Can I Start Option Trading With 1000 Rupees?
Rs 1000 is a small amount to start active option trading, it is possible to learn by buying 1-2 option contracts as a start.
The tradeoffs are limited profits due to low capital and higher risk of losses wiping out the amount. It is better to paper trade first before risking real money.
Key Points:
- Buying options requires less margin than selling options. To buy a call or put option, the margin required is usually the option premium amount.
- With Rs. 1000, one can buy 1-2 option contracts depending on the strike price and expiration date. Buying deeply out of the money options would allow trading of more than 1 contract.
- Selling options requires a higher margin which is a percentage of the underlying stock price. With just Rs. 1000, it would be difficult to sell options as the margins required would be more than the available capital.
How to do Options Trading with 1000 Rupees?
With Rs. 1000, you can start as an option buyer.
This keeps margin requirements very low, only the upfront premium paid.
To make the most of Rs 1000, search for OTM options trading at pennies, or options about to expire within the week.
- One can only buy options, not sell, with Rs. 1000 capital.
- When buying, the margin required is just the option premium amount.
- To buy, look for very cheap OTM options where 1-2 contracts can be purchased.
- Buying options expiring soon, like weekly or daily expiries, keeps premium costs very low.
Key Points to Remember Before You Start Options Trading:
1. Take time and understand the market:
Take time to study pricing, Greeks, strategies and market behavior through various cycles before putting real money at risk in this market. Simulate trades to get hands-on practice.
- Paper trade strategies to test different scenarios without risking money. See how options react to market movements.
- Don’t blindly buy options, use proper strategies like spreads that limit risk. Naked options trading requires high experience.
- Follow option chains and open interest to gauge what levels traders are expecting support/resistance.
2. Start with a small investment:
- Only risk a small portion (10-20%) of your total trading capital in any one trade. This limits downside if it goes wrong.
- Open a maximum of 1-2 contracts when taking an options position starting out. Limit your risk exposure.
- Focus on low risk, defined risk strategies like bull call spreads where the maximum loss is limited. Avoid naked options.
3. Holding Options for the right time frame:
- Short-term trades of 2-4 weeks can work but involve timing the market correctly. Easy to lose money if wrong.
- Long-term LEAPS or contracts over 6 months decrease the time decay effect of options.
- Monitor and exit positions within 1-2 days of important earnings/events if an adverse reaction is expected. Don’t hold through high volatility periods.
4. Use Stop Loss:
- Monitor trades daily and exit partially at 50% profit target, trailing the rest with tight stops.
- For defined risk spreads, risk is limited to maximum loss at initiation. Use full width as predetermined stop loss.
- Use technical analysis tools like key moving averages, Fibonacci levels to determine logical profit targets on the chart.
Final Words:
It is possible to start options trading with Rs. 1000, one needs to be very careful and aware of limitations. Stick to buying just 1-2 contracts of cheap OTM options due to expire soon to minimize risks.
Only pick liquid stocks. Have a defined plan for targets and stops instead of impulsively holding on. Start paper trading first to make your strategies in options trading.
Profits from OiGenie users
