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What is the Difference Between Demat Account and Brokerage Account?
Demat Account Vs Brokerage Account Let us explore the primary difference between a demat account and a brokerage account along with the pros and cons of each. Demat Account: It is very clear that you are a beginner in the stock market. Let me summarize what is a Demat account. The word 'Demat' standRead more
Demat Account Vs Brokerage Account
Let us explore the primary difference between a demat account and a brokerage account along with the pros and cons of each.
Demat Account:
It is very clear that you are a beginner in the stock market. Let me summarize what is a Demat account.
The word ‘Demat‘ stands for dematerialization, which means converting physical securities into electronic form.
Note: Previously shares were in the form of physical copies not online.
A Demat account provides a facility to hold various types of securities, including stocks, bonds, mutual funds, government securities, and exchange-traded funds (ETFs) online.
When you buy shares in the stock market, these stocks are added to your Demat account in digital format. When you sell stocks, they are debited from your Demat account.
After introducing the Demat accounts, buying and selling shares has become very simple & hassle-free.
Brokerage Account
I think you have a little idea about the Demat account, If you have time and energy, go through the below lines that explain the purpose of the Brokerage account.
We know that the Demat accounts are designed for storing stocks/ securities in electronic format, and brokerage accounts are platforms for executing trades in the market.
When you want to buy or sell stocks, bonds, options, or other securities, you do so through your brokerage account.
Brokerage accounts are provided by brokerage firms like Zerodha, Upstox, 5Paisa, AngelOne, Groww, etc.,
These firms act as intermediaries between investors and the financial markets, facilitating the buying and selling of securities on behalf of their clients.
Difference between Demat & Brokerage Account
I think it is boring to read, but anyway, you came to this line, trust me below lines are more useful than the above.
Purpose of these Accounts:
Demat accounts are primarily used for holding securities in electronic format, whereas brokerage accounts are used for buying and selling securities in the financial markets.
Functionality:
Demat accounts deal with the safekeeping and management of securities, while brokerage accounts involve the execution of trades and provide access to trading platforms and services.
Ownership:
Demat accounts are owned and operated by depository participants (DPs), whereas brokerage accounts are offered by brokerage firms or online trading platforms.
Cost:
Demat accounts may have maintenance charges levied by the depository participant, while brokerage accounts typically charge commissions or fees for executing trades and providing additional services.
See lessIs Trading Better than Job?
The answer is YES and at the same time NO. Let us assume you are running a low-equipped old model car with a maximum speed of 60 KMPH. Trading is like driving a sports car at a speed of 200 KMPH, If you know how to handle a sports car at maximum speed, you will be thrilled and you reach your destinaRead more
The answer is YES and at the same time NO.
Let us assume you are running a low-equipped old model car with a maximum speed of 60 KMPH. Trading is like driving a sports car at a speed of 200 KMPH, If you know how to handle a sports car at maximum speed, you will be thrilled and you reach your destination soon.
At the same time, if you are a fool and drive the sports car at 200 KMPH with your eyes closed or with little negligence, life will be even crazier than you expect.
So, do not enter the stock market without proper knowledge, sufficient money, an alternate income source, and finally without discipline.
There are many YouTube channels and free e-books to learn stock market. Spend some time and effort to understand how it works.
After learning you can practice those strategies on paper trading websites. Here is the list of paper trading websites.
Don’t’s for Beginners in Stock Market
Still confused? don’t worry. Everybody will become successful if they put their heart and soul into what they are doing. Love what you do or do what you love.
See lessHow Does IPO Allotment Process Work?
IPO Allotment Process: Everything You Need to Know The IPO allotment involves a 6-stage process starting from subscription to the final allotment. If you are planning to apply for an upcoming IPO in India, you must have some idea of how the IPO allotment process works: Here is a detailed explanationRead more
IPO Allotment Process: Everything You Need to Know
The IPO allotment involves a 6-stage process starting from subscription to the final allotment.
If you are planning to apply for an upcoming IPO in India, you must have some idea of how the IPO allotment process works:
Here is a detailed explanation of each stage of the IPO allotment process.
Subscription Period:
Before any company goes public, it announces an IPO and sets a subscription period during which investors can apply for shares.
This period usually lasts for a few days (mostly 7-10 days).
IPO Application:
Interested people will submit their application to purchase shares of the company.
During the IPO, applicants submit their applications through their respective brokers or online platforms.
In the application, investors specify the number of shares they wish to buy and at what price.
If you are not aware of how to apply for an IPO in your broker’s account, below guide will help you
How to Apply for an IPO in Zerodha
How to Apply for an IPO in Upstox Account
IPO Allotment:
Once the subscription period ends, the company, along with the investment banks, reviews the applications and determines how many shares will be allotted to each investor.
Allotment decisions are typically based on various factors such as the number of shares available, the demand for the shares, and any allocation criteria set by the company.
Lottery System Allotment:
In cases where the demand for shares exceeds the available shares (oversubscription), a lottery system may be used to allocate shares among investors.
In a lottery system, investors are randomly selected to receive shares.
Refunds:
Applicants who are not allotted any shares are typically refunded the amount they paid at the time of application.
These refunds are usually processed within a few days after completing the allotment process.
Listing:
After the allotment process is completed and shares are allocated to investors, the company lists its shares on the stock exchange for public trading.
Once listed, the shares can be bought and sold by investors on the secondary market.
Check the IPO Allotment Status Here
See lessWho Should not Invest in Mutual Funds?
Who Should Not Invest in Mutual Funds? A thumb rule in investments like mutual funds, and stock markets is that never risk your hard-earned money into stock businesses. Are you getting retired soon? Then follow the lines to understand ‘Who should not invest in mutual funds?’ Mutual fund schemes haveRead more
Who Should Not Invest in Mutual Funds?
A thumb rule in investments like mutual funds, and stock markets is that never risk your hard-earned money into stock businesses. Are you getting retired soon? Then follow the lines to understand ‘Who should not invest in mutual funds?’
Mutual fund schemes have emerged as a simple and effective financial tool for creating wealth over the long term. Among the different kinds of MF schemes, such as equity funds, debt funds, or a mix of them, equity mutual funds are suited for long-term
goals.
Remember it is in the long term, but it is not advisable if you are about to retire.
Best Tool to Beat Inflation: Mutual Funds
Mutual funds are right for those wanting to generate income to beat inflation over the long term. If you can invest in mutual funds for a long term, say 7 to 10 years in a systematic investment plan then there is nothing better than mutual funds.
Over time, your asset value may fluctuate between highs and lows but shall yield good returns in the long run.
Nearing the Retirement Age: Protect your Corpus Fund
You must be mindful and never entertain buying mutual funds when you want to protect your corpus fund.
You will never be advised to purchase a mutual fund while you are due for retirement, or investing in a high-risk profile zone.
In such a condition, you must preserve your capital and try to obtain a fixed-income investment.
Retirees: Play Cautiously
Another option left is to invest in hybrid funds that can help you beat inflation in times of retirement years and fixed-income investments yield low returns and are also subject to taxation.
Make an Investment in RD if the Mutual Fund Doesn’t Interests You:
RD may not produce a high dividend on the investment over the long term, but it is certainly a safer place to run. Let us check with the below example.
In the Recurring Deposit, you will be investing quarterly, half-yearly, or yearly basis. And, in the SIP in equity funds, you may begin to invest every month, an amount of INR 10,000/-.
The expected annual return on SIP equity is 10% and in the RD investment is 7%.
In the case of SIP, the investment value after 30 years will be INR 2.28 crore, and the investment in RD after the same period will become INR 1.22 crore.
Hence, if you are not eager to make a huge money then a recurring deposit can be the best option.
Retirees Can Take a Calculated Risk:
Although you may not want to invest in mutual funds as it incurs huge losses, they can be still minimized by making mutual fund investments in a diversified portfolio at a lower cost.
Diversification is a process that reduces the risk of losing your securities and attaining good returns until you opt for the continuance of the mutual fund.
See lessWho is the Founder of FinnovationZ?
In a broader spectrum, FinnovationZ on the Youtube channel can be looked upon as a voluminous upload on financial education on stock markets in an animated format. The uploaded information contains customized tutorials, fundamentals of mutual funds, book reviews, stock market’s typical case studiesRead more
In a broader spectrum, FinnovationZ on the Youtube channel can be looked upon as a voluminous upload on financial education on stock markets in an animated format.
The uploaded information contains customized tutorials, fundamentals of mutual funds, book reviews, stock market’s typical case studies on bullish/bearish trends.
If you make a thorough search on the said topics you will see 320 videos with 41 million views and the FinnovationZ channel is followed by 1.56M subscribers.
Sample: Stock Market in 17 Minutes?
Stock market in 17 minutes? is the first episode in the stock market crash course dealt with by Prasad and designed by Finnovationz company. The remaining episodes are covered in a similar manner.
The author taught the basics of the stock market and explained the important terms associated with stocks by using practical examples. The entire subject is described by keeping in mind that the learner belongs to a non-finance background.
The author narrates practical examples of successful traders like Warren Buffet’s life story and also compares the awareness of stocks in Indian scenarios.
You will get to know the definition of the capital market and its importance, and further explain the introduction of demat services (electronic).
Why stock splits are essential and how they are applied when the value of a stock is not within the reach of an average investor to purchase.
In 1993, MRF’s share price was INR 11 and it rose to INR 82000 per share in the current scenario and company did not go for a share split, while Eicher motor bike company introduced a share split in the ratio 1:10 which means a share of INR 22190 splits into ten shares of INR 2219.00.
Likewise, Wipro has conducted a stock split twice from 1980 to 2021.
Further, several examples of market capitalization are explained and described as the properties that demark large-cap funds, mid-cap funds, and low-cap funds.
In a similar manner, you can listen to remaining YouTube tutorials and gain knowledge for free, you can also Join Telegram where every important stock issue is mentioned and discussed. You are free to join the finnovationz activities on social media platforms like Facebook, and Twitter.
See lessWhich Stock to Buy Tomorrow for Swing Trading?
Best Swing Trading Stocks for Tomorrow Swing trading is the best sort of trading style adopted by traders and you too can lay hands because you can reap short-term returns, and the duration of trading would last from a few days to a few weeks. When you plan to conduct swing trading you must keep a mRead more
Best Swing Trading Stocks for Tomorrow
Swing trading is the best sort of trading style adopted by traders and you too can lay hands because you can reap short-term returns, and the duration of trading would last from a few days to a few weeks.
When you plan to conduct swing trading you must keep a measure of two important parameters and they are price and volume. When these parameters are applied in swing trading they help you in analyzing the probable swing trading candidates.
You can find the best stocks for swing trading in India, and to name a few, it can stated as
You can trade on the best stocks in India by checking certain parameters that open up the doors to buy or sell your stocks more effectively.
How to Select Stocks for Swing Trading
By following the set procedures you can also define the best-to-perform stocks in India and they are listed below.
Bearing the below-stated points can enable you to decide on the best stocks in the Indian share markets (NSE/BSE).
You can visualize the share market trends on the candlestick charts whether your chosen stocks are taking an upward, downward, or range-bound trend. It will help you gain a better understanding of the market sentiments.
You can consider stocks that exhibit clear-cut trends or consolidation patterns to trade the best stocks and the technical tools that deliver them.
These analytical tools represent price charts, candlestick patterns, and indicators ( moving averages, MACD, RSI).
You can utilize the help of brokerage platforms that present the best stocks by screening on specific parameters like sector performance, price range, volume, or volatility.
Once a specific stock is listed to be the best performer you still need to look into the financials of the stock’s company, earnings, and growth. In addition, you must draw information on the news released by the company in the stock media circles.
You should study the key indicators of the company in the following areas: Price-to-Earning ratio is the relative value of a company’s share. Earning per share tells the efficiency with which the company’s earned revenue is issued to the investors. And, price-to-earnings growth Ratio is the price-to-earnings ratio divided by the growth rate of the earning in a specific period.
See lessWho is the Husband of CA Rachana Ranade?
CA Rachana Ranade Family Details Drawing the media attention to her YouTube posts, Rachana Phadke Ranade is a seasoned chartered accountant professional. Having made a deeper progression into digital media, a profound YouTuber, an entrepreneur. She runs a digital education company where she teachesRead more
CA Rachana Ranade Family Details
Drawing the media attention to her YouTube posts, Rachana Phadke Ranade is a seasoned chartered accountant professional.
Having made a deeper progression into digital media, a profound YouTuber, an entrepreneur.
She runs a digital education company where she teaches stock fundamentals to beginners and the same is extended over YouTube.
CA Rachana Ranade Husband & Children
Born on 26 June 1986, Pune, Maharashtra, India, and the 36 years old Rachana is happily married to Akshay Ranade, a Chartered Accountant, by profession on 11 June 2011.
The couple is blessed with a child, Mr Megh Ranade. Her brother Sri. Rajesh Phadke is also an Indian Business man.
Rachana Ranade Bio/Wiki:
Born in a middle-class family on June 26, 1986, Rachana’s Zodiac Sign is Cancer, believes in the Hindu faith and the nationality of the Indian Republic.
As a resident of Pune, Maharashtra, India, Rachana became the most popular YouTuber by making strides in the field of money and stock markets.
In addition, she delivers her expertise in enhancing business concepts, and marketing techniques for major firms.
Rachana Ranade Educational Profile
Rachana Ranade held an outstanding academic record throughout her career and one can get a brief note of her schooling, college, and CA/PG. Rachna Ranade attended her school at Abhinava Vidyalaya English Medium from 1990 to 2002.
Further, she joined Brihan Maharashtra College of Commerce from 2002 to 2007. Then, Rachana appeared for an examination at the Institute of Chartered Accountants of India in 2008. In 2009, she joined a three-year Master’s degree in business studies that lasted till 2011.
Rachana Ranade’s Digital Social Presence:
To reach her readers, the highly decorated Youtuber, Rachana Ranade utilizes channels existing on the Internet such as Twitter, Instagram, and Facebook.
Readers can get in touch with her twitter account and she is assigned with @ca_rachanaranade an Instagram handle.
She makes the best use of the features awarded on social apps such as Facebook, Twitter, and Instagram. Her accounts on these social platforms manage images, videos on finance related to various stock market topics.
Her blogging account is full of travel information and posts relevant travel photos. Her accounts on different platforms like Instagram account (892k followers), Facebook account (48K followers),and Twitter account ( 176K followers).
Rachana hosted her Youtube channel on March 10, 2009 and is a specialist in providing education on stock markets. Till date, the Youtube channel has subscribers of over and above 4.25 million.
See lessWhat is the Role of SEBI in Stock Market Regulation?
SEBI Plays a Prominent Role in Stock Market Regulations Investors in the Stock Market need protection and also need better development of the stock markets in India. Securities and Exchange Board of India, SEBI since its formation in 1988 has undertaken several activities. The most important are safRead more
SEBI Plays a Prominent Role in Stock Market Regulations
Investors in the Stock Market need protection and also need better development of the stock markets in India. Securities and Exchange Board of India, SEBI since its formation in 1988 has undertaken several activities.
The most important are safeguarding the interests of the investors, maintaining a high degree of transparency, and developing efficiency in securities markets.
Key Functionaries of SEBI:
SEBI is a regulatory authority assigned to securities markets in India.
SEBI authority covers market stakeholders such as listed companies, stock exchanges, investors, advisors, and brokers.
The SEBI conducts its operations through proper regulations thus resulting in transparency, accountability, and fairness in the security markets.
The regulatory authority looks into the activities such as disclosure requirements, market manipulations, inside trading, etc.
Investor Protection Measures:
SEBI performs its best to protect investor interests in security exchanges.
It checks on the disclosure requirements and a comprehensive financial report on the company’s performance. The company should release the Corporate Governance issues and relevant matters.
SEBI lays its quasi-executive powers and maintains strict norms for auditors and credit rating agencies.
SEBI does regulate the mutual funds and portfolio managers. It benchmarks high standards for them to maintain professional competence.
SEBI has taken initiatives in which an investor is educated about their entitled rights and responsibilities. It enables investors to make better investment decisions on information.
SEBI needs to take active participation in various interests of issuers, intermediaries, and investors.
Cooperation between Regulatory Bodies:
Different financial regulatory bodies operate in the Indian stock markets in accordance with the purpose for which they are laid down.
Institutions like the Reserve Bank of India, the Ministry of Corporate Affairs, etc. employ policies and regulations that are in line with the regulatory framework of the established norms.
SEBI operates in association with those regulatory bodies and becomes prominent by benefiting stakeholders.
SEBI has to work closely with other regulatory bodies, such as the Reserve Bank of India and the Ministry of Corporate Affairs. It is to ensure that its policies and regulations are aligned with the broader regulatory framework in the country.
SEBI Key Role in Brief:
SEBI Plays a Key Role in Benefiting Stakeholders like investors, stock brokers, financial institutions, etc.
SEBI is a regulatory authority, that strengthens the operations in securities exchanges.
SEBI takes challenging features like educating the investors by promoting all essential courses.
SEBI aims to maintain total transparency, operate efficiently, and maintain a resilient security market in India.
SEBI Board Constitutes
SEBI’s board is held by Ms. Madhabi Puri Buch, Chairperson, and the other members in the category of whole-time members, and part-time members.
Currently, besides the chairperson, both the whole-time/part-time members are selected under section 4(1)(d) of the SEBI Act, 1992.
The chairman of the SEBI is nominated by the Union Government of India, two members are officers from the Ministry of Finance, and one member is from the Reserve Bank of India.
In fact, the Union Government of India nominates five members and of them, three members are whole-time and remaining hold part-time posts.
SEBI Location:
Headquartered in the district of Bandra Kurla Complex in Mumbai, and holds regional offices in New Delhi (Northern), Kolkata (Eastern), Chennai (Southern), and Western (Ahmedabad).
Further, the SEBI has offices located in Jaipur and Bangalore, and in the financial year 2013-14, Gauhati, Bhubaneshwar, Patna, Kochi, and Chandigarh were set up.
See lessDebt Free Penny Stocks Below 1 Rupee
Top Penny Stocks Under Rs 1 - Low Risk, High Reward The below-listed stocks are absolutely debt-free and multi-bagger penny stocks. The following stocks are as per my fundamental analysis. I am not suggesting you to invest blindly, do your own research before investing. 1. Coral India Finance and HoRead more
Top Penny Stocks Under Rs 1 – Low Risk, High Reward
The below-listed stocks are absolutely debt-free and multi-bagger penny stocks. The following stocks are as per my fundamental analysis.
I am not suggesting you to invest blindly, do your own research before investing.
1. Coral India Finance and Housing Ltd.
Coral India Finance and Housing Ltd. – a Debt-Free Multibagger Penny Stock
Coral India Finance & Housing Ltd. (Real Estate Industry) is listed under the penny stock category and its performance makes it a multi-bagger. The company belongs to the small-cap, and the market capitalization is INR 143 crore.
The company holds a record of having a debt-to-equity ratio equal to zero for five years which indicates the company is completely debt-free.
When compared with the previous trading sessions, on July 21, the share price is up by 0.14 percent and is at INR 35.65 per share.
In the financial year, FY23, the company had impressive growth in ROE (12.4 %), and ROCE (14.0 %) respectively.
In FY 22-23, the revenue growth was 7 percent when compared with FY 21-22. The company’s year-on-year growth was at INR 29 crore.
The net profit made significant progress from INR 17 crore in FY 21-22 to INR 18 crore in FY 22-23.
With such impressive performances, you should miss out on participating in trading, Coral India Finance & Housing Ltd, multi-bagger penny stocks.
2. Oswal Agro Mills Ltd.
Oswal Agro Mills Ltd – A Debt-Free Multibagger Penny Stock
Oswal Agro Mills Ltd. is a small-cap company with a market capitalization of INR 386 and was listed under the penny stocks.
The company is immersed in conducting trades and developing real estate, does item trading, and invests its excess cash by issuing loans in the form of inter-corporate deposits. The company shares trade at INR 28.80 per share.
In contrast to the previous trading session, the company share went down by 0.52 percent to INR 28.80.
The important parameters like Return on Investment (ROI) and Return on Capital Employment (ROCE) touched 2.86 percent and 1.93 percent respectively.
The company made a good sale, it spiraled by 145 percent to 27 crore in FY 22-23 and the net profit rose by 350 percent to 9 crore.
With such a progressive growth in the performance of the stocks, you can think it about buying these penny stocks.
3. Jullundur Motor Agency Delhi Ltd
Jullundur Motor Agency, Delhi Ltd is one of the leading vehicle spare parts distribution firms, the company has attained expertise in trading and entertains the distribution channel of vehicle parts, accessories, and gasoline supplies.
On July 21, 2023, the price per share was INR 71.80 and in fact, went down by 1.31 percent from the previous session.
The significant elements that infuse you to opt for Jullundur Motor Agency shares are the following upswing figures.
First, the company is a completely debt-free multi-bagger penny stock that represents a loan-free firm. Something you can think of to purchase it.
Second, in FY23, the company’s ROE/ROCE was 13.21/17.65 and the revenue rose by 15 percent to 503 crore in reference to the previous year FY22. Meanwhile, the net profit weighed by 12 percent to INR 27 crore.
Features of Penny Stocks:
Penny stocks begin with a single-digit low price, less than INR 10 and with this feature made available, you can buy more penny shares with a small capital investment.
Penny stocks yield huge capital appreciation on selecting the companies that hold good market fundamentals over the long term.
Penny stocks are high-risk investments and you are advised to approach them with caution. Hence, experts suggest you do detailed research before making an investment in penny stocks.
Providing suggestions for purchase of the upcoming well-to-do penny stocks in the year ahead, 2023-24 for you.
Best Companies Where You CAN Buy Stocks in July 2023
List of the best penny stocks whose stock price is less than 1 Rupee
List of the Penny Stocks Below INR 1 @NSE as of March 30, 2023 (Forbes Official Website)
List of the Penny stocks below INR 1 @BSE as of March 30, 2023 (Courtesy: Forbes Official Website)
Benefit in Investing in Penny Stocks Below INR 1
You shall benefit from penny stocks below INR 1 as these stocks get multiplied quite easily.
If you happen to purchase 100 stocks for 0.5 percent per share and the sector projects a positive slide by 90 percent then the investment value reaches INR 4500 from INR 50.
And, equally a negative slide is a fall in the share price can cause a huge loss. Hence, you need to get prepared for a calculated risk.
Important Observations:
The stock markets rallied very high during covid-19 and strangely several smallcap, midcap, and largecap peers had spiraled. However, experts say that you must be calculative and be ready to take risks.
The stock markets are highly volatile, before considering a penny stock you must analyze the chosen company’s revenue model. In addition, you check for the sustainability of the business operations.
See lessWhy is Option Selling Better than Option Buying?
Why selling puts is better than buying calls? You can understand why option selling is better than option buying only after you realize the process involved in buying and selling of underlying assets and the level of risk assessment, and the profitability one can dream of. With my current experienceRead more
Why selling puts is better than buying calls?
You can understand why option selling is better than option buying only after you realize the process involved in buying and selling of underlying assets and the level of risk assessment, and the profitability one can dream of.
With my current experience in derivatives, let me evaluate those facts that shall determine option selling to reap more profitability than option buying.
Let me compare various factors between buy options and sell options before I arrive at the conclusion that Option Selling is the Right Choice for Profitability.
Buy Options at the Start of Expiry/End of Expiry: Impact on premiums
Start of Expiry:
Whenever I trade option calls in a monthly expiry segment, I could make considerable profit because change in price is observed due to Delta.
The ideal time for the decay in premium is quite less, just 5 to 6 days before the start of expiry.
End of Expiry:
Whenever I reach the end of the expiry, theta decay works in opposite direction and only if you identify strong directional move (highly bullish drive), the option shall prevent a decrease in option premium and hence it is not an ideal period to execute buy option.
Sell Options : Impact of Decay on Premiums
Start of Expiry:
Sell options never benefited me in a monthly expiry, and the negative side movement did affect my underlying assets.
I held options for about six days at the start of the expiry and time decay did cause a fall in premium but the main change in price was an outcome of Delta, that occurs in a directional move.
In addition, in the given scenario, the market should be a range bound, to make an option selling.
End of Expiry:
When I executed sell options close to the expiry, theta decay worked for me and my stocks could experience a drastic decrease in option premium in respect to time.
The situation is highly conducive for selling and until a strong directional move against my seller position came, I always incurred a good profiting.
Not just for me, even you can benefit from fast decay in price as your stocks head near to expiry.
Employing Margins for Option buying and Selling:
For option buying, the margin is the premium of the NIFTY option and if the price per share is 100/- and the lot size is 75, then the total premium shall be 75X100 equals 7500/- which is reasonably low.
For Options Selling the margins will be high as 1.2 lakh to sell a lot of NIFTY and hold it. In order to reduce the margin, you can hedge positions with future On the Money option buying as a hedge.
Therefore if you sell 10900 calls and buy 11100 calls then the margin shall be reduced by half. Sometimes I prefer to pledge long term holdings, bonds as a source of collateral.
Risks and Probability of Profits : Options Buying/Selling
In the option buying, the profits are unlimited and your loss is limited. I did obtain the highest profitability when I purchased in the money option and at the money option gave a profitability of 50 percent.
In the option selling the risk of your underlying assets are unlimited and the profitability depends on what option I execute.
When I did sell the Money (OTM) it gave 99 percent of probable success, and at the Money option it gave 50 percent of probable success.
Sellers Must Execute Option Adjustment:
In a realistic situation, 80 percent of options buying expire and show unworthiness.
In case of options selling, 70 percent of the selling options generate small premiums that reflect profitability.
But, if incidentally, one trade goes negative you may end up in losing more than the earned profits.
The payoff can be like +12,+16,+20,+10, -200 and hence as a seller I will be alert at adjusting options. The margin in Option selling is high and it does encounter unlimited risk.
See less