Zerodha Intraday Margin Calculator Charges, Limit ...

Why I trade futures over options

Hello autists.
I thought I shall share some tips on why I trade futures instead of options. If it is not your cup of tea, feel free to ignore this. After all, everybody's risk appetite is different. Tailor it to your Personal Risk Tolerance.
Note: I am not a financial advisor. These are my ideas alone and anyone looking to go through with this must consult their advisor.
Before i get started, I should warn newbies that it is not advisable to start off with futures. I have been doing this for 2 years now, starting off with 2L and saved up my salary every month to put it in my account. I realized that Mutual Funds were managed by tards and I do not want to enjoy a yatch when i am 60. But before all this, I started off with conventional stocks and slowly dipped my feet into futures.
Pre-requisites: 1. Some understanding of your emotional levels (do you immediately square off your position if things are not looking good, or do you wait for it to play out? ) 2. Do you have a trade setup you trust? Do you keep a log of how it performs and how it does in a bull or bear market? 3. Is the money in your trading account something you can afford to lose? If not, save up more and come back.
Futures: I shall not get into the details of what futures are, and why it was started in the commodity business. Basically, for brevity, the equity futures go by lot size. For example, Reliance has a lot size of 500. If reliance is trading at 1000, the margin given by zerodha is Rs. 2,00,000 approx to hold these shares overnight. For intraday, you need a margin of ~1Lakh.
Imagine, if you wanted to buy the same amount of shares you would need an account size of Rs. 5L. Now, with great power comes great responsibility. Lets say, there is a huge oil fight and oil prices drop. The price of reliance drops 20% to 800. If you had bought the shares, your account size also drops 20% to 4L. But if you had bought futures, your account size of 2Lakhs now loses 1Lakh, which is a 50% loss. The plus side is, you can also make the same if you are right.
Now why do i trade futures instead of options:
Lets say my account size is 2.5 Lakhs, and I want to buy reliance and hold it overnight. 1. 2 lakhs is taken up for my margin, and i have a balance of 50k. If the next day, reliance goes up by Rs.20. I would have made a profit of Rs. 10000 (500x20). Now if i by the end of the night, my account size becomes 2.6Lakhs. That is i can use the full 2.6L margin now.
This is very important for me. These profits are already realized in your account. And this is called Mark to Market (MTM). Note: in options, the profits you make are unrealized. They are sitting in your account until you square it off.
  1. If i were to buy the same amount in shares (for 2 lakhs). The next day, i can only trade with 50k in my account. The 2 lakhs do not show up until i square off. But when i am holding futures, and the next trading day starts, I convert my overnight positions to intraday, thus saving up 50% of the margin. When things dont go my way, I immediately square off and use the full margin for my next trade.
  2. If you are buying options, you need to be right about the direction of price movement AND the time it would get there (also called as delta and theta). Implied volatility also comes into play, meaning, when a herd of people are betting the same, you will still lose if you are with the herd. In futures, you only have to be right about the direction.
  3. You ever get a thrill when the VIX is sky high? with so much volatility you profits keep shooting up and your losses are devastating at the same time? Do you enjoy that feeling? Then fuck it, you have a gambling addiction. But, thats how i feel like trading future. Even in a low volatility environment my losses can wipe away 10% of my account in a single trade. Know yourself first.
Hope this helped a few autists.
Good luck trading.
Current positions:
Tldr: if you can't read this, stick to yoloing options
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Zerodha Margin Calculator

Here, Trading Fuel introduce the Zerodha Margin Equity Calculator, zerodha margin against shares, Mutual funds margin calculator for Intraday Trading. Read now!
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Zerodha Me Intraday Margin - Zerodha Intraday Margin For Equity

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