Options Trading & the Best Five Stock Picks:
Top 5 Best Stocks for Options Trading 2024: In the stock market, you can buy stocks and hold them for a long term to make financial gains, and it is the most common kind of investment strategy.
Technically, the approach is referred to as a buy-and-hold strategy and it facilitates financial growth in the long term. Traders and investors have adopted several techniques that allow them to seek financial gains in the short term.
Top 5 Best Stocks for Options Trading 2024
Across different portfolios, you can find the best stocks for options trading and they do belong to industries like Conglomerate, Tyre Manufacturing, Automotive, Banks, etc.
1. Adani Group
Adani Enterprises Limited is a holding company that operates in different spheres. They do integrate businesses such as infrastructure, mining operations, coal, ports, oil and gas explorations, power generation and transmission, edible oil, and agro commodities.
In addition, you can integrate resource management, end-to-end procurement, and logistics, and have a firm hold in solar manufacturing, airport, etc.
2. Apollo Tyres
It is India’s largest tyre manufacturing company that operates various parts such as Automobile tyres, tubes, and automobile flaps segments.
The company has establishments in Europe, APMEA, and others. APMEA segment conducts manufacturing and sales operations in India, UAE, Thailand, Malaysia, and South Africa.
The Europe segment conducts manufacturing and sales operations through various entities in Europe. The company has sales operations in the USA and corporate entities.
3. Bajaj Auto
The company is headquartered in India and it is the manufacturer of motorcycle, three/four wheeler vehicles. Due to its excellent performance, it is a well-preferred stock.
The company is involved in a chain of activities, motorcycle manufacturing, three and four-wheeler vehicles, and spare parts.
4. Dalmia Bharat
Dalmia Bharat is an Indian-based cement manufacturing company that engages in manufacturing and selling of cement and the company is involved in refractory products.
There are several cement divisions that participate in the production of different cement grades and other products that fall in the line.
5. HDFC Bank
It is a private sector bank that covers commercial/investing banking operations and also involves in transactional/branch banking in retail operations.
The bank is engaged in the account of trading in foreign exchange and derivative contracts and net interest earnings from the Banks Investment Portfolio, money market borrowing, and gains/losses on investment operations.
Most Active Options: What are the Best Options to Trade
Individual investors and traders opt for stock trading on a full-time basis and sometimes adopt the culture of making quick money out of short-term fluctuations during trading sessions.
In a way, you can consider financial instruments that are actively traded. Here, options trading comes to play when you plan to earn more than usual.
Let’s assume that you are a trader and have been involved in buying and selling contracts on the stock markets of the Bombay Stock Exchange/National Stock Exchange and by doing so, you will be termed as an options trader. Hence, your activity shall involve buying options contracts and selling those at a higher price.
As an options trader, you can speculate the price movement of individual stocks, indices, foreign currencies, and commodities and obtain potential profits by placing a range of different orders. You as an options trader shall tend to short positions on a specific stock.
For instance, if you speculate that a stock in a day shall go down in value, then you shall take a short position by selling that stock and then wait to buy back at a lower price soon.
You will prefer trading options when compared to stock trading when you understand the multiple choice in trading and quick money making in a short while.
Options Contracts: Stock Exchange’s Operational Flexibility
Options contracts are flexible to operate in the stock exchange, and when you opt to execute option contracts you can act according to the situation. For instance, you can buy your chosen asset when its value is up or even buy if the asset value goes down.
What is Option Buying?
Here, you can buy options contracts by deciding what stock to buy, and how many: After that, you can place a ‘buy to open order’ with your stock broker.
Once a stock is bought at a fixed price, you can decide to sell the stock if its value goes up or hold them, which is dependent on your choice.
What is Selling & Writing Options?
You may have already bought some options contracts previously, and now intend to either realize the profits or cut down the losses, then you can sell those contracts by placing a ‘sell to close order.’
Writing Options:
You can also adopt a new format in selling, you can sell options, by opening a short position and conducting short selling them. To do so, you will have to write new contracts for selling your stocks in the process and hence be termed as writing options.
It is done so, by using the sell-to-open order, and the exchange shall make the payment as and when such an order is placed.
In case, the value of the stock goes up you shall be liable for the potential loss and if no change is observed by the time the options expire then the remitted payments on the writing options shall remain untouched.
Exercising Options
You may have bought contracts and for some reason plan to exercise your options like buy or sell the underlying security.
Options Spreads
spreads are considered powerful tools in trading in which you make buying options on a specific stock and later write contracts on the same stock.
Evidently, there are two reasons you will go for options spreads. First is to limit the risk of taking the positions, and second is to reduce it to the required financial outlay by utilizing the position.
Facts to Consider When You Choose Stocks for Options Trading:
Wide Spectrum of Maturities:
You can choose options markets and follow trading instruments that fit your options. In the markets, there are different contracts such as short straddles, iron condors, and calendar spreads. Depending upon your requirement you can select your contract.
Volatility:
Volatility is high in options trading, and investors can take advantage of unexpected events like geopolitical, and economic fluctuations, that cause rise and fall in the stocks before the completion of the expiry date.
Intrinsic Value;
In an Options contract, the intrinsic value is determined by the future cash flows, and the value is determined by the options payoff chart.