Advantages & Disadvantages Of Nifty Option
Nifty options are simple vanilla options. It’s mainly the European options by the nature.
There are lots of nifty options available within different strikes and have a small difference of
50 points between every option.
There are some of advantages and disadvantages of nifty option. Here, I try to discuss al these
briefly as an aid to the investors especially for the new comers in the option trading.
Advantages of nifty trading:
Flexibility is one of most important advantages of nifty option. It can easily be used within a
wide range of strategies like very conservative to the high risk.
Second one is the leverage. Nifty option facilitates an investor a fixed leverage without being
committed to trade.
Third one is the limited risk. The amount of risk is so small that you don’t need to worry about
it at all.
The last one is hedging. It allows the investors to alter or change their position to a suitable one
when the stock price extensively fluctuates.
Disadvantages of nifty trading:
Nifty option has a bit higher cost in the percentage than trading the primary stock. This cost
can significantly eat the profit.
Liquidity is another drawback of this option. As there is lots of array of various prices
available, some investors experience low liquidity that creates complexity in the trading.
Nifty options are so complex that it requires a close observation and the maintenance as well.
Time decay is another most important drawback of the nifty option. As almost all the options
are time sensitive, a good number of options expire worthlessly. This only happens with the
investors who like to purchase the options.
In some especial cases the investors have to take unlimited risk that is really difficult for the
new investors or the people who have shortage of capital. There is not any alternate way that
can lessen the risk of these options like writing uncovered options.
In the nifty options anyone can easily formulate any plan to take benefit of volatility of the
primary stocks as well as the prices. Most of the investors take these disadvantages seriously
and try their best to make their step free of any danger. There are so many sites in the online
that is ready to help the investors with lots tips given by the market experts, market news and
with the analytic report regarding future market situation as well.
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