Introduction
Before we look at how to do bank nifty intraday options trading, let us revise the basics once.
Intraday trading: In Intraday trading, you buy and sell stocks within a day. Intraday trading involves the squaring off of all positions before the close of the market. Stocks are bought not as a form of investment, but as a mode of making profits by utilising the movement of the stock index. Although it is a bit risky, intraday trading is a quick way of making a profit from the stock market.
Options: Options give you the right to buy or sell a share on or before a predetermined date. As a seller, it becomes your obligation to follow the terms of the transaction. The terms will be to either buy or sell, based on if the buyer decides to make use of their option before the date of expiry.
Bank Nifty: Bank Nifty is a group that comprises a group of stocks from the banking area that is mostly liquid and largely capitalised. The selected stocks are then traded on the National Stock Exchange. The importance of Bank Nifty lies in the fact that it provides investors with a benchmark for the market performance of the Indian banking sector.
Trading nifty or stock options in intraday trading are possible. Most traders open a position at the beginning of a day, and close it near the end of the day.
What is nifty?
A good understanding of how the stock market works is incomplete without knowing about NSE and BSE. These are the most essential pillars that support the Indian stock market and keep it functional.
BSE is the Bombay Stock Exchange and NSE is the National Stock Exchange. Each of these stock exchanges has introduced their own stock index. The stock index of BSE, which is the oldest stock exchange of our country, is Sensex. The major stock exchange that NSE introduced is called Nifty.
The term ‘Nifty’ is basically an amalgamation of two words – National and Fifty. Nifty is the list of 50 of the most highly traded stocks, as taken from all sectors. Nifty is the list of all the top stocks of NSE. So, if we say that Nifty is going up, it means that all the major stocks of NSE, irrespective of the sector they belong to, are going up. It is through BSE and NSE that most of the stock trading done in our country. So, that goes to show how important the Nifty is.
The Nifty list comprises 50 major companies that span 24 sectors. The performance of the best stocks from various sectors is taken into consideration while computing Nifty. Nifty is used as a benchmark by different mutual funds. How the mutual fund performs is mapped against how the Nifty performs.
The NSE also offers the choice to trade in futures and options which base Nifty as their underlying index. The calculation of Nifty is done using the method of market capitalization-weighted Index. Based on this formula, each company is assigned a weight based on its size. The bigger the size of the company, larger is its weightage.
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How to invest in Nifty?
As we understand now, the Nifty is a benchmark of the Indian stock market index.Nifty comprises of around 50% of NSE’s complete trade stock. It is an indicator of the performance of NSE as a whole, and by extension, the Indian economy too. If Nifty is going upwards, it signifies that the whole market is moving upwards.
Investing in NSE is not the same as making an investment in Nifty. If you invest in the Nifty index, it gives you the opportunity to enjoy the growth and reap benefits from the entire bunch of 50 stocks. There are numerous ways in which you can invest in Nifty-
1. Spot Trading- You can buy the Nifty script, which is the most simple and straightforward way of investing in Nifty. This is the equivalent of buying the equity shares of various listed companies. Once you become an owner of the stock, you can reap the benefits from various price movements of the index, which result in capital gains.
2. Derivative Trading- Financial contracts that obtain their value from an asset that is underlying are called derivatives. These assets could be anything- indices, stocks, currencies or commodities. The parties involved agree on a future date to settle their contract. Profit is made by speculating on the value the underlying asset will attain in the future. To trade directly in the Nifty index two kinds of derivatives are available- futures and options.
- Nifty Futures:In a future contract, the buyer and seller agree to buy or sell the nifty contract on a future date. During the period of the contract, you can sell it and make a profit if you see that the price has gone up. If the price goes down, you can wait it out till the date of settlement.
- Nifty Options: In a contract of this type, the buyer and seller agree upon buying and selling the Nifty stock in the future, at a price they decide upon in the present. The buyer of this contract pays a sum as premium and obtains legal rights to buy or sell the Nifty share in the future. But, this is a right, and not a compulsion, so, the buyer can choose to not take action if the price is not favourable to him.
3. Index Funds- Index funds are a kind of mutual fund whose portfolio is designed to increase market exposure. This is done by creating a portfolio to match the parts of market index in such a fashion that it offers a wider exposure in the market. Such funds also invest in Nifty, amongst other indices.
The increase in popularity of the Nifty index in the last few years has attracted a variety of investors from retail, institutional and foreign areas. These investors invest in Nifty through index funds or directly. These factors make Nifty an attractive option if you are searching for a new avenue of investment.
Trading in stock options intraday
You can trade nifty or stock options on an intraday basis. In this, a trader is required to open a position at the beginning of the day and close it before the market day ends. The procedure you need to follow to carry out intraday trade is similar to the process for trading in options. You should watch out for the volume and fluctuations in the price of the stock.
Trading volume- Volume basically denotes the total number of traders who are buying and selling the share over a given duration of time, generally a day. A high volume of the share means that it is more active. The data that denotes the volume of a specific share is easily available. It is displayed online on your trading screen. Almost all financial sites offer information regarding volume of shares. The stock you choose should have enough volume so that you have the freedom to sell it off with ease whenever you want.
Price fluctuation- It is impractical to expect huge fluctuations in a share price during a day. But, there are stocks whose prices waver enough for you to make a profit if you invest in them. So, you should choose a share whose price fluctuates enough to enable you to make a profit within a day.
Trading in stock options on an intraday basis is what a majority of retail traders do. Options are volatile, so if you sense an opportunity to make an intraday trade, you should grab it. Short term traders depend on the price shifts in intraday shares and other technical charts to figure out the best moment to enter or exit a trade. Trading strategies are implemented on the basis of this analysis and they exploit the price fluctuations that are short term.
Strategies for intraday trading are used widely in the trade of options too. The prices of options do not change as rapidly as the prices of underlying stocks. So, what traders do is they keep an eye on intraday price fluctuations instead. This helps them figure out periods when the price of the option is not in sync with the price of the stock. This is when they make their move.
FAQs
You must pick a point where the first two candles are either both bullish or both bearish. If your first two candles are bullish, you must place the buy order at the high of the second candle. Once this is triggered, the stop loss order must be set at the low of that same candle.
What is the best strategy for Banknifty options trading? ›
A bear call spread is a trading strategy that you can use when the Bank Nifty index is showing mildly bearish sentiments. In this case, you sell an In The Money (ITM) call option and purchase an OTM call option in order to hedge against unexpected price rises.
How many lots can we buy in Banknifty options intraday? ›
NEW DELHI: In a bid to boost retail participation in the derivative segment, the National Stock Exchange (NSE) has reduced the market lot size for Nifty Bank futures and options to 15 from 25. The new rule is applicable from the beginning of July 2023 contracts.
Can we buy Nifty options in intraday? ›
An investor can do intraday option trading in both NIFTY as well as bank NIFTY. A trader needs to open a position at the beginning of the day and close it before the end of the market day. The process you need to follow to fulfil an intraday trade is similar to intraday options trading.
Which time frame is best for Bank Nifty option trading? ›
Hence, this makes the time frame between 9:30 am to 10:30 am the ideal time to make trades. Intraday trading in the first few hours of the market opening has many benefits: – The first hour is usually the most volatile, providing ample opportunity to make the best trades of the day.
What is the best time for intraday trading in Bank Nifty? ›
In India, some experts consider the best time frame for intraday trading to be from 9:30 AM to 10:30 AM and from 2:30 PM to 3:15 PM.
Which is no 1 option trading strategy? ›
Straddle is considered one of the best Option Trading Strategies for Indian Market. A Long Straddle is possibly one of the easiest market-neutral trading strategies to execute. The direction of the market's movement after it has been applied has no bearing on profit and loss.
What is the trick for option trading? ›
Understand the Leverage Well
You can buy and sell options with relatively lower risk because you do not need to actually own the stock. Thus, by putting a smaller amount (option premium)- you get exposure to a significantly higher contract exposure. This is known as leverage.
Who is best bank nifty option tips provider? ›
About Shyam Advisory® as Best Bank Nifty Tips Provider
We are perfectly capable to work with investors, traders, and intermediaries. Our motto is to preserve the capital of the client first and then invest the money to gain profit.
Can I buy 75000 quantity of Nifty options in a single order? ›
That is you cannot buy or sell Nifty Futures more than 1,800 contracts in a single order.
After the June 2023 expiry, the Bank Nifty long-term options contracts (where the expiry is greater than 3 months) will be revised from the current lot size of 25 Qty to 15 Qty.
How much is 1 lot in options trading? ›
The lot size for NIFTY50 is 50 shares. So, traders can only buy it in the multiple of 50 only. The value of the options contract in the product of the number of units and price of each. So, if NYFTY50 options' price is 7000 and one buys a lot size of 100.
What is the no loss strategy of Bank nifty? ›
No loss option strategy : “in this strategy, You have to write extreme in the money call and put options at the same time and hold them till expiry. This strategy always pays 10-20% average return on capital”
Can we hold Banknifty options for 2 days? ›
BANKNIFTY futures contracts have a maximum of 3-month trading cycle - the near month (one), the next month (two) and the far month (three). A new contract is introduced on the trading day following the expiry of the near month contract. BANKNIFTY futures contracts expire on the last Thursday of the expiry month.
How much is one lot of Bank nifty? ›
The market lot size for Nifty Bank futures and options has been reduced to 15 from 25, effective from the beginning of July 2023 contracts.
What is bank Nifty 2pm strategy? ›
Buy when day high is crossed and Short when day low is crossed, exit at 3:20 PM or when stop loss is hit. Place SL-M orders for both Buy(day high as entry ) & Sell (day low as entry) at 2 PM and relax.
Which is better for options Nifty or Banknifty? ›
The bank nifty has a beta of 1.2. Beta measures the volatility of any stock or index. This value is compared to the nifty. A beta value of 1.2 shows that the bank nifty will always move ahead of the nifty.
Can I sell bank Nifty options same day? ›
You can trade nifty or stock options on an intraday basis. In this, a trader is required to open a position at the beginning of the day and close it before the market day ends. The procedure you need to follow to carry out intraday trade is similar to the process for trading in options.
Which is the best indicator for intraday trading? ›
Some best indicators for intraday include relative strength index (RSI), moving averages, stochastic oscillator, Bollinger Bands and volume. Moving averages help traders identify trends and potential reversals, while RSI and stochastic oscillators indicate overbought or oversold conditions.
Which chart is best for intraday trading? ›
Tick charts are one of the best reference sources for intraday trading. When the trading activity is high, the bar is formed every minute. In a high volume period, a tick chart offers deep insights in contrast to any other chart.
Many experts suggest that 10.15 AM to 2.30 PM is the right time to conduct intraday trading. Morning volatility usually tends to subside by 10.00 to 10.15 AM, making it the perfect time to place intraday trades.
What is safest option strategy? ›
Two of the safest options strategies are selling covered calls and selling cash-covered puts.
Who is the most successful options trader? ›
1. Paul Tudor Jones (1954–Present) The founder of Tudor Investment Corporation, a $11.2 billion hedge fund, Paul Tudor Jones made his fortune shorting the 1987 stock market crash.
What are the 4 option strategies? ›
Some basic strategies using options, however, can help a novice investor protect their downside and hedge market risk. Here we look at four such strategies: long calls, long puts, covered calls, protective puts, and straddles.
What are the four biggest mistakes in option trading? ›
The four are: 1) relying solely on market timing to trade options; 2) buying only out-of-the-money options; 3) using strategies that are too complex; and 4) casting too wide of a net.
What is the 1 rule about option trading? ›
The 1% rule is the simple rule-of-thumb answer that traders can use to adequately size their positions. Simply put, in any given position, you cannot risk more than 1% of your total account value.
Can I become rich by options trading? ›
Can Options Trading Make You Wealthy? Yes, options trading can make you a lot of money — if you understand how it works, invest smart and maybe have a little luck. You can also lose money trading options, so make sure you do your research before you get started. There are two primary types of options: calls and puts.
Which gives more profit nifty or Banknifty? ›
Looking into constituents, Nifty tracks the overall market, while Bank Nifty only looks at the banking sector. For those looking for making bigger profits, trading in bank nifty is more rewarding as it is more volatile and can result in bigger rewards (and obviously bigger risks too).
How to catch bank nifty movement? ›
Technical factors: Derivative Indicator
- High Call and Put option OI (Open Interest) of the index: Positional and short term.
- High Call and Put option OI of HDFC Bank, ICICI Bank, KOTAK Bank, SBI and Axis Bank.
- Index Future OI and Price movement on weekly and monthly data: Long Buildup, Short Buildup, and Short Covering.
Rakesh Jhunjhunwala –Rakesh Jhunjhunwala is popularly known as Share Market King of India.
One option is called a contract, and each contract represents 100 shares of the underlying stock. Exchanges quote options prices in terms of the per-share price, not the total price you must pay to own the contract.
How much margin required for Bank Nifty option buying? ›
Pay 20% upfront margin of the transaction value to trade in cash market segment. Investors may please refer to the Exchange's Frequently Asked Questions (FAQs) issued vide notice no.
How many options trades can I make per day? ›
You're generally limited to no more than three day trades in a five-trading-day period, unless you have at least $25,000 of equity in your account at the end of the previous day.
Is intraday possible in options trading? ›
Trading intraday options can be a great way to benefit from short-term market fluctuations and make quick money. Before you dive headfirst into the fast-paced world of intraday options, it's important to have a sound strategy with an understanding of risks and rewards.
Is Bank Nifty option trading profitable? ›
Bank Nifty is the darling of Options Traders as it has the potential to make more profits. However, the risk involved is also higher.
How much money required for Bank Nifty intraday trading? ›
The value of the futures contracts on BANKNIFTY may not be less than Rs. 5 lakhs at the time of introduction.
Can we short sell Bank Nifty options? ›
Under the exchange rules, short delivery goes to auction and the losses can be as high as 10-15% which will have to be borne by you. The big advantage of selling in futures is that you can not only sell stocks but you can also sell indices like the Nifty and Bank Nifty.
