Part4 Institution Trading

Options trading in India is governed by SEBI and offered by NSE and BSE. Most options are European-style, meaning they can be exercised only on expiry day (unlike American options which can be exercised any time before expiry).

Popular instruments:

Index Options: Nifty 50, Bank Nifty, Fin Nifty

Stock Options: Reliance, HDFC Bank, Infosys, etc.

Example Trade
Suppose Nifty is at 22,000. You expect it to rise. You buy a Nifty 22,200 CE (Call Option) at ₹100 premium, lot size 50.

If Nifty goes to 22,400 → intrinsic value = 200, profit = ₹100 × 50 = ₹5,000

If Nifty stays at or below 22,200 → Option expires worthless, loss = ₹5,000

This asymmetry is what makes options attractive for speculation.

1. Retail Traders
Mostly use options for directional bets and small capital plays.

2. Institutions (FIIs, DIIs)
Use options for complex hedging and large-volume strategies.

3. Hedgers
Use options to reduce portfolio risk.

4. Speculators
Profit from volatility or short-term price movements.