Options Trading Made Easy

Many stock market participants avoid F&O trading because they believe it is too difficult. Whereas few traders are attracted by the returns and begin trading. What both situations have in common is a lack of understanding of the subject, which leads individuals to avoid trading or suffer losses. 

To solve this issue, we have curated a basic options trading course where you will gain an in-depth understanding of all the fundamental concepts and how they can be used as financial instruments for managing risk and gaining substantial returns.

The objective of this course is to help you understand the workings of options contracts and is designed to fully equip you to start your trading journey in equity derivatives.

This course is structured in a way where we will begin with the basics of derivatives. Moving on, we will understand everything we need to know about options contracts, including its terminologies, intrinsic value and time value, pricing, moneyness and factors affecting the option premium, option Greeks, and practical aspects of trading. 

Once we are thorough with the basics, we will explore the various directional, non-directional or neutral, hedging and advanced strategies with the help of a case study. Additionally, we will look at the tax implications of F&O trading.

Please find below the topics covered in the course - Options Trading Made Easy:

Section 1: Introduction to Derivatives

• Basics of Derivatives: We will first delve into the world of financial derivatives. Here, we will gain a deep understanding of the derivatives market with the help of an example of Gold. We will analyse several situations to comprehend the implications for the buyer and seller under this contract. 

Section 2: Basics of Options Contracts

• Introduction to Options: After understanding the workings of a derivative market, we will take a closer look at Options. We will understand the concepts and why they are also known as derivative contact. Moving on, we will gain a thorough understanding of call and put by using examples.
• Options Terminologies: We will first learn about Strike Price with an example of Nifty and RIL and then move on to understand Expiry with an example of TCS. We will understand why strike price and expiry are crucial in derivatives contracts.
• Options Buyers & Sellers: We will then move on to understand the difference between the option buyers and sellers, what the option premium is and who pays the premium to whom. We will then learn the differences between purchasing a share and purchasing a call option, selling a share and purchasing a put option, and selling a share and purchasing a call option.
• Risk, Reward and Payoff: We will look at the risk, reward and payoff for option buyers and sellers with real examples.
• Intrinsic Value and Time Value: In this section, we will explore the concept and calculations of Intrinsic Value and Time Value of call and put. These fundamental principles provide insights into option pricing, profitability, and the factors influencing their value over time, which are essential to traders. 
• Options Pricing: Now we will see how these contracts work, how we can make or lose money in such contracts and what the option premium is. We will then see how it is calculated using the Black Scholes and Binomial models.
• Moneyness of Options & Factors Affecting the Premium: We will now look at the concept of moneyness, such as In The Money (ITM), At The Money (ATM) and Out of The Money (OTM) and learn the factors affecting the premium, including spot price of the underlying, strike price, expiry, dividend, interest rates, historical volatility and implied volatility.
• Option Greeks: Studying the Options Greeks is important because it allows traders to make better profit and risk management decisions by educating them on how this contract act in various market conditions. Here, we will simplify this concept for you, where you will learn the concept and implications of Option Greeks - Delta, Gamma, Theta, Vega and Rho.
• Practical aspects of trading in Options: By now, we have covered most of the basic concepts and are ready to dive into the practical aspects of trading. In this section, we will cover concepts such as what happens when you hold the contract till expiry, whether you can exit the contract before expiry, how is the profit or loss settled, and the margin requirements. 
• Volume, Open Interest and PCR: We will then move on to analyze the Volume and Open Interest and learn how to interpret the Option Chain from the NSE website and StockEdge App.

Section 3: Options Strategies

• Directional Strategies: When we are sure on the underlying movement direction, we use directional strategies. It includes either bullish or bearish strategies as it depends on the trend of the market. Here, we will explore strategies such as Bull Call Spread, Bear Call Spread, Bull Put Spread and Bear Put Spread.
• Non-Directional Strategies: When we can’t predict the direction of the underlying, believing it will be range bound or expected to move significantly, we use non-directional or neutral strategies. In this section, we will look at the Long Strangle strategy, Short Strangle strategy, Long Straddle strategy and Short Straddle strategy.
• Hedging Strategies: We use strategies such as Covered Call, Protective Put, Synthetic Short Call, and Synthetic Long Put to minimize losses or create a hedged position.
• Advanced Strategies: We will also look at Long Strip, Short Strip, Long Strap, Short Strap, Long Butterfly Spread, Short Butterfly Spread and Condor Strategy. 
• Case Study: Moving on, we will analyze these strategies with the help of a case study.
• Resources: We will also learn how to analyze derivatives data using StockEdge and the NSE website.

Section 4: Taxation

Income Tax on F&O Trading: In this section, we will explore the basics of taxation on F&O Trading and determine the tax on F&O turnover.