Facts with retail options trading in Index (Nifty/Bank Nifty)

Beginners Guide on Options/Derivatives Trading

What you should know before you start trading

1. Build Your Foundation:

• Firstly learn basics on equity and derivatives
• Understand basic financial concepts
• Study technical and fundamental analysis
• Live trade simulation for at least 6 months

2. Assess Your Readiness:

• Do you have emergency funds (6 months expenses)?
• Can you afford to lose the capital you're planning to trade with?
• Do you understand that 9 out of 10 traders lose money?
• Are you trading or gambling?

3. Capital Requirements (Post-2024 Rules):

• Minimum ₹2-3 lakh for meaningful Nifty options trading
• Consider transaction costs (₹26,000 average annually)
• Keep 50% buffer for margin calls

Risk Management Guidelines

1. Position Sizing:

• Never risk more than 1-2% of capital per trade
• Don't allocate more than 20% of total capital to F&O

2. Stop Loss:

• Always use stop losses
• Exit when wrong, don't average down in options

3. Avoid These Common Mistakes:

• Trading on tips or social media advice
• Over-leveraging
• Holding options till expiry (theta decay)
• Selling naked options without hedging
• Revenge trading after losses
• Not maintaining trading journal (FindNex maintains trading journal from it's Algo tool)

Recommended Safer Alternatives

For Building Wealth:

1. Equity Mutual Fund SIPs: Disciplined, diversified, managed
2. Index Funds: Low cost, market returns
3. Direct Equity: Long-term wealth creation
4. Debt Instruments: Fixed income, lower risk

If You Must Trade Options:

1. Start with buying options (limited risk)
2. Use defined-risk strategies (spreads, iron condors)
3. Focus on hedging rather than speculation
4. Trade only with surplus capital
5. Keep trades small and infrequent

It is important to learn and understand the trading principles 

Official SEBI Resources

• SEBI Investor Portal: https://investor.sebi.gov.in
• SEBI Saa₹thi Mobile App: For investor education
• NSE Investor Education: https://www.nseindia.com (investor section)
• SEBI Investor Certification Exam: Available through NISM

What to Learn

1. Market Basics: How exchanges work, order types, settlement
2. Options Fundamentals: Greeks (Delta, Gamma, Theta, Vega)
3. Technical Analysis: Chart patterns, indicators, support/resistance
4. Risk Management: Position sizing, stop losses, portfolio allocation
5. Taxation: How F&O profits/losses are taxed

Important Red Flags to Avoid

• "Guaranteed returns" promises
• Pressure to trade frequently
• Tips from unverified sources
• Telegram groups offering "Buy/Sell signals" trades
• Anyone asking for money upfront for tips
• Strategies that seem too good to be true