I have been a lot busy to write research articles on Nifty future and nifty options, but today I am sharing why should a trader trade in nifty futures and options. About 75% of the total turnover in NSE F&O market comes because of Nifty (that’s a huge volume). Nifty futures and options has highly liquid contracts and it is less volatile compared to stocks, also trading in Nifty futures and Nifty options can benefit you in several ways. Here are the few advantages that will surely convince you to trade in Nifty:
1. Lower spreads: The spread means bid-ask difference, it is the price difference in the quote of buyers and sellers which is important for traders who uses scalping trade strategies. Lower the difference the better will be trading experience. As Nifty futures and options are popularly traded, the bid-ask difference are relatively better, there by giving you better prices to buy or sell.
2. Well diversified: Nifty 50 index is well diversified, it consists of 50 stocks which represents more than 10 different sectors. This diversification provides stability and therefore protects you when your view goes wrong. Also this diversification gives us the bigger picture of the market in near and longer term.
3. Less margins: For Nifty futures the margin required to take position is just 8% as compared to stock futures where on an average 13% of margin is required to take positions in it. Some brokers offers to trade nifty future with just 10,500 for intraday positions.
4. Highly liquid options: Due to high liquidity in Nifty options it becomes easy to research and take a trading call by studying various Out-of-the money and In-the-money strike price and simultaneously hedging against your long or short positions with it becomes very easy.
5. Hedge against stock portfolio: As Nifty being a benchmark index and most of the stocks reflect the price moment based on the Nifty moment, hence it can be used as a hedging tool against your equity portfolio.
6. Far month liquidity: As there is enough liquidity in far month contracts of Nifty futures compared to stock futures, it becomes easy to take positional view by buying mid and far month Nifty contracts.
7. Easily to predict: Tracking and predicting moves in nifty is easy as compared to stocks, as for nifty we only have to look for technical analysis. Nifty usually follows global sentiments.