As a derivative instrument, Finnifty options allow traders to capitalize on price movements without needing to own the underlying assets. With the right strategies, traders can enhance their chances of success.
In this article, we will discuss the best Finnifty option trades suitable for taking short-term exposure along with useful strategies for smooth trading.
Understanding Finnifty Options
Finnifty options are financial derivatives based on the Nifty Bank Index which depicts the performance of the Top 50 Banking Stocks in India. These options are of two types, the call option and the put option.
A call option gives you the right to buy the underlying index at a specific price before a certain date, making it useful when you expect the market to rise.
On the other hand, a put option provides you the right to sell the index at a certain level, which is very useful in case you expect the market to go down.
Trading Finnifty options is a way through which one can benefit from fluctuation in the market without actually buying the securities and this makes it convenient for trading.
Finnfty Option Trading for Short-Term
Here is how you can trade in this derivative in the short-term to make a profit.
1. Scalping
Scalping is a type of trading strategy that operates within a 5 to 15-minute time frame, where a trader earns several small profits from multiple price changes instead of focusing on a single larger price swing.
In Finnifty options trading, a scalper buys or sells options for just a few seconds or minutes, aiming to profit from small price changes.
The goal is to accumulate multiple small profits throughout the day, rather than waiting for one large price move. It requires fast decision-making, constant market monitoring, and disciplined risk management to minimize losses while maximizing gains in a short period.
2. Intraday Trading
Intraday trading in Finnifty options is the practice of taking positions and squaring off the entire trade on the same day.
Here, trading is done to make profits based on price fluctuations. For example, if you buy a Finnifty option in the morning when the price is low and sell it later in the day when the price rises, you make a profit.
Since trades are closed before the day ends, you avoid overnight risks, but you need to carefully monitor the market throughout the day.
3. Straddle/Strangle
A straddle and strangle are strategies used when traders expect a big price move but aren’t sure which direction it will go.
In a straddle, you buy both a call option (betting the price will rise) and a put option (betting it will fall) at the same strike price.
In a strangle, you do the same, but with different strike prices for the call and put. If the price moves significantly, either up or down, you can make a profit.
4. Covered Call
A covered call is a strategy where a trader holds a long position in an asset, like Finnifty options, and sells call options on that same asset.
This means you earn premium income from the options sold while still owning the underlying asset which here is Finnifty. If the asset’s price stays below the strike price, you keep the premium.
If it exceeds the strike price, you may have to sell the asset at that price, but you still profit from the premium earned.
Conclusion
Trading Finnifty options can lead to impressive short-term returns if approached with the right strategies and risk management. By implementing the different trading strategies mentioned in this article, you can make a profit in the derivative market. Also, use the best app to trade options to enhance your trading experience and maximize your potential profits.
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