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Home/ Questions/Q 566
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Abhishek
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AbhishekProfessional
Asked: October 19, 20212021-10-19T09:59:14+05:30 2021-10-19T09:59:14+05:30In: Derivatives

What is the Minimum Capital Required for Options Trading?

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Can I trade in Options with less capital?

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    1. Phani Raj Contributor
      2023-09-13T22:00:37+05:30Added an answer on September 13, 2023 at 10:00 pm

      How to Trade in Options with Small Capital

      When you have asked the minimum capital investment for option trading then you must know the working pattern of option call and option put.

      In other words, the occurrence of the risk and the loss when you are executing option buying or option selling. In option trades, you will find two factors involved whether you buy or sell stocks and they are strike price and expiry.

      Another important factor that is applied is the premium attached to the call option or put option. Premium is the minimum amount charged by the stock exchange and is calculated by a simple formula.

      Example: Nifty

      Consider a scenario, when the spot price of the share is 17550 and you want to buy shares of a lot size at a strike price of 17500.

      Nifty (Lot size = 50) and hence if you want to buy a single lot and the premium per unit-share is 60/- then total premium will be (premium per unit-share * lot size) = (50 x 60) = 3000/-

      Example: Bank Nifty

      For a spot price of 17550 you may wish to purchase bank nifty shares at a strike price of 17500. For the standard lot size is 25 shares and if the premium is 1/- per unit-share then the premium per lot size will be (1/- * 25) = 25/- per lot.

      Important Rule:

      You ( buyer) have a right on the underlying asset of the option seller and you can choose to buy when your desired strike price is reached or exit for any other reason like the chosen strike price hasn’t reached until the date of expiry.

      But, the seller is obligated to sell the  underlying asset and maintain the position until the expiry.

      Based on the above statement, if you (buyer) strikes the deal then your paid premium of 3000/- in case of Nifty or 25/- for Bank Nifty shall be transferred to the option seller’s account.

      Premium Charges : Type of Options

      Premiums are charged depending on the type of options. If you are engaging out of the money option then you shall be asked to pay the least amount of premium, and at the money option you shall be charged with a premium that is more than out of Money and less than in the money option.

      If you have selected the money option you shall be paying the highest premium.

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    2. Nilesh Jaiswal Contributor
      2021-10-26T10:04:40+05:30Added an answer on October 26, 2021 at 10:04 am

      Most of the retail traders choose option buying thinking option selling requires high margins. Eventually most of the time they lose the entire capital with in no time.

      Option selling doesn’t require heavy margins if you hedge the positions properly. Even you can sell options with a minimum capital of 30k to 40k.

      If you are an option buyer, the minimum capital required is premium value x lot size. As I said the minimum capital required to sell the options is 30k if you hedge the position.

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