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How Different Nifty Strategies Traders Implementing Outlook Of The Market?
People are always looking to earn money by exploring different avenues of investment. Investing in the stock market has become such a venue where people are learning about the different companies listed in the stock market. They study the company by learning about the work the company is doing and going through the fiscal data available in the public domain.
After thorough research, people decide whether to buy the share of the company or not. Many agencies help people make the decision and do all the research if the individual doesn't have time for it.
Countless strategies are implemented by people and agencies who have been working in the stock market for a long time. One of these strategies is Nifty Futures Strategies as the name suggests the trading is done in nifty futures. It is essentially a contract on nifty futures, and the minimum lot size to trade is seventy-five units of nifty. But traders need to be very careful when trading in nifty futures and must consider few points like whether trading in an intraday or long term.
In futures, the trade is spread over a spot price, which needs to be checked ...
... by the trader before trading. Usually, the monthly spread is determined by the prevailing cost funds. Traders should avoid buying nifty futures when the prices steep premium or at a discounted price compared to the spot prices. This might be due to over positive news in the market or aggressive selling in the future.
The position in nifty future trading is that of a leveraged position. When a trader buys a Nifty in a near month, the trader's margin is around 10% for normal trade and 5% for intraday trade. It means the trader in leverage is ten times in normal trade and twenty times in intraday trade.
Leverages don't mean only your profit will get multiplied; rather even losses can be multiplied. Hence the trading in the futures should be done by enabling the stop losses & profit target. The trader should be aware of the overnight risk in the nifty future.
Even though the stop losses are put by the trader during the day, these orders don't cover the overnight risk. In nifty futures, traders don't earn dividends.
In the stock market, "Option" is a financial derivative that gives the trader the right to either hold or sell or buy an underlying asset at a pre-specified date and at a pre-specified price.
In Nifty option strategies, there are two types of options known as the call option and put option.
● In case of the call option, buyers have the right but no obligation to buy an underlying asset like a stock, commodity, currency, etc. at a pre-specific price and pre-specific date.
● In put option, the buyer has the right but not obligation to sell an underlying asset like a stock, commodity, currency, etc. at a pre-specific price and pre-specific date.
The duration of the trade can last months. The options can also be classified into three categories based on the spot price with the strike price during the expiry date; it is known as the moneyness option. In option spread strategies is one of the simplest strategies a trader can implement. This is a multi-leg strategy which involves two or more options that has two or more option transactions.
In spread strategy, there is a bull call spread that is best implemented when the trader's outlook for a particular stock and index is not aggressive or moderate. Similarly, a bull put spread, which is also a two-leg strategy, is invoked when the view of the market is moderately bullish.
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