Nifty futures are highly popular amongst F&O traders, there are many reasons that traders choose to trade Nifty futures. Most important is limited risk in option buying.
But no one can deny the fact that Nifty options have limited risk as compared to nifty futures. Wait, I will clear each and every point here to prove this.
When you buy nifty options you pay a price know as premium. Now if you are holding this nifty option till the time of expiry, this option may become 0 (ZERO). So when you buy options, the maximum that you can lose is the premium amount.
But in the nifty future, you are required to meet the MTM (Mark to market) obligations at the end of the day. If the settlement price is lower than your buy price you need to pay the loss amount for the day and carry position for the next day.
Limited Risk in Options than Futures:
The margin for holding nifty future is Rs. 1,35,000 and if the market corrects 1000 points in few trading sessions we will lose Rs. 75,000 i.e. more than 50% of what you have initially invested. The current lot size of nifty is 75 shares.
In Option selling, the risk is unlimited if positions are not hedged. So keep in mind that options are riskier as they are highly complex. Many traders think options are easy to trade, but make sure we know all if and buts of options before trading. If you are really a die-hard options trader, then you should check out Advanced Options Trading Course.
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