Welcome to our comprehensive guide to options trading with Zerodha. In this article, we will delve into the intricacies of trading options on one of India's leading discount stock brokers. Whether you're a novice looking to dip your toes into the world of options or an experienced trader seeking a deeper understanding, we've got you covered.
Activating the F&O Segment
To kickstart your options trading journey with Zerodha, the first step is to ensure that the Futures and Options (F&O) segment is activated in your trading account. If you didn't opt for F&O trading during your account opening, don't worry; you can enable it by following these simple steps:
- Log in to your Zerodha Console using your Kite login credentials.
- Click on your Client ID in the top-right corner and select 'My Profile.'
- In the left menu, navigate to 'Segment activation.'
- Click on 'Activate segments' and fill in the required information.
Your F&O segment will be enabled within 48 hours, opening the doors to a wide array of trading opportunities.
Trading Options with Zerodha
Zerodha offers a user-friendly platform for buying and selling options, and we'll walk you through the process step by step.
Buying Call/Put Options
Step 1: Log in to Zerodha Kite
Begin by logging in to the Zerodha Kite website or mobile app.
Step 2: Adding Funds
To make trades, you'll need to fund your Zerodha account. Click on 'Funds' in the top menu to access the 'Funds Page' and add funds to your account.
Step 3: Adding Desired Options to Your Market Watch
Before buying a Call/Put options contract, you need to add it to your market watch. Zerodha's 'Universal Search' makes this process simple. Just enter the name of the desired option contract and click the '+' symbol to add it.
Step 4: Placing an Option Buy Order
Once you've added your preferred options to your market watch, you're ready to make a purchase. You can place a buy order by either clicking 'B' on the contract in your market watch or by scrolling up or down and hitting 'B' on your keyboard. Ensure you specify the order type, quantity, and price.
Step 5: Checking Order Execution
It's crucial to verify whether your order has been executed. Access the 'Orders' section in the top menu to view open and executed orders. You may need to wait for the order to execute or modify it if necessary.
Modifying or Canceling an Open Options Order
If you need to make changes to an open options order, you can do so by hovering your mouse over the specific contract you wish to modify or cancel. A blue-colored button will appear next to the contract, allowing you to choose 'modify' or 'cancel' as needed.
Selling Options
Selling an existing Call/Put options contract with Zerodha is straightforward:
- Go to your Market Watch and hover your mouse over the specific contract you want to sell.
- Click 'S' to activate the order form.
- Enter the price and quantity details.
- Check the status of your order in the 'Orders' section.
Understanding Options Contracts
It's essential to comprehend the details of options contracts, such as market depth, quantity available, open interest, and price indicators. This knowledge will empower you to make informed trading decisions.
Option Order Types
Zerodha offers various order types, including:
- Limit (LMT) order
- Market (MKT) order
- Stoploss (SL) order
- Stoploss Market (SL-M) order
Each order type serves a specific purpose, so choose the one that aligns with your trading strategy.
Quantity and Price
Remember that each options contract has a lot size, which determines the number of shares included. Ensure you enter the correct quantity and the premium price for each share.
Stop Loss in Options
Implementing a stop loss order is a prudent risk management strategy. Zerodha allows you to place two types of stop loss orders: SL and SL-M. While SL-M ensures your position is squared off at the market price, SL enables you to set a specific price for the execution.
Brokerage Charges
Zerodha charges a flat fee of Rs 20 per executed order for options trading. It's important to be aware of additional costs, including government taxes, STT, exchange transaction charges, SEBI fees, and GST.
Conclusion
Options trading with Zerodha opens up a world of opportunities for traders. By following the steps outlined in this comprehensive guide, you can confidently navigate the complexities of options trading and make informed decisions. Remember that successful trading requires continuous learning and practice, so keep honing your skills to maximize your trading potential. Happy trading!
