Risks of Options Trading
Options can be powerful but come with risks:
Time Decay (Theta): Options lose value as expiry nears.
High Volatility: Premiums can fluctuate wildly.
Leverage Trap: While leverage amplifies profits, it also magnifies losses.
Unlimited Risk (for Sellers): If you sell options, your risk can be theoretically unlimited.
Complex Strategies: Advanced option strategies require deep knowledge.
How Options Work in Practice
Let’s take a step-by-step breakdown using a Nifty Call Option Example:
Nifty Spot: 20,000
You buy a Call Option with Strike = 20,000, Premium = 150, Expiry = 1 month.
Scenario A: Nifty goes to 20,500
Option intrinsic value = 500 (20,500 - 20,000)
Profit = 500 - 150 = 350 per unit × Lot size (say 50) = ₹17,500 profit.
Scenario B: Nifty falls to 19,800
Option expires worthless.
Loss = Premium × Lot size = ₹150 × 50 = ₹7,500 loss.
This shows both the leverage and limited risk nature of options.
Options can be powerful but come with risks:
Time Decay (Theta): Options lose value as expiry nears.
High Volatility: Premiums can fluctuate wildly.
Leverage Trap: While leverage amplifies profits, it also magnifies losses.
Unlimited Risk (for Sellers): If you sell options, your risk can be theoretically unlimited.
Complex Strategies: Advanced option strategies require deep knowledge.
How Options Work in Practice
Let’s take a step-by-step breakdown using a Nifty Call Option Example:
Nifty Spot: 20,000
You buy a Call Option with Strike = 20,000, Premium = 150, Expiry = 1 month.
Scenario A: Nifty goes to 20,500
Option intrinsic value = 500 (20,500 - 20,000)
Profit = 500 - 150 = 350 per unit × Lot size (say 50) = ₹17,500 profit.
Scenario B: Nifty falls to 19,800
Option expires worthless.
Loss = Premium × Lot size = ₹150 × 50 = ₹7,500 loss.
This shows both the leverage and limited risk nature of options.
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Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
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Hello Everyone! 👋
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Publicações relacionadas
Aviso legal
As informações e publicações não devem ser e não constituem conselhos ou recomendações financeiras, de investimento, de negociação ou de qualquer outro tipo, fornecidas ou endossadas pela TradingView. Leia mais em Termos de uso.