How to buy options in Zerodha- Complete Guide
You must have heard that money can be made very easily in the stock market and it is true that it has become very easy to start trading in the stock market.
A countless number of people have been tempted towards the markets by dreams of getting rich quickly and achieving financial freedom. The ease of starting trading makes this attraction big. However, the truth is: less than 1% of active traders earn more than bank fixed deposits over a period of 3 years. But you have to keep in mind that making trading profitable is a difficult task.
Through this article, I’ll share you some useful tips for trading in Zerodha and how to buy options in Zerodha. I will take you from the basic to advance and let you understand the core parts of options trading which mean how you can buy call and put options and after buying how you can sell these options. In this article, you will get a step-by-step complete guide for beginners and also for the experts.
Read this article completely don’t miss to read any part otherwise you may miss the important tips and then you find it difficult to understand but if again you have any personal query please mention it in the comment box and I’ll try to give you the solution as soon as possible.
Now, Lets begin this step-by-step guide on how to buy options in Zerodha.
Ways to earn from option trading in Zerodha
There are in total four ways to earn from option trading.
- Buying call options
- Buying put options
- Selling call options
- Selling put options
How much money you need to start
If you are interested in buying options whether it is Call options or Put options then you need at least Rs 500 to start but on the other hand, if you like selling options whether it is Call or Put then you need a lot of money approximately Lakhs or more.
Option Trading Platform’s
You can do options trading in BANKNIFTY, Nifty, or in a particular stock. The lot size for BANKNIFTY is 25 and you can buy options there only in the multiple of 25 but on the other hand lot size for NIFTY is 75 and here you can buy options only in the multiple of 75.
How to Buy Options in Zerodha
Friend’s in options trading before buying any options (Call or Put) first you have to see is the option chain. It will help you to understand that, what is the rate over the particular strike price.
To know this I opened google chrome here or if you are using a computer or a laptop you can open any browser but, if you use google chrome in phone then too you can use it properly.
Here I open NSEindia and first search for NIFTY to see it’s option chain.
Now click on the option chain. First, what you have to do is to select expiry.
I am saying you this because generally what happens is when you buy normal equity stock of holding. So, in holding there is no expiry for it and you can keep it for many years but here in options trading there is an expiry which means that your premium value becomes zero when you reach that date.
Let’s understand it with basic example. Suppose I select the expiry of 6 feb and bought any Call option and if I didn’t sell it until 6 feb then it’s value become zero and I lost all my money which I invested to buy the contract.
So, what I can do is that I tried it to hold it maximum upto 6 feb but for goodd result we should try to do intraday trading in this type.
So, here I selected the expiry of 6 Feb and as you can see here, there are two red boxes separated with the strike price. The right hand side shows you the Call option’s detail whereas, the left hand side shows you the detail of Put option and the midline with blue clour shows you the strike price.
If we feel that the stock price rise which means when we observe and finalize that he NIFTY will rise from the current position then we should buy the Call option in that case because the Call option is parallel to NIFTY but if we feel that the NIFTY will fall from the current position then, in that case, we must buy the Put option because the Put option is opposite to NIFTY.
Just to show you here for better understanding. I finalize to buy a Call option at a strike price of 12500.
How to buy Call options in Zerodha
Now, we will open the Zerodha kite app first. Then we will add our index or option chain so that we can buy it.
I decided to buy a Call option at a strike price of 12500 that’s why I select a NIFTY 6th Feb 12500 CE option to buy but you will find many offers here for various expiry dates but because today is 29th January and I finalize to buy an expiry of 6th Feb so I select a NIFTY 6th Feb 12500 CE. Here CE and PE mean to Call and Put option respectively.
I added that CE option. After adding it, click on that option and you will find two options buy and sell. We are trying to buy so click on buy.
After clicking on the buy option soon this page opens. Here comes a little tricky so understand properly.
In the quantity option, you can see there are 75 selected. If you want to buy one lot then leave it as it is but if you want to buy two, three, or more, then change it into the multiples of 75 only. You can’t change it to 100, 120 or any other number’s. Must select only in the multiple of 75. You can select 75, 150, 225, and so on. Also, you cannot change it to less than 75.
As I wanted to buy one lot so I leave it to 75. Then below this, you found the product. It has two options normal (NRML) and MIS. Leave it to normal you may select MIS too but in some cases, MIS won’t work so normal is best. In case if you want to hold it until expiry then too normal is the best.
Then comes the market and the limit option below. The meaning of limit means that on what price you want to purchase it and you can change it to any numbers as per you. But if you want to purchase it as per the market rate then you can select the market rate also.
Then comes the advance option here you can select RGLR (regular option), BO & CO (bracket order, cover order) is a little different, so we learn that separately. Then in validity, you have to select Day.
Most people are confused between these two option Day & IOC. It means that if I place this order and suppose my price match to the market then it will buy immediately and if not then it will wait for the whole day and whenever the price matches it will buy automatically. Whereas in IOC if the price matches at the time of placement then it will buy otherwise it will cancel your order.
I put the limit of Rs 37.80 before buying because the market price falls a bit. So, after putting the limit I slide the arrow to buy and now it is executed at a price of Rs 37.80.
Now what we have to do is to wait until the price does not go up from this. When we saw that the price is above Rs 37.80 then we can exit whenever we want.
Now, If we want to see how much profit we are getting or the loss then we click on portfolio and then click on positions here it will show us how much profit we are getting or what is the loss. So as you can see here that right now I am in a profit of Rs 15.
So, if I want to exit this order (because I am in profit) then we click on exit and soon the page for a sell option opens.
Here you need to change very few options. First is order type then market and the last one is limit. If we want to sell it immediately then we use market otherwise here I want to set a target price so choose limit.
I set the limit price of Rs 38. When market price matched my limit then it will sold out automatically.
Variety, validity, quantity everything is same.
Now I click on sell. When the market price matches Rs 38, it will automatically be sold and if it didn’t match, then it will wait in pending.
You can modify or cancel any of the pending orders if you want. If in case you did it by mistake or you change your plan. So, here is the option for that also.
How to buy Put options in Zerodha
The process is the same for the Put option also that’s why I may skip showing some of the basic screenshots. So, please try to understand.
So, before buying the Put option first you have to do is to add the index. I want to add NIFTY, So here I search for NIFTY and then find our strike price and the expiry date and then click on the contract it will add to your watchlist automatically.
One thing I want to say is that options trading is very risky than equity trading here you can make profit as well as loss very quickly.
As you can see the Put stock I added here fall by 25% just in a day and this 25% also becomes 50% or more at any time but on the other hand like the fall it will rise up to 50% also.
So, what we learned from here is that while doing options trading you have to keep in your mind that, If you are new then first you need to learn it properly and then aim for big trading.
Now, click on the Put stock and then click on buy. The same page will open like the Call and we have to do the same procedure as we did earlier while buying the Call option. So in quantity, I choose 75 means one lot and if you want to buy more you can double it. Then comes market and limit so now in this stock I will use the market and buy it at a market price. Validity and variety both will be the same like the Call option means regular (rglr) and day respectively.
Friends if you are buying at market price then it will buy your stock immediately. We use this option because sometimes we want to buy the stock quickly. So in that case you can use this option and it will help you buying immediately but the chances of loss become higher because when you are buying at market price which means may be at that time or a moment the price of the stock went higher and you have to pay more.
Now, when I came on my position I found that both my order (I bought Put and Call both) are falling (minus).
Some people may ask that when the stock price is falling then the call option should also fall and the Put option should have to rise, but I will tell you that it’s not right because on various strike price there is various different moment type and to be safe from that you have to apply some of your own trick of making own combination. You can also learn this, only when you practice.
As you can see here my both order is going in loss and I do have to exit it quickly because when I delay in it then I have to face a big loss. So, today I am exiting with a loss.
I am showing you my loss because when I show you only profit then you too came in greed with it and started investing big amounts and waste all your money.
Here you can exit it in a selected manner or you can exit both simultaneously. But I want to do it selected manner. So, the Put option I bought here if I want to sell it or exit then also the procedure is the same.
First, click on it and if you want to sell it at the market rate then you don’t need to change anything just swipe for sell because I am at a loss so I select market rate (here also the selling page is the same as like Call option sells page) and then I sell my call order too at the market price.
Here you can see I got a loss of Rs 123 but it’s not only Rs 123. There is a brokerage charge also of Rs 20 for buying and then Rs 20 for selling. The price of brokerage for Call and Put is the same and again Rs 20 for other charges like excise duty, stamp duty, etc. So, in total, I have a loss of Rs 100 more which I gave in the form of a brokerage.
Rs 100 + Rs 123 = Rs 223 (total loss)
Note: if you are buying one lot or any other number the charge for buying and selling is the same which is Rs 20.
Pros of Buying Options
This is a screenshot of a contract of the BANKNIFTY call option. In the morning I bought it at the price of Rs 90.70 but when it closed in the evening the price went Rs 534.55. Now, think if you are buying something for Rs 90 and then selling it for Rs 534. How much profit you are getting? Approximately you are getting a profit 6 times. So, suppose if I invest Rs 9000 in the morning then Rs 53,000 it becomes in the evening. It means your investment amount can be increased multiple times up to 10 times in a single day.
But, all days are not the same so we need to know about the negative side also.
Cons of Buying Options
In the pros section as you see the profit becomes 6 times but in the loss, you don’t need to worry much because the maximum loss is your investment amount meaning the price you spend on buying the orders is the only loss. However, you have one option. In that case, When you see that the product of Rs 90 is decreasing and it’s going Rs 60, 50 then you cut the position to Rs 50. There you atleast save your Rs 50 only the loss is Rs 40. So, it’s the other trick to mitigate your loss.
How we got profit or loss if we buy Contract
Here comes two condition.
- When we buy and sell at the same day (means Intra day trading)
- and the second condition is when we hold our contract until expiry
* Profit or loss when we do Intraday trading
As you can see in the screenshot above, here BANKNIFTY is trading on the strike price of 36587 and I felt that this BANKNIFTY fall 100 to 200 points after some time that’s why I bought put option of weekly expiry of BANKNIFTY at the strike price of 36800 by giving Rs 120.30 premium.
Now understand this simple calculation:
I bought one lot of put option in which there are minimum 25 quantity. Now, for every lot I have to pay the premium of Rs 120.30 then my total investment became:
120.30 × 25 = Rs 3000
So, my total investment is of Rs 3000 while buying this contract at 11:15 ‘O’ Clock.
But, when I saw it at 11:38 ‘O’clock. I found that BANKNIFTY falls 169 points. While I was purchasing it falls 50 points and now it falls a total of 169 points (fall of more than 100 points ) The put Option I bought at that time has become Rs 185 now.
Now, understand this simple calculation:
When I bought it. It was at Rs 120.30 and now it is Rs 184. Suppose if I cut my position now then it means I booked my profit of Rs 63.70 on each quantity.
184 – 120.30 = Rs 63.70
Because I bought one lot in which there is total 25 quantities. So, my total profit become
63.70 × 25 = Rs 1592 (profit)
* Profit or loss when we hold until expiry
If I decided to hold this contract until expiry. Then, the important thing you need to understand first is the way of settlement on the day of expiry.
One thing you should always keep in your mind that the settlement of NIFTY and BANKNIFTY on the day of expiry is on Cash, Whereas, the settlement of Stock is a little bit different.
Now, the status I see on the day of expiry when the market close at the time of 5:16 P.m. is at Rs 211.55.
Now, understand this simple calculation:
I bought this at Rs 120.30 and it close on Rs 211.55 then again I got the profit of Rs 91.25 on each point.
Because, I bought one lot in which there is a minimum of 25 quantities. So, the total profit I got is
Rs 91.25 × 25 = Rs 2281.25 (profit)
And, it will take 2-3 working days and it will automatically transferred it into my account.
Now first, understand how is this settlement happened
The market closed at current is on the strike price of 36587 and I booked the contract of 36800 but because the market closed is below 36800 and on the same hand I bought a Put contract that’s why I have a profit of Rs 211 each.
Which option you should Buy (Call or Put)
Wherever you saw the current position of BANKNIFTY and if there is a probability of rising 100 or 200 points in the strike price then you should invest in the Call option if you want profit because the Call option moves with respect to BANKNIFTY. If BANKNIFTY increases Call options increase and vice versa.
As you can see here that BANKNIFTY is down then the contract of call option is also down.
But, when you think the BANKNIFTY falls from the current position like 100, 200, or 400 points then you have to buy a contract from the Put option because when BANKNIFTY falls Put options rises and vice-versa.
I hope you read this article on how to buy options in Zerodha completely and definitely learned a lot of new things from it. If yes then mention your valuable feedback in the comment box below or if you have any query in buying options in Zerodha then also you can ask. I’ll try to help you ASAP.
FAQ’s on how to buy options in Zerodha
First Log in to the Zerodha console with your kite login then click on your Client ID and then click on the ‘My Profile’ link.
In the left menu, click on ‘Segment activation’ link and then click the ‘Activate segments’ button then you need to fill the form and then click the ‘Submit’ button
The F&O segment will be enabled in 48 hours.
First open NSEindia then select which option chain you have to buy after choosing that open Zerodha kite app and then search for the same option chain(same expiry date and stock price) and then add it.
There is no specific verdict on that because both are better if you have skill and experience.
Yes, Of course but it didn’t happened in a day. For this you have to apply best strategy and tricks every time.
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