Anyone who has little to no knowledge about stock markets, find Future and Options the most rewarding segment in markets. And why not?
Fin-influencers, tip providers and so-called stock market gurus, have bombarded social media with the “Puts and Call Profits”. So, it is obvious for people to comprehend that options are a “magical bucket” where you can put in a couple of thousands, and they would multiply to become lakhs. Unfortunately, that doesn’t happen in most of the cases.
In majority of the cases, people put in their couple of thousands and loose their money altogether. Sometimes, when this trade goes their way, they would have multiplied their capital to a double or even more. But with majority, that happens very rarely. Therefore, you would have heard people losing their savings altogether in options and then blaming that stock markets are a gamble.
The fact why people loose money in such trades is that they buy very far out of money options, which are cheap to buy. Thus, when expiry of the option contract reaches, their amount reduces to zero, as very rarely a very far out of the money option becomes in the money or at the money.
They often ignore the fact that market doesn’t move in a straight line. It undergoes small and short-term corrections in the trend too. To put it in simple words, markets would neither rise daily and nor fall daily. So, a few seeing losses average it down and end up losing more.
Another major mistake that people do while trading options is not using a SL or a hedge. It is rather difficult to put a SL as premiums are not directly co-related with the asset value, but using a hedge is much easier. The only drawback of using a hedge is that then it requires a hefty sum in lakhs. Thus, people ignore hedging in options and do naked option trading, which is nothing but trading with no protection if the trade goes wrong.
So, to answer this question, that can you make lakhs with options is a yes, but with a catch. You need to have a sufficient capital of at least Rs 2 lakh to Rs 2.5 lakhs for one trade. But you can’t deploy your entire capital in one single trade. Thus, if you wish to do option trading, you need to have a trading capital of Rs 8 lakhs to Rs 10 lakhs to do it effortlessly. If you could deploy such a capital after learning derivative trading using strategies like spreads, back spreads, straddles, strangles then you could make lakhs as profits from options. To learn more about these strategies, you could refer to our Irresistible Stock Market Architecture Program 2.0 or Top 5 Online Stock Market Courses in India.
