ZOZTRADE

Basics of NSE Option Trading

Options trading is a type of derivatives trading that allows traders to take positions in the market with limited risk and potentially unlimited profit. NSE (National Stock Exchange) offers options trading for both stocks and indices, including the popular **BankNIFTY** index.

Key Terms in Options Trading

• Strike Price: The predetermined price at which an option can be exercised.
• Premium: The cost of buying an option.
• Lot Size: BankNIFTY options are traded in fixed lot sizes, usually 15 or 25.
• Expiry: Weekly and monthly expiry cycles for options.
• Intrinsic Value: The real value of an option.
• Time Decay: As an option nears expiry, its value decreases if the price doesn't move favorably.

Important Factors in Option Trading

Before entering options trading, consider these factors:

• Option Greeks: Understanding **Delta, Gamma, Theta, Vega** helps traders predict price movements.
• Liquidity: High open interest ensures smoother trade execution.
• Implied Volatility (IV): Affects option pricing; higher IV means costlier options.
• Risk Management: Using stop-loss, position sizing, and hedging strategies to limit losses.
• News & Events: Economic events, corporate earnings, and government policies impact option prices.