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What is options trading and how to learn options trading as a beginner?

For a beginner, options may seem overwhelming as the options trader needs to have a deeper understanding of the market and option trading strategies which are advanced compared to direct equity trading. 

However, with the right options trading course, even the newbies can learn trading options like professionals if they put their heart and mind into it. This article will help you understand how you can learn options trading easily. 

What is options trading?

Before you dig deeper into the strategies and concepts of options trading, let’s understand what options trading means. So, options are trading instruments that help traders to buy or sell an underlying asset at a pre-determined price on a specified future date. 

Moreover, you do not have to pay the entire amount as you do while buying stocks, you just need to pay the premium to buy these options, and the rest of the amount is adjusted after the expiry of the options. 

For instance, you anticipate that price of Stock A will go up to Rs. 500 in the next 2 months. The stock currently trading at Rs. 350. Instead of buying the stock, you purchase the call option with a strike price of Rs. 360 by paying a premium of Rs. 20. 

If the stock price increases to Rs. 500 by the end of the 2 months, you can execute the call option and buy the stocks at the pre-determined price of Rs. 360 and sell the same in the market for Rs. 500 making a gross profit of Rs. 140 and the net profit will be Rs. 140-20 = Rs. 120 per share. 

How do trade options as a beginner?

You can trade options using these four steps mentioned below – 

  • You need to open a trading and Demat account
  • Then you need to anticipate whether the underlying asset which you are tracking will go up or down. If you think it will go up, then you will have to buy a call option, and if you think it will go down, you need to buy a put option. While this is the very basic strategy of options trading, you can learn advanced strategies using options trading courses online. 
  • Finally, you need to decide by analysing the market trend, what will be the right strike price of the option, and the option tenure that is when the option will expire. 

How to learn options trading using an options trading course?

You need to look for an e-learning platform where options trading courses for beginners are offered. 

You can start with the basic course on options trading which will help you understand how to set a strike price, choose the right expiry, and basic option trading strategies like long call, short put, and others. 

Then you can go for advanced option trading courses which will help you understand advanced option trading strategies like married put and others. 

Conclusion

With the advent of e-learning platforms, you can now easily learn how to trade options. Options trading helps in optimising returns on your trades while minimising losses. However, options traders need to be prudent in their choices of strategies and you can learn with the help of online courses for option trading. 

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