Many retail traders prefer buying options because they limit potential losses and require lower capital upfront. However, options are tricky. To make money with options, the Nifty index needs to move quickly and significantly in the direction you expect. This means timing is very important for option buyers.
Selling options (also called writing) is more complex than buying them. Strategies like covered calls, credit spreads, straddles, and strangles require understanding market probabilities, volatility, time decay, and price movements. These strategies usually need advanced tools and knowledge, often available only to big financial institutions or sophisticated traders who have the means to apply this knowledge.
Most retail traders don’t have the skills or money needed to sell options effectively. Many end up buying options to speculate on price changes based on tips or rumors, which is very risky and often leads to losses. This is why a high majority of retail traders fail, as evidenced by statistics.
Why Nifty Futures Might be Better
Contrary to popular opinion, trading Nifty futures can be more rewarding and less risky than options because of their straightforward payoff. While it takes more money to trade Nifty futures (about INR 2.6 lakhs for 2 lots, following safe exposure limits of 50%), it can be very profitable with the right knowledge and strategies. Using a proven trading system with good money and risk management can greatly improve your returns.
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