NSE, BSE, F&O, MCX, FOREX ADVISORY

*********************************

One Target One SL
Recommendations

What is Banknifty Options? How to trade in Banknifty weekly and monthly call and put options?

As we know that Banking stocks favorite of Indian trader. So exchange made one index of main banking stocks like HDFC BANK, STATE BANK OF INDIA (SBI), PUNJAB NATIONAL BANK (PNB), YESBANK, RBL BANK, KOTAK MAHINDRA BANK, BANK OF INDIA and some other public and private banks, and named if BANKNIFTY. And started contract in Banknifty Future and Banknifty options for trading.

We are going to share here some basic concept about Banknifty options with you in very simple language. There are two type of options in Banknifty known as CALL and PUT. Exchange giving you facility to trade in Monthly Banknifty options and Weekly Banknifty options. Monthly Banknifty options expired on last Thursday of each month and weekly options expired on every Thursday as per contract expiry date.

What is Banknifty Call options ?

Let us first explain CALL. In general word we can say CALL means up and PUT means down. Suppose currently Banknifty Spot trading on 30000, Banknifty Future April Contract trading at 30300. Then, there are monthly call options available for Banknifty, from strike price 25100 to 32000. Means if you want, you can buy Banknifty 26000 call also but for that you have to pay high premium like for example it may be trading around 4000-4100 if Banknifty around 30000, so it will require Rs. 80000 (20x4000). You can also buy out of the money option, means you can buy Banknifty 30500 call , Banknifty 30800 call or Banknifty 32000 call, or whatever strike call options you want to buy. Call option prices move up or down as Banknifty Future move up or down. Let us take one example for call option, If Banknifty Future at 30300 and Banknifty Monthly 30400 call (Apr 2019 Contract) available at Rs. 410 so when Banknifty Future will move towards 30400, Banknifty 30400 call price will go up, same when Banknifty Future will go towards 30200, Banknifty 30400 call price will come down. Lot of other factor also impact on options prices, like if it is the starting of fresh expiry then call option will be less volatile and as the expiry date will come closure option becomes very volatile. If any event there, then both call and put options premium will be high and just after event premium will come down fastly. So you are advised not to take big position if you do have proper knowledge of options trading.

What is Banknifty Put options ?

As we told earlier that CALL means up and PUT means down. Suppose currently Banknifty Spot trading on 30400, Banknifty Future April Contract trading at 30500. Then, there are monthly put options available for Banknifty, from strike price 25100 to 32000. Means if you want, you can buy Banknifty 32000 put also, but for that you have to pay high premium like for example it may be trading around 1500-1600 if Banknifty around 30400, so it will require Rs. 30000 (20x1500). You can also buy out of the money put option, means you can buy Banknifty 30000 put, Banknifty 29500 put or Banknifty 28000 put, or whatever strike put options you want to buy. Put option prices move up or down as Banknifty Future move up or down. Let us take one example for Put option, If Banknifty Future at 30500 and Banknifty Monthly 30200 put (Apr 2019 Contract) available at Rs. 350 so when Banknifty Future will move towards 30300, Banknifty 30200 put price will go up, same when Banknifty Future will go towards 30600, Banknifty 30200 put price will come down. Lot of other factor also impact on options prices, like if it is the starting of fresh expiry then put option will be less volatile and as the expiry date will come closure option becomes very volatile. If any event there, then both call and put options premium will be high and just after event premium will come down fastly. So you are advised not to take big position if you do have proper knowledge of options trading.

What is Option Writing?

To sell any call option or put option without having position in our account is know as option writing. Suppose Banknifty Future is around 30600 and we think that till expiry it will not cross 31000. And Banknifty 30900 call available at suppose 200 rs. Then we can sell it. We can sell one lot or more lot as per our capacity. If we are selling this option then we will get Rs. 4000 [ lot size 20 x call price Rs. 200 ] same time and on expiry day or before expiry we will have to cover it. If we do not cover it , means we are not buying it then there is the provision of some penalty. So it is advice to cover your position before settlement. If in any case, Banknifty moved to 31400 after your option writing then the value of Banknifty 30900 call will be above Rs. 500 and as you sold it at Rs. 200 , so your current loss will be Rs. 6000 cause you will have to buy that option at 500 rs. So in simple lagunage your buying price Rs. 500 and sell price was Rs. 200. In option writing profit is limited but loss is unlimited.

How to calculate Profit / Loss in Banknifty options trading?

Let us take more example :-

Suppose you bought today one lot Banknifty Monthly 30500 call at Rs. 300 and sold out next day at 500, it means you gained 200 points and your profit will be

20 ( lot size ) x 200 ( Gained Point) = Rs. 4000 (Profit)

Suppose you bought today Banknifty Monthly 29800 put at Rs. 150 and sold out same day at Rs. 350, it means you gained 100 points and your profit will be

20 ( lot size ) x 100 ( Gained Point) = Rs. 2000 (Profit)

Suppose you bought 10 lot Banknifty 32000 call at Rs. 30 and sold same day at Rs. 40 , it means your total profit will be

20 ( lot size ) x 10 ( Gained Point ) X 10 = Rs. 2000 (Profit)

Recently exchange started trading in weekly Banknifty options also, it means now you can buy or sell weekly call and put options. These options will be available at very low premium as they will expire every week on Thursday. Suppose you bought 20 lot (200 quantity) Banknifty 29500 call at Rs. 15 and sold same day at Rs. 35, it means your total profit will be

20 ( lot size ) x 20 (No. of Lot) x 20 ( Gained Point ) = Rs. 8000 (Profit)

We have not added the brokerage in these calculation.

Now I hope that Banknifty Options trading concept is clear to you. If you want to share your view with us or having any kind of query and want to ask any question then you can post it here, as soon as possible, you will get the reply.You can directly write to us to email id "stocknifty@yahoo.com" or call at +919981722011.

Post a comment or feedback