What do the future and options tell us about Nifty?

By Angel Broking | Published on 5th May 2021 | 44

What do the future and options tell us about Nifty?

Overview

  • On Monday, the Nifty opened with a gap down, but it was able to maintain the 14,400 level and gradually recover most of its intraday losses to finish the day flat.
  • On the daily timeframe map, it established a Bullish Candle, closing above the opening level and reclaiming its 50-day EMA. It must now retain the 14,600 mark in order to see a rebound towards 14,800 and 14,880 levels, with support at 14,500 and 14,400 levels on the downside.
  • The India VIX increased by 2.88 percent from 23.02 to 23.69. To re-establish a bullish stance, India VIX must remain below 20.
  • Options data was scattered at various strike prices since it was the start of a new sequence. On the options front, the highest Put Open Interest was at 14,000, followed by 13,500, and the highest Call Open Interest was at 15,000, followed by 15,500. Data from options indicated a broader trading range between 14,200 and 15,200.
  • The Bank Nifty began the session with a gap down and advanced in a consolidative manner during the day. Banking stocks underperformed the broader market, and the index broke through the 32,000 level of immediate support. For the second session in a row, it ended the day with a loss of about 300 points and proceeded to form lower highs and lows. On the daily scale, the index shaped a Bullish Hammer candle, indicating buying interest at lower levels following the three-session correction.

What Exactly Does The F&O Segment Entail?

The markets have a section where futures and options on securities and indices like Nifty and Bank Nifty can be purchased and sold, in addition to a cash market where shares can be bought and sold.

What Is The Difference Between A Future And An Option Contract?

A futures contract allows you to purchase or sell an underlying stock or index at a predetermined price for delivery on a certain date in the future. There are two types of options: call and put. A call option offers a buyer the right to buy an underlying stock or index at a predetermined price during the contract’s liquid life, which is usually a month or week in the case of Bank Nifty.

A put option allows a buyer to sell a stock at a predetermined price during the contract’s term. Even if the current market price is higher than the previous, a call seller is obligated to deliver to the buyer at the preset price. Even if the CMP of the stock is lower, a put seller is obligated to buy underlier from the buyer at a predetermined amount. The call and put seller was compensated by the buyers. Only cash differences are exchanged in practise.

Understanding The Fundamentals Of Options And Futures

Futures offer you the option of trading equities on margin. However, regardless of whether you are long or short on futures, the risks are limitless. When it comes to options, the buyer will only lose the sum charged as a premium. Options are more amenable to complex strategies because they are non-linear. When buying or selling futures, you must pay both upfront and mark-to-market (MTM) margins. You must also pay initial margins and MTM margins when selling an option. When you buy options, though, you just have to pay the premium margins.

How Do I Buy Futures And Options?

To trade in the Futures & Options market, you’ll need a demat and trading account with your broker. A trader shall pay a margin, which is a percentage of the overall investment, to take a futures position. After you submit it, the stock exchanges tie your specifications with available buyers or sellers in the market.

For options, the contract buyer pays a premium to the contract writer or seller. Option trading helps you to enter the market with a long or short position. Angel broking can help you do both. Open a demat account in a few simple steps and explore the world of trading.