Benefits of Trading in Nifty Future and Nifty Option

 Before getting into knowing the advantages of Nifty Futures and options, we will understand what Nifty Future and option. Options are derivative products in which the buyer holds the right to execute an option to buy or sell shares or another underlying at a predetermined price (also known as the strike price) during a predetermined time period. Nifty options are a type of derivative instrument in which the underlying asset is the Nifty; similar to Nifty futures, they have a lot size of 50, different strikes, and multiple expiry periods. It is a derivative similar to futures, but unlike futures, your profit/loss will not be linear depending on the NSE NIFTY’s up/down movement.

As we all know, a futures contract is a derivative contract whose value is determined by an underlying asset. The underlying in the context of Nifty futures is the Index itself. As a result, the Nifty Futures derive their value from the Nifty Index. This means that if the Nifty Index rises in value, so will the value of Nifty futures. Similarly, if the value of the Nifty Index falls, so will that of the Index future.

• Lesser number of Spreads:
  The spread denotes the bid-ask difference, which is the rate difference between buyer and seller quotes. It is significant for traders, particularly those who use the scalping trading method. The lower the difference, the lower the trading charges. Because nifty futures and options are widely traded, the bid-ask spread is nearly as large. As a result, trading in the Nifty provides you with better returns to buy or sell.
• Diversified:
  The Nifty Future is completely diversified. The 50 stocks in the Nifty Futures Index come from more than ten different industries. This diversification provides stability and thus protects you when your point of view shifts in the wrong direction. This diversification also allows us to see a high-level view of the market in the short and long term trading.
• Lower margins:
  The margin required to enter a position in nifty futures is only 8%. When compared to stock futures, an average 13 percent margin is required to obtain positions. For intraday positions, some brokers offer a trade in nifty futures with as little as Rs.5000 margin. In addition, some brokers provide nifty futures tips.
• High Liquidity:
  Because of the high liquidity in Nifty options, it is simple to conduct research and make a trading decision. You simply need to examine a variety of out-of-the-money and in-the-money options, as well as open interest. These options can be used to hedge your long or short positions.
• Hedge against stock portfolio:
  As the Nifty is a benchmark index, the majority of stocks exhibit the same trend. Because the stocks are likely to follow the Nifty change, it can be used as a hedging tool against your stock portfolio. Hedging, on the other hand, is reserved for large investors with large capital. As a result, small traders can exit if the market becomes extremely dangerous.
• Far Month Liquidity:
  Because there is sufficient liquidity in Nifty futures contracts related to stock futures. It is simple to take a position by purchasing next and far month Nifty contracts. Complex trading strategies can be carried out on the Nifty futures using the long and short sequence.

Brokerage plays an important role in any Future and options transaction, and it holds the same for Nifty F&O aswell.