Option Trading

Cover
Contents
I. INTRODUCTION
	1.1 Objectives
	1.2 Conceptual Frame
	1.3 Structure of this Book
	1.4 How to use this Book
		Summary
		Keywords
2. INTRODUCTION TO DERIVATIVES
	2.1 Objective
	2.2 History and Evolution
	2.3 Stock Exchanges in India
	2.4 Types of Derivatives
		Summary
		Keywords
3. OPTION CONCEPTS
	3.1 Objective
	3.2 What are Options?
	3.3 Different Forms of Options
	3.4 Need for Options
	3.5 Risks in Option Trading
		Summary
		Keywords
4. STRUCTURE OF INDIAN OPTIONS MARKET
	4.1 Objective
	4.2 Stock and Index Options
	4.3 National Stock Exchange (NSE)
	4.4 Bombay Stock Exchange (BSE)
	4.5 Participants
	4.6 Contract Cycle
	4.7 Types of Orders
	4.8 Leverage of Options
	4.9 Writing an Option
	4.10 Contract Structure
	4.11 The Clearing and Settlement Process
	4.12 Role of Broker in Options Trading
	4.13 Why Indian Options Market Became More Complex than any Other Market in the World?
	4.14 Futures and Options as Leveraged Instruments
	4.15 Management of Long Put Option
	4.16 Conversion of American in-the-money Put Options to Short Stock Futures
	4.17 Calculation of Margins
	4.18 Open Interest
		Summary
		Keywords
5. OPTION PRICING IN DIFFERENT SCENARIOS
	5.1 Objective
	5.2 Option Pricing Concepts
	5.3 Calculation of Call Option Premium
	5.4 Calculation of Put Option Premium
	5.5 Put-Call Parity
	5.6 Option Price Calculation in Different Scenarios
		Summary
		Keywords
6. OPTION GREEKS
	6.1 Objective
	6.2 Introduction to Greek Letters
	6.3 Delta
	6.4 Gamma
	6.5 Theta
	6.6 Vega or Kappa or Epsilon
	6.7 Rho
	6.8 Lambda
	6.9 Calculation of Option Greeks
		Summary
		Keywords
7. OPTION STRATEGIES IN A BULL MARKET
	7.1 Objective
	7.2 Why Derivative Strategies?
	7.3 Bullish Strategies
	7.4 Strategies Suitable for Stock
	7.5 Low Risk Stock Option Strategies
	7.6 High Risk Stock Option Strategies
	7.7 Complex Trading Strategies in a Bull Market
	7.8 Combination Strategies
	7.9 Calendar Spread
	7.10 Intermonth Combinations
		Summary
		Keywords
8. RISK PERCEPTIONS IN OPTION TRADING
	8.1 Objective
	8.2 Introduction to Risk
	8.3 Various Forms of Risk
	8.4 Risk Management
	8.5 Risk Identification
	8.6 Managing Risks
	8.7 Portfolio Hedging Through Nifty Options
	8.8 Case Study: The LTCM Fiasco(ii)
		Summary
		Keywords
9. MARKET INDrCATORS
	9.1 Objective
	9.2 Put CalI Ratio
	9.3 Rollover of Positions
	9.4 Volatility
	9.5 Bullish Characteristics
	9.6 Option Premium
		Summary
		Keywords
10. FREQUENTLY ASKED QUESTIONS
	10.1 Objective
	10.2 What are the Key Differences Between Options and Futures?
	10.3 Who Can Buy Options?
	10.4 Why do European Options Trade below Intrinsic Value?
	10.5 Who Fixes Option Premium?
	10.6 Do the American Options Trade at a Discount?
	10.7 Who Can be a Writer of an Option?
	10.8 Why do We Need to Develop Option Strategies?
	10.9 What are the Key Factors to be Considered While Purchasing an Option?
	10.10 How CanWe Manage a Long Option Position?
	10.11 How Can an Option Writer Reduce Risks in His Short Position?
	10.12 How Can a Call Option Buyer lncur Loss even if the Underlying Asset is on aRise?
	10.13 Is it Advisable to Average an Option?
	10.14 What is Meant by Naked Call Writing?
	10.15 How Can We Open a Trading Account with a Broker/Sub-broker and What are the Important Norms Followed?
	10.16 What is the Maximum Brokerage that the Broker/Sub-broker Can Charge?
		Summary
11. FUTURE AND OPTIONS SEGMENT STOCKS
	11.1 Objective
	11.2 Available Opl\on Instruments and Its Lots
Glossary
Index