What is Options Trading and how to use Sensibull for options trading?

Options is a tool for protecting your position and reducing risk. Like normal trading, there is a buyer and a seller in options trading. Options Contract is a type of deal or contract between the buyer and the seller that gives the purchaser of the option the right to buy or sell a particular asset at a later date at an agreed price. To enter the options contracts, the buyer of the options contract has to pay a small amount to the seller which is called the premium. The stock price listed in the contract is called the strike price.

Options trading can be done in two ways:

• Call Options

The buyer of the call option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument (the underlying) from the seller of the option at a certain time (the expiration date) for a certain price (the strike price). The seller or writer is obligated to sell the commodity or financial instrument should the buyer so decide. The buyer pays a fee called premium for this right.

• Put Options

Put options contract gives the buyer of the contract the right to sell the stock at a strike price by a specified date. This means the put option seller, upon expiry will have to buy if the "put option buyer" is selling him. The party agreeing to pay a premium is called the "contract buyer" and the party receiving the premium is called the "contract seller".

Sensibull allows placing options order based on the strategy you choose. All you need to do enter your market view on any stock or index and Sensibull will do its work. It presents all the possible strategies that you can apply along with profit percentage, capital required and return on investment for each strategy. By pressing the expand button, you can further know about more details like the number of legs in the strategy and Risk and Reward percentage etc.

You can choose any of these strategies and place the order from the Zerodha Kite platform. You can also filter the recommended strategies based on Buy, Sell and Expiry Date.