Buying Stocks Without a Broker

Futures And Options Books – The Odds of Trading Futures and Options in the Stock Market

Futures And Options Books

Any individual trader can also trade in the Futures and Options of an Index or a stock which requires less capital margin with the same profit margin. By saying this, one should not abandon their entire position in Equities and Debt Securities Investment and jump right into trading F & O. Because, you will always be tempted to do it. There are some odds which many traders faced and get burnt while they shift their much secured investment into a high risk way of F & O trading. It is all about control and self discipline that one must learn and check before starting to trade F & O. Let me tell you a fact as an example here:-

Mr. A is a trader who was buying equities and fixed deposits of a particular company called XYZ. He usually books profit at a rate of around 5% maximum of the invested capital in a month. Let’s say he had invested 10,000/- and books 500/-  in a month. Sometimes he didn’t book any and even incurred loss if the market goes down. He get bored and started to trade in the F & O section of the same company XYZ. Now, with the same 10,000/- capital he gets 5 times more buying margin than it did in equity. At the same time, he books profit in days and doesn’t need to wait for a month, and most surprisingly he even gets profit when the market goes down too as there’s a product which he can buy that earns profit when the stock falls down. It’s when he thought ” What was I doing with Equity or Debt or some Lazy Securities when this F & O trade easily gives 5 times profit with the same capital involved?” Now, he started to break all his secured investements and pumps them into the F & O trades thinking he can build a fortune within a few months which will take many years if he trades with Equity or Debt or Fixed Deposits. Futures And Options Books

This hope of getting an amazing amount of profit will let him forget and ignore all the potential risk of trading F & O. He will forget he might lose his entire capital if the market behaves contrary to his speculation and shock him with a sudden change of trend. This way, Mr A got burnt and went broke after series of losses he made in his F & O trades which he keeps on doing as it’s only way he will recover his past losses. No any other legitimate investment plan can regain what he had lost. And now there’s the most dangerous thing which every stock traders experience, the hauntings of past losses affecting present trades. For every future trades, the trader always count and calculate his past losses to be regained from that trade which starts giving him some profit. He will wait & wait even though that particluar trade already made it’s highest mark. Because he’s calculating the profit amount to leverage his past loss. Once, the position started giving away the profit, he will get upset for not booking at a higher profit margin earlier and stand confused whether to book or not or wait for a second time rise which didn’t happened and end up the position with the lowest profit or no profit or even loss.

So, the best thing Mr.A could have done with a capital of 10,000 in the stock market is:-

* Invest 5000/- in FD or Debt Security
* Invest 3000/- in Equity
* Invest 2000/- in F & O by limiting an amount of 500/- in a single trade keeping a bearable 50/- as stop loss.

He must realise that his total investment now has an earning potential what he was getting earlier with Equities & Debts with the surplus of some more income from the 75% capital in Equities & Debts. Look from the angle of an equity trader, never look from the F & O trading angle.

ONE MUST ALWAYS REMEMBER NOT TO PUT MORE THAN 5% OF THE ENTIRE CAPITAL IN A SINGLE TRADE WHILE TRADING FUTURES & OPTIONS Futures And Options Books