?
In This is a little. I have picked out 3 here. Okay? In This is a little. 5900 Call, This is perfect. This is how it is supposed to be. So what we are getting to see is that 5900 Call is costly, 6000 are at a cheaper rate and this is at a more cheaper rate. Why is this happening? What is this scene? We need to understand this only.
So let’s go, now we will begin to understand that there are 2 types of Option. there are 2 types of Option. There are 3 types but to make it easier First understand this there are 2 types of Options. So one is. It’s better if we move here Now you have seen that 5900 is at ₹269, Then 200 And then See how much was it? then 175.
Now I will bring you here. Alright. See, I am telling you there are only two types of options in this world. Study two now. You will understand the third on your own. We say In the Money In the Money or we are talking about moneyless and Out of the Money.
So ITM and OTM. There are 2 types of Options In The Money means So I will make you understand the meaning of in the money and out the money both. You have just read the name, just read what is in the money and out of the money. Okay. Now whenever we Bajaj finance is now at ₹5997. Whenever we read a statement, Bajaj Finance 5900 CE.
If that sentence is true in the present tense. What did I say? If what I am reading right now, that statement in present tense is true then I am In The Money and if the statement is false then I am Out of The Money. The meaning is very simple.
If Bajaj Finance is above 5900 CE. Is Bajaj Finance is above 5900 CE. yes, Obviously it is 97 rupees above in fact. Which Option is this then? This for me is then In The money option.
I will tell you later how to use it. As of now we will learn to read it. Bajaj finance 5900 CE, means Rs 97 up So therefore; it is In The Money Option. If we see here that Bajaj Finance 6000 CE is true or false? Let’s read it Bajaj finance is moving above 6000, CE right now in present tense Is it upward? This is below Rs 3 So what is this? that is false. Therefore, it is out of the money.
Although it is at the money but we will read that after this. so as of now this is out of the money according to the beginners. so if we talk about Bajaj finance’s last option that is 6100 CE. Are we above 6100? No, we are 103 rupees below 6100 CE so definitely this is definitely a false statement it’s OTM. ok Good enough. I think you have understood
what is In The Money and Out of The Money respectively. Very simple, this was very simple. Right? Good enough.
so Now what we understand is in the money is always costly in comparison with out of the money. And this is deep out of the money Deep means very much. What will be the 5800? If we talk about 5800 here, then what will Bajaj finance 5800 be called? Bajaj finance 5800 will be called deep in the money.
Deep ITM, that is it it too much inside. from Strike price Whenever it is inside it’s in the money and it is outside it’s Out The Money. if it’s true it’s in the money and false Out The Money In the money is costly whereas Out The Money is cheaper. In the money is stable whereas Out The Money is volatile.
In, in the money there are chances that a beginner can still manage their position in Buying whereas in Out of the money it’s very risky there is a chance of disturbance in the account. So there are a lot of things that now we will start learning. ok So let’s go now I have told you. Let’s take an example A very last example which is simple.
So as a simple example we will take Nifty at the end Now I will take one example of SBI. SBI is currently moving at What is the LTP of SBI? tell me? It’s Rs.424. means it is Rs.424. So SBI of 400 CE SBIN 420 CE and SBIN 440CE. So I have opened three of them the rate is coming in a similar way. It has only Rs 6 that is Rs 15 and it has Rs 29.
That means to buying the same item will require 44,000. And to buying this one will just require 23,000. And for buying this one will just require ₹10,000 that that means we are getting it on price with 4 times reduction then it must have some catch. I’ll tell you what the catch is. Now first of all I had to clear out another concept. So guys where is SBI at right now? At 424 okay? Now I’ll bring you back on iPad.
Where is SBI at? SBI is at ₹424. Now You see there is something in between in the money and out of the Money that is At The Money. Why do we call it At The Money so that we can define if you’re going to buy At The Money or In The Money or Out of The Money Gonna Buy or Short There are so many strike prices. Did you see we have gone through to the watch list and there were many? So we don’t talk about all of it. We always talk like In The Money At The Money, Out of The Money, like this. If something is of hundred rupees, here its 100, here it's 120 some stock is at the range of 111 then 110 will be At The Money Ok? So it’ll be called At The Money like this So let’s take an example of SBI.
So Here we choose three. All the SBIN in the month of July above 400 CE is available So Yes, it is 24 above. So this is the true or false statement? This is a true statement. Then this is called what? This is called In The Money. Okay? This is In The Money. So let’s talk about one thing, you can see SBIN 420 CE written.
Is it working above 420? Yes, it is working. ok But it is very near to it. That means it’s very near to it. The next strike price is SBIN 440 CE, let’s leave it for some time although it’ s In The Money. as we talked Are we operating above 440? No, we are Rs.16 below 440.
so Definitely, this statement is false. so what should we call it Out of The Money. This is In The Money. So what's left in the middle is, At The Money. Ok guys I hope it’s clear now which one is called At The Money. The thing which is closest to the strike price is known as this. Okay?
Now let’s cover the Put Option. After this we need to understand about Bank Nifty and Nifty also. Bank Nifty and Nifty and also how do we need to use it, we need to understand that If SBIN. If I write SBIN here whose value is operating on 423, of SBI so 424 sorry, 423 same things. Let’s talk about Put Option.in the same situation.
In the same situation, if we write SBIN 400 PE, SBIN and write SBIN 440 PE and write 420 PE. ok SBIN So let’s start reading now. You guys read first. SBI What SBI? SBIN is below 400.
But this is above Rs 23 So is this statement true or false? So this statement is false and if it is false it will be called Out of The Money. Okay? Is SBI is below 420, No So this is also Out of The Money. but only because this is near to the point this will be At The Money. And Is SBI is below 440, obviously it is 17 below 440, so is it In The Money? we call This is In The Money.
So now you have understood the Put Option also. You have to read and understand that whether it is true or false. If it’s true it’s In The Money and if it is false it's Out of The Money. And if it’s nearby it’s At The Money. Let’s talk this way So here we understand the Put and Call Option of SBI. what to call them I’ll make you understand how we use it. ok
I’ll show you an interesting thing. Whenever we trade in Nifty Bank Nifty, go to Nifty Bank Nifty, here we get an option of July also, 1st July also, 8th July also, 15th, 22 and then then August also. How do we manage so many strike rates? See in equity you can buy it for long-term, ok One-sided. In future you can buy it also and short it two side Now in option there are Call and Put. Call can buy and sell Put and there are multiple strike prices, and multiple expiries.
This is a thing called Option chain is made. In this Option chain you get an entire data of what price belongs to which thing? Alright? Alright? You don’t need to learn all the Option chain in detail right now It’s not necessary right now for a beginner to learn Option Chain to do the analysis. This is very much. This is enough, If you know how to study Price Action properly, if you work on price actual level, support resistance, Basic moving averages and simple stuff it’s more than enough for you. Let’s come back Basically in stock there is monthly expiry that is on the Last Thursday, but in index what happens? There are three index that have been trade in India Nifty, Bank Nifty and finance Nifty. Finance Nifty has just started.
so In all of these three there is a weekly expiry, every week they get expired, every Thursday there is an expiry that means they become 0 they become zero on thursday and then you get a chance to trade. There is a weekly series, 1st July was Thursday 8th July is the coming Thursday, 15th is on Thursday 22nd is also Thursday. 29th, although date shown in Upstox but in Zerodha straightaway says July 29th is the last Thursday, that's why July is directly written. So many people got confused in Zerodha So in which the date isn’t written means it is the last Thursday, Expiry of the monthly series. So this is like that. So what you have to do here is simple.
If you have to do a swing trade then you can do it on monthly, if you want to do swing trade. And if you have to do normal trade, for one or two days then you can do this one. If it’s Thursday and you might just have to hold a day, then on Thursday always trade for the next expiry. As you know from this video, 10 lakhs + + live, trading profit We initiate this trade on Thursday So I I haven’t used that expiry, I used 1st’s expiry. If you watch that video you will get a practical answer on how to use it.
Now you have understood that this a Weekly option series are published. Ok Now let’s get back to a simple SBI example. In front of you in SBI 440 CE Out of The Money, At The Money, In The Money.
what are you going to trade? Basic rule says, whenever you exit. Options are made up of two things In there are two values, there are a lot of values but, if you take out the formulas Option, There are many like Theta, Rho, Gamma, Delta, which is known as multiple Greeks you have to the entire subject. Which you have to read If you want to use basic without reading and skipping it, directly telling you that there are two types of values, Intrinsic values and extrinsic values.
Extrinsic values and Intrinsic values Intrinsic values are only available in in the money. There are no intrinsic values in at the money and out of the money. This data that I am trying to tell you is approximately correct not appropriately correct so don’t judge me on the basis of any of the information. I know all of that
but to make a beginner understand we need to ignore it. No need A lot of big people in India Option traders and traders clearly tell you that there is no need to learn Option Greeks. Optional Greek should be learn by those people who does positional training and long term trading. It is of no use in Intraday or trading of 1-2 days. Those who invest heavy capital and don’t consider chart movement but but they do different option by Greek trading, they are high-level things.
As a beginner you don’t need to know. Coming back to the topic, let’s get back, The difference between In The Money and Out of The Money is just one and that is that in in the money there is an Intrinsic value and value of chart movement. If we are buying on 400 at the strike price of Rs.20 and our stock has gone up to Rs.24 that means that there is approximately an intrinsic value of Rs.20.
Okay? 20, 15 There is an intrinsic value of 15 or Rs.20. The leftover intrinsic value called as theta or time decay. As soon as it reaches near to expiry because of theta decay everyday 50 Paise or one rupees 30 paisa depending on the big formula would decrease. No matter if the price goes up and down
the Extrinsic value from all of these three will reduce. So in out of the money that Rs.6 is just Extrinsic value If it doesn’t reach 440 and if it stops even at 4:39 it will become zero. It won’t happen that your loss will be 10% 20% or 30%, It will just come to 0.
So most of the people don’t understand this they think that they have to buy ITM buy ITM it or not, it doesn’t matter buy if you are beginner when you exit you exit on ITM. Remember it I told a very important thing. A lot of people of confusion, when I trade sometimes I take At The Money or Out of The Money but you have always observed that whenever I exit I’m always In The Money.
So, whenever you exit you have to exit in in the money that you always have to remember. So have taught you all of this to just tell you one thing that whenever you have to buy do it In The Money, if you are beginner and if you are a little experienced buy in At The Money or can do Out of The Money if Zerodha allows you. And after that when you trade and doesn’t exit in in the money then there is a big loss.
So, with this i am going to end today’s video because in one video you have got enough of information and for the rest of information I’ll have to tell you more things. Alright So what we did today That how to read about an Option what is an option, what is the difference between weekly and monthly concept of in the money and out of the money, And what is intrinsic value and extrinsic value, in the money there is intrinsic value and extrinsic value have both but in out of the money only extrinsic value which gets over during expiry. So when we have to trade what strike rate should be buy? you should choose any strike price the target should be that it should be in the money, a little above in the money only Then you can take In The Money or At The Money, Out of The Money If it’s a very big target you can take Out of The Money but it’s very risky. If it’s your expiry date you wait and trade on the next expiry. Or trade on monthly expiry If it is Expiry day, as beginner I am telling you For everything that I am telling you you must realize that I may do something different Because my experience time is a little different than yours but you always remember that I am telling you all of this at the beginner level for your benefit otherwise you won’t be able to manage.
So we revised it as well Extrinsic value, Intrinsic value, ITM, ATM, OTM, told you everything Alright I hope you enjoyed it Now after this Three important things That there are 3 ways to earn money in this Option Buying What is that? Option Buying Which strike Price should we choose This is not very successful always In this win rate is very low Because win size is very high When to do this and why? What is Option Selling? Option selling requires more money. But in Option buying let me show you something interesting before going. If you'll go here to Buy You can buy it for only Rs 44 thousand.
And to buy this it only costs you Rs 23 thousand But if you'll go to Sell, see it cost Rs 2 Lakhs To buy this it only requires Rs 10 thousand but for selling.... if we go for selling it is taking Rs 1 lakh 91 thousand You have to give the future margin but there needs to be some calculation here. why this You have to give the future margin but there needs to be some calculation here. why this what is it so Selling requires more money What is Option Hedging? Just like we saw: strangle, straddle, bull call, spread There are a lot of stuff like that What are those? Who uses them? why do they use them? How much capital do they need? We will uncover all these topics in our up-coming videos. If you like this series, I want to see maximum likes in this video. Maximum shares in the video. And your honest feedback comments,
that whether you're benefiting from it or not? Because it's really important for all the public of India and the retail traders. And for all the people who are new in this field. As this is basic, don't take it as advanced knowledge. This is really basic of these things, and people lack basics and they are doing because of some tippers and everyone telling you to do this and that.
So, I hope you got an idea about all these things. And we'll cover the rest in our next videos. Alright! you got to know today, how Out of the money / In the money works, Why are some of them cheap? what we actually call in the money and out of the money.
what is weekly expiry and what is monthly expiry. Why do we have 3 months of future lots? You got to learn everything in this video today. Now our next video is a mind-blowing video, Why is it a mind-blowing video? How will you use it? if I've 1 lakhs rupees should I go for Option buying or Option selling? Can I go selling, If I've 5 lakhs rupees? What are the benefits of selling? why majority of people go for selling and not buying? When to do buying and selling? What is Hedging? What is a straddle? What is a strangle? How can I earn money by doing non- directional trading? If you want to see that, then wait for our next video And we'll post the next video only when I'll get to know that you are liking these series, When we know that you like this series? If we get a minimum 10 thousand likes on this video, I'll get to know.
Don't worry I'll upload the video even before that but If we'll get 10 thousand likes I'll upload it sooner. So, guys please let me know. Are these series helpful for you? What type of videos do you like on this channel? Please tell us via your comments and by subscribers you can see this is a fastest growing channel, so do subscribe to the channel. and press the bell icon. Alright! So I hope you are enjoying the series and all the new videos are also coming up.
A Lot of strategies and things are coming-up your way Thank you so much guys for staying with us. Bye!
2021-07-06 19:01
