Best Option Trading Strategies For Beginners

As you know, there are two ways to trade in the stock market, through cash markets and derivatives. While most novice traders are familiar with trading stocks in the cash market, derivatives still remain a mystery. In this blog, we will discuss option trading for beginners through simple option strategies. Derivatives are financial contracts whose values are derived from the value of the underlying asset. These contracts generally have pre-defined parameters such as quantity (lot size), quality (in case of commodities), and expiry date. Derivatives make it possible for traders to take trades with indices as the underlying assets, which would not be possible through cash market trading. They are traded on the National Stock Exchange, which also allows trading of currency derivatives. Let us take a look at the different types of derivative contracts.
A futures contract signifies an agreement between two parties for the purchase and delivery of an asset, where the price is decided at the time of entering the contract but the contract is executed at a future date. Futures are standardized contracts that are traded on an exchange. These contracts are often used for hedging and speculation rather than for delivery. It is traders of the contract are obligated to fulfill the commitment to buy or sell the underlying asset if the contract is not squared off before expiry.
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