Nifty Future and Option Money Managament


When a trader trades in a Nifty Future with Rs 17,000- 20,000 margin and he has to bring in extra money if some loss occurs. Compare this with a deep in the money Option which is around Rs 400. It will cost you 400*25= Rs 10,000.

 

Count the Advantages now

 

1. Even in the beginning of the month there will be very little time value premium very much equal to futures. so same benefits as in future.
2. Margin will be limited to option value, meaning limited risk.
3. You can sleep well in night
4. In second or third week you can even switch to Rs 200-300 option.
5. In the last week still you can trade in Rs 100 “In the Money” options that will have very little time value.
6. Rs 20,000 Vs 10,000 is a good deal.

 

Disadvantages
1. The liquidity in Deep in the Money options may be less than Futures, However if you are doing a swing trade you should not be bothered.
2. If you were trading in 1 lot of nifty future, keep trading in 1 lot only and save your left over margin to fulfill the next trade, because in case of a loss your capital will reduce and you can make up for next trade with the extra margin.

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