Free Resources to Learn Option Trading on the Indian Stock Market

Are you looking to delve into option trading but are hesitant due to the initial learning curve and potential costs involved? If so, this guide is designed to provide you with a comprehensive approach to learning option trading through free resources. It is particularly suitable for new learners or those seeking to build foundational knowledge about the Indian stock market.

Understanding the Basics of Option Trading

Before diving deep into the specifics, it is important to understand what option trading is. In simple terms, it allows you to buy or sell the right to buy or sell a stock at a specified price (strike price) before a certain date. Learning about strike prices, buying or selling calls and puts, and understanding terms like delta, theta, gamma, etc., can be a monumental step toward mastering option trading.

To get started, you can explore the following free resources:

YouTube Channels

One of the best YouTube channels you should subscribe to for new learners or even those with basic knowledge in the stock market is [Channel Name]. This channel offers valuable insights and tutorials that can be highly beneficial for beginners.

Google Resources and Online Articles

Google is your friend when it comes to gaining knowledge in option trading. Through simple searches, you can find numerous articles, tutorials, and books that are free for the taking. For instance, you can learn about:

Delta: Measures the change in the price of the option relative to the change in the underlying stock price. Theta: Indicates the rate of decline in the price of the option as time passes. Gama: Reflects the rate of change of Delta itself as the price of the underlying stock changes.

These concepts can be very complex and it's advisable to take your time to thoroughly understand them. Many websites provide free online courses and articles that cover these topics in detail.

Free Platforms for Learning

If you prefer a more structured approach, Sharekhan offers a free investment and trading class through their platform. To access these resources, you'll need to open a Demat account with them. Joining this platform opens up the opportunity to learn about a wide range of trading strategies and techniques.

Example of a Practical Trade

To better illustrate the concept, let's consider a practical scenario:

Step 1: Choose a broker like ICICI Direct or Upstox to open a trading account and load some funds into it.

Step 2: Understand the two main options: Calls (CE) and Puts (PE). You buy CE when you think the stock will go up and PE when you think it will go down.

Step 3: Decide on a strike price and market the stock's current position. For example, if NIFTY is at 11900 and you foresee it reaching 12000, you would buy a CE with a strike price of 12000.

Step 4: Make the purchase. If the CE costs you 50 rupees and the lot size is 75, you would spend 3500 rupees to initiate the trade.

Step 5: Monitor the trade. If NIFTY indeed rises to 13000, you make a profit of more than 100 points on your trade. If it falls, your maximum loss is limited to the amount you invested (3500 rupees).

For further guidance, you might want to read articles on selecting strike prices or learn advanced strategies from the book available on the mentioned website.

By following these steps and using the free resources available, you can start your journey in option trading with confidence. Remember, while the potential for big profits exists, so does the risk. Invest wisely and with a well-thought-out plan.