Well, you all must have started your favorite topic in this series that you are learning option trading. Well, first of all you should focus on learning because as attractive as option trading looks, I told you that if you don’t know what you are doing then it becomes risky. But if you know what you are doing then you will definitely make money. See option trading is liked by many people but many newcomers get confused about what is ITM, ATM and OTM. Even if they know a little bit, they are not able to choose where they have to trade. So first of all I will tell you briefly why options, what are options and then I will tell you in which trading you will get more profit and what you should focus on. So when we are talking about options, now we have two options. Either I can talk about stocks or indices. Most of the people trade in indices i.e. they trade in Nifty or Bank Nifty now you know that the lot size of Nifty is 50 and the lot size of Bank Nifty is 25. Whatever the lot size will be it will be in multiples of 25. So whatever the value of ITM, ATM and OTM will be we will multiply it with the lot size. So the example is 100, for example add the money then you will see that it will cost you Rs 2500. So why it will cost Rs 2500, if you want to buy the option then you want to buy but as soon as you want to sell then things change. So now we are going to understand and see. So why options, if we talk about a stock for example, and you see that stock that the price of that stock is ₹ 10,000 and you don’t have ₹ 10,000 to buy it, but you have an option that you hold for example ₹ 100, if it rises by ₹ 50 here, it will rise by ₹ 50 to become ₹ 150. So now many people find it attractive that why should I buy the whole stock when I can buy an option of it. In fact, if you think it will fall, people buy options. When we buy on rise here, I am making one basic thing clear because I believe many people will be beginners that if I think the stock price will rise, then we buy call option and if I think the stock price will fall, then I buy put option if I think Nifty will rise then this option is to buy but if my analysis is still the same that Nifty will go up then I have only one option not to buy call. The other option I have is to sell put because when the market falls then the put buyer will make profit but if the market goes up then there will be loss. The seller’s loss is the profit because option trading is a zero-sum game. What does zero-sum game mean? Someone’s profit is someone else’s loss. If the buyer incurs loss then the seller will make profit. If the seller incurs loss then the buyer will make profit. Similarly if I think here, my analysis says that Nifty will fall then it is not necessary that I buy put, I can sell call. This is important. Why is this important? I am telling you in short if you are buying a call here then I am telling you the journal that the probability of the trade going in your favor is 33% and the seller always makes a profit so here 67% I am saying that the seller has more probability, the reason for this you will understand in the next video. The reason why I have written 33% and 67% here, we will talk about it in the next video in which we will talk about Theta. We will give you training of Greeks, in that we will talk about this in detail. I just want to tell you that the seller gets a little more profit than the buyer but the buyer can earn more money. If I talk about earning money on capital then the buyer’s capital is very less.
As we gave an example, if someone has an example here, we were talking about Nifty, so take the example of Nifty, if you see that Nifty is running at ₹ 18000, now if I buy Nifty futures, it will cost a lot of money. If I cannot buy Nifty, this is about the index, if I buy the option then it is a lot of ₹ 50. I am giving you an example, suppose you said the value of the option is ₹ 100 then it is less than ₹ 5000 but if you had to sell it then you would have to buy it but if you are a seller here, if you had to sell it then it would cost you around ₹ 100000.