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  • The Ultra-Beginner Guide For Expiry Date

    An expiry date usually refers to the last day when a product or service can be used. Expiry marks the conclusion of a contract or an asset in the market. When trading in the derivatives market, such as futures and options contracts, the expiry date refers to the contract’s final date after which it will no longer be valid.

    When a derivatives contract reaches its expiration date, it has a variety of consequences for derivative traders as well as the Indian stock market as a whole.

    Before we get into the basics of expiry trading, it’s important to know that expiry day trading is extremely risky and it takes a certain level of experience before you can become profitable. However, if you would like to get started with options and futures analysis, you need access to the best trading platform from one of the best online share brokers in the country. At Zebu, we give you all of this and more – we also offer the lowest brokerage for intraday trading.

    The meaning of derivatives contracts

    Futures and options contracts on stocks, commodities, currencies, and other assets are examples of derivative contracts. Futures and options are similar in that they both convey a guarantee to buy or sell an asset at a certain price at a future date. But that’s where the resemblance ends.

    You are not obligated to keep your pledge under an Options contract. You can simply choose to ignore the contract, and it will end on the agreed-upon date. A Futures contract, on the other hand, requires you to complete the deal by the expiration date. You must not allow the contract to lapse. This is what distinguishes futures from options.

    The Indian stock exchange has a predetermined standard expiry date for the F & O market to remove any confusion among traders. Every month on the last Thursday, we call it an expiry day.

    For example, if you buy a futures contract on January 14th, 2022, the contract will expire on January 27th, 2022, the last Thursday of the month.

    If the final Thursday of the month is a trading holiday, meaning the stock market is closed on that day, the previous day, i.e. the last Wednesday of the month, is the expiry date.

    Please note that Nifty and Bank Nifty indices have weekly expiries which happen every Thursday of the week. And stocks have a monthly expiry which is the last Thursday of the month.

    What happens during the expiry date?
    Here’s what occurs when a derivatives contract reaches its expiration date in different sorts of contracts —

    Options Contracts

    You are not obligated to fulfil the contract in the case of options contracts. As a result, if the contract is not used before the expiration date, it will simply expire. The seller forfeits the premium you paid to purchase the option. You don’t have to pay any additional fees.

    Futures Contracts

    You would have to fulfil the deal on the expiration date if you were to use a futures contract. This happens in two ways.

    You can purchase a new contract to replace the existing futures contract. Assume you purchased a futures contract to purchase 1000 shares of XYZ Company. You can buy another futures contract to sell 1000 shares of XYZ firm on the expiration date.

    The first contract to sell the shares is nullified by this new contract, which will now be in your position. You would have to settle the price discrepancy, if any, in such cases. The price difference is due to the difference in the futures contract’s price. Because stock prices fluctuate every day, the price of the futures contract fluctuates as well. As a result, the price of the futures contract you buy first may differ from the price of the futures contract you buy later. In such circumstances, you’ll have to pay the price difference in order to complete your contract by the expiration date.

    The impact of the stock’s expiration date on its price
    Due to the fact that the expiry date signifies the end of F&O contracts, there is a lot of volatility on the stock exchange as a whole. The stock market may turn bullish or bearish depending on the type of futures contracts settled on the expiry date.

    Arbitrage trading also has an impact on stock market prices towards the expiration date. Arbitrage trading is when F&O traders want to profit from the small price difference in the same security’s contracts on different expiry dates. They might buy on the secondary market and sell on the F & O market, or the other way around. Price changes from this buying and selling have an impact on the stock market as a whole. However, this effect is just temporary, as the stock market corrects itself once the expiration date has passed.

    In Conclusion

    Know the expiry date of the derivative contracts you buy if you trade futures and options. The settlement of your contracts is determined by the expiry date, and you should be aware of what happens on that date. Also, as a stock trader, you should be aware of the impact of the expiry date on the overall stock market. Due to increased volatility around the expiry date, you can either book short-term profits or avoid trading altogether to reduce losses.

    As we mentioned before, this is the most basic introduction to what happens on an expiry day. In future articles, we will get into more details about a few popular expiry day strategies. For now, you just need to understand that to get started with futures and options analysis, you need the lowest brokerage for intraday trading as well as the best trading platform. As a leading online share broker, we at Zebu have created the perfect trading platform with an extensive amount of features to make trading simply for you.

  • Leading And Lagging Indicators For Beginners

    For those who trade using technical analysis, technical indicators are the core of their trading.

    Whether you day trade or swing trade, these indicators are extremely important. Technical analysis’ principal purpose is to forecast future price movement. Understanding the art of trading patterns and indicators will help you in understanding them better.

    Technical indicators are separated into two types: leading and lagging indicators.

    In this post, we’ll look at both types of indicators to see which one best suits your trading style. But before we begin, let’s talk about access to indicators. When you start trading, it is important to have one of the best trading accounts from the best share broker in terms of the number of indicators you can use. Zebull Smart Trader is a high-end online trading platform that gives you the widest range of leading as well as lagging indicators for you to choose from. With us, you can execute any complex strategy with any number of indicators.

    What is a Leading Technical Indicator, and how does it work?

    Leading indicators are used to anticipate future price changes and provide a trading advantage to the trader.

    Leading indicators provide an early signal of entry or exit and show price momentum over a period of time that is utilised to calculate the indicator.

    The following are some well-known leading indicators:

    Stochastic Oscillator
    RSI
    Volume
    William % R
    Volume profile

    Because volume gives us the buying and selling pressures in the market, it tends to indicate changes even before the price moves. For example, when a market top is formed, you can clearly see an exhaustion of buyers. If that is followed by an increasing number of sellers, then you can assume that the trend has reversed.

    What is a Lagging Technical Indicator, and how does it work?

    Lagging indicators are price reversal indicators that follow a trend and predict price reversals.

    These are especially useful if you follow a trend following strategy.

    They don’t predict future price changes; instead, they just notify us whether prices are rising or falling so that we can invest accordingly.

    Despite the delayed feedback, many traders prefer lagging indicators since they let them trade with greater confidence by confirming their results.

    Before buying a stock, traders usually employ two or more lagging indicators to confirm price movements.

    Examples of lagging indicators:

    Moving Averages
    Moving averages convergence and divergence

    Let’s look at an example:

    A 50 period 200 period moving average is a typical example of a lagging indicator setup.

    When the 50 MA crosses below the 200 SMA, a security is said to be bearish. When the 50 MA crosses above the 200 SMA, a security is considered to be bullish.

    If you consider the first signal from the moving average crossover and execute your trades, they might end up in a loss.

    The key reason for this is that by the time the price moves lower and the SMAs respond, the price would have already dropped significantly and reversed.

    Similarly, when we receive a bullish crossover indication, it is better to wait for a pullback before entering a trade.

    What is the difference between the two types of indicators?

    Signal Generation
    Leading indicators provide trading signals when a trend is about to begin, whilst lagging indicators track price movements.

    Time Periods to Avoid
    Leading indicators attempt to predict price using a shorter timeframe and, as a result, trail price fluctuations.

    Lagging Indicators provide signals after a trend or reversal has occurred. They can be used to determine the direction of the trend.

    Drawbacks of leading and lagging indicators

    Leading indicators are prone to false signals because they react quickly to price changes.

    Lagging indicators take a long time to react and might also send out false signals.

    Using Leading and Lagging Technical Indicators in Combination
    Traders can use a combination of a leading and lagging indicator to create a better trading system. For example, you can use RSI and Moving average crossover. In this strategy, you can wait for a buy/sell signal from RSI (a leading indicator) and wait for a confirmation from the moving average crossover to initiate a trade. Combining leading and lagging indicators can be a simple but powerful way to trade.

    Creating a trading strategy is an art. You need the best trading accounts from the best share broker to give you access to all types of leading and lagging indicators. This is exactly what we offer at Zebu. We have created a highly advanced online trading platform that helps you take the best possible trades with a host of indicators. To know more about Zebull Smart Trader, please get in touch with us now.

  • Strangles And Straddles For Beginners

    Both strangles and straddles are options techniques that allow an investor to profit from big price changes in a company, whether the stock moves up or down. Both strategies involve purchasing an equal number of call and put options that expire on the same day.

    Option prices are intrinsically related to the price of something else, making them a sort of derivative security. You have the right, but not the responsibility, to buy or sell an underlying asset at a specified price on or before a specific date if you purchase an options contract.

    A call option allows the holder to purchase stock, whereas a put option allows the holder to sell shares. An option contract’s strike price is the price at which an underlying stock can be purchased or sold. Before a position can be closed for a profit, the stock must rise above this price for calls and fall below this price for puts.

    Before we give you an explainer of the strangle and straddle, it is important to know that you need to analyse them for maximum profits. At Zebu, one of the fastest-growing brokerage firms in the country, we have created the best Indian trading platform with the lowest brokerage for intraday trading. If you would like to simplify your option trading game, we are here to help you out.

    Options Straddle

    A straddle trade is one technique for a trader to profit on an underlying asset’s price change. Let’s imagine a company’s latest earnings are due in three weeks, and you have no idea whether the news will be positive or negative. Because the stock is expected to go dramatically higher or down when the results are published, the weeks leading up to the news release are an excellent opportunity to enter into a straddle.

    Let’s pretend that the stock is trading at Rs 1000 in April. Assume the price of a Rs 1000 call option for June is Rs 20 and the price of a Rs 1000 put option for June is Rs 10. A straddle is created by buying both the call and the put options. If the lot size is 200, your total investment would be (20+10)*100 = Rs 3000.

    The straddle will gain value if the stock rises (because of the long call option) or falls (due to the short call option) (because of the long put option). Profits will be achieved as long as the stock price swings in either direction by more than Rs 30 per share.

    Profits will be achieved as long as the stock price swings in either direction by more than Rs 30 per share. Since ATM options are bought, this strategy is called a long straddle. Traders with large capitals often choose short straddles to make additional income.

    In short straddle, instead of buying the ATM call and put options, traders sell them. It is a directionally neutral strategy.

    Options Strangle

    The improvisation of the strangle over the straddle mostly helps in lowering the strategy cost. But, the number of points required to break even rises.

    The strangle requires the purchase of OTM call and put options. Remember that the OTM strike is usually cheaper than the ATM strike, therefore setting up a strangle is less expensive than setting up a straddle.

    For example, if the Nifty is currently trading at 7921, we’ll need to buy OTM Call and Put options to put up a strangle. Keep in mind that both options must have the same expiration date and underlying.

    Assume you purchase OTM options with a 200-point spread. As a result, you would purchase the 7700 Put option and the 8100 Call option. These options are currently trading at a price of Rs 20 and 30, respectively. The total premium for executing the strangle is 50. Nifty must expire above 8100 or below 7700 to be profitable in this method.

    When you sell OTM options, then it is called a short strangle. It is a neutral strategy that is profitable if the underlying expires between the two strikes of the OTM options.

    While this is just an overview of the strangle and straddle, two of the most common options trading strategy, we will get into a detailed look at the strategies with respect to moneyness as well as option greeks in a later post.

    As we mentioned before, trading strangles and straddles requires the best Indian trading platform and the lowest brokerage for intraday trading. As one of the best brokerage firms in the country, we have created a powerful trading platform that makes option analysis easy for you. To know more about its features, please get in touch with us now.

  • How Do Economic Sanctions Work?

    It was on Thursday that President Biden announced more sanctions against Russia, this time aimed at its financial sector. Russia’s biggest banks will be cut off from the U.S. financial system, and some of its biggest businesses, such as Gazprom, will not be able to get money from American banks.

    Economic sanctions are penalties that are imposed on a country, its officials, or private citizens, either as punishment or as a way to make people think twice about certain policies and actions.

    Trade embargoes and asset seizures are examples of economic sanctions. They can be used to stop people from going to the country or to stop them from exporting goods. By definition, sanctions are for people who aren’t easily subject to law enforcement by the country that is sanctioning them. For example, as a Russian citizen, President Putin cannot be tried by the law enforcement of the USA. But in order to still hold him accountable for certain actions, sanctions are imposed on his country’s economy.

    Economic sanctions are a policy tool that doesn’t use military force to punish or stop bad behaviour. They can be used all over the world, even if the sanctioning country doesn’t have a border. They can be costly for their targets because they will be cut off from global trade and economies.

    Economic sanctions can also be a weak and ineffective policy tool. They can have little effect on the governments they target and a lot on their most vulnerable citizens.

    It is because the U.S. and the European Union are the world’s biggest economies and trade blocs that they have a lot of power to use sanctions.

    In many ways, sanctions can be put on people, but they can also come in many different forms.

    Economic sanctions can be put in place by a single country or by a group of countries or an international organisation.

    Sanctions can be used in multiple ways

    When a country doesn’t want to trade with you, it puts a “trade embargo” on them. This means that you can’t do business with them, but sometimes there are exceptions for humanitarian reasons. It has been a long time since the United States has banned trade with Cuba, Iran, and North Korea.

    Export controls: Export restrictions stop the sale of certain products, services, and intellectual property to certain countries. They often limit the sale of weapons, technology that can be used in the military, or, as for Russia, oil drilling technologies and equipment.

    Capital controls: these can limit investment in certain countries or industries, or they can make it difficult for a country’s issuers to get money from other countries.
    There are many types of trade sanctions, and they can include import restrictions for certain countries, regions, or industries.

    Asset freezes or seizures: Assets in sanctioning countries can be frozen or seized, which stops them from being sold or taken out of the country.

    Travel restrictions: Officials and private citizens, as well as their immediate families, may not be able to travel to countries that have been punished.

    Examples of sanctions

    Economic sanctions against China include restrictions on U.S. imports from China’s Xinjiang region because of human rights violations against Uighurs.

    In 2014, Russia took Crimea from Ukraine, and the U.S. and the European Union also put sanctions on Russian officials, businesses, and companies because of the move.

    Economic sanctions against apartheid-era South Africa are often said to have played a role in the peaceful transition to majority rule there.

    Sanctions against Saddam Hussein’s Iraq, on the other hand, did not stop him from running the country and were called by some a “humanitarian disaster.”

    In conclusion:

    The success of sanctions can be measured by how well they achieve the policy goals they were set out to achieve, or how much they cost the countries and people they target, if punishment is the goal. They can also make the people of the country they want to punish pay for it, as well as the businesses of the country that is being punished.

    If the goal is to change the behaviour of the countries and people who are being sanctioned, their incentives and options will play at least as big a role as the sanctions’ power.

    For example, in Russia’s case during this war, these sanctions will hurt Russian citizens economically. The Russian index fell more than 45% since the start of the war and sanctions are an indirect way of putting pressure on Russian citizens to oppose the rule of the President.

  • A Quick Guide To Price Action Trading

    Price action is the study of market price movement. Why not examine, analyse, and learn from the price itself?

    The price shown on a chart is based on the combined beliefs, knowledge, and actions of market participants. Buyers are in charge if prices rise. Prices falling suggests sellers are in command. In a sideways market, buyers and sellers cannot agree. Also, price action traders ignore fundamental events, believing the markets already know about them. For them, price movement is the best indicator. Price action is employed by everyone from ordinary investors to floor traders and even institutions. Price action is a fantastic approach to look at markets.

    Many believe that prices move based on public opinion. Because people can have opposing views while trading in the same market. There are two types of traders: those that buy an instrument when the price is approaching a resistance level, and those who wait to see if the price bounces off or breaks through. In any case, both traders appear to be wrong since they lack market knowledge and appear to be following the crowd. The financial markets are fundamentally unpredictable, making future price movements impossible to predict.

    Trading price action strategies requires the best Indian trading platform with a wide range of features. With Zebu, one of the best stock brokers in the country, your online stock trading journey will be drastically enha

    How to trade with price action

    Many price action trading methods use a two-step procedure to discover and exploit market trading opportunities.

    Find out what’s going on now.
    As previously stated, a market can go up, down, or sideways. Looking at the prices of various assets should reveal the market’s movement.

    Find the optimal trading moment.
    After determining the current market conditions, a trader looks for a profitable trading opportunity. If prices are rising, the price action should indicate whether prices will continue to rise or if a correction is imminent. For example, consider a price action trade in Reliance. Assume that INR 2,500 is a resistance. A price-action trader would wait for a break of INR 2,500 to buy Reliance. If it breaks out above INR 2,500, the stop loss would be below the previous support of INR 2,400.

    Most price action traders enjoy candlestick charts because they are informative and visually appealing. A candlestick shows the high, low, opening, and closing prices of an asset through time. A candle that closes higher than its initial price is green (bullish), while one that closes lower is red (bearish).

    By closely examining the prices, a price action trader can learn a lot about how the market operates. The size and information provided by a candle are determined by the pricing points used to create it. As a result, some candle types display bullish hammer, bearish hanging man, and neutral Doji. As time passes, a chart shows more and more candlesticks. When candlestick patterns appear on a chart, they reveal more price data.

    When employed correctly, candlestick patterns can show traders how the market moves like “confirmation, reversal, or neutral.”

    In any case, there are patterns that imply the dominating tendency will continue.

    Head and shoulders and double bottoms are reversal patterns that indicate the current trend is poised to reverse. Neutral patterns, like symmetrical triangles, can occur in any market and, while they indicate a major shift, they provide no direction.

    It’s more important to understand what they say than how they were made. Price action traders can utilise trendlines to find the right entry and exit.

    Price Action Patterns

    In price action tactics, you can find out what individuals are thinking by watching price fluctuations. These are some of the market’s most reliable price action setups.

    A long wick
    A candle has a body and wick(s). This is the distance between the opening and closing prices (the high and the low). Long wick candles are prized by price action traders because they reveal price movement. During that period, buyers tried to drive prices up, but sellers fought back, bringing prices back to where they started the day. A price action trader can now either back the sellers or wait for more proof. No matter how they seem, long wick candles are vital to price action traders.

    Inside bar
    Traders wonder if breakouts are legitimate when they occur. The term “within” refers to when one or more candles trade inside the major breakout candle’s high and low positions. This is called an inside bar. If an inside bar occurs after a breakout, it is a sign of the strength of the breakout according to price action theories.

    Trading Trendlines
    Trendline trading is the use of lines to determine the ideal places to enter trades in up or down markets. In an uptrend, a trendline is projected from a swing low to a swing high. It’s a “trend line.” Retracements to the trend line are effective entry points. In a ranging market, horizontal trendlines might identify support and resistance zones.

    Essentially, price action trading can be used to locate and trade low-risk, high-reward trades.

    If you are a price action trader or want to get started with this concept, you need the best Indian trading platform from the best stock broker to back you up. With our state-of-the-art platform, you can take your online stock trading to the next level. To know more about our products and services, please get in touch with us.

  • 5 Things To Keep In Mind During Volatile Markets

    Right as we are escaping the third wave of a pandemic, we find ourselves in the midst of a war. And naturally, that has made global markets topple and become extremely volatile.

    What exactly is market volatility? Market volatility, in technical terms, refers to the standard deviation of stock market returns from the mean. Volatility is the fluctuations of the stock market in layman’s words. What is the significance of market volatility? It is significant for three reasons. To begin with, market volatility is a measure of risk; the higher the volatility, the higher the market risk. Second, while volatility cannot be avoided, it may be managed. Your volatility plan will come in handy in this situation. Finally, there is an inverse link between stock market volatility and returns. Higher returns are associated with lower volatility, and vice versa.

    When the Nifty index is compared to the VIX, or volatility index, the dramatic surge in the Nifty after 2009 has been accompanied by a continuous and secular decline in the VIX. Similarly, the Nifty had reached a long-term bottom when the VIX reached a peak in 2008. So, how should you invest in volatile markets, given that volatility cannot be avoided entirely?

    Before we get started, it is our duty, as an online stock broker, to caution you about keeping your capital safe in a volatile market. However, if have advanced knowledge about a volatile market, you can make use of it to drastically improve your profits. That is why we have created a high-end online trading platform with the lowest brokerage for you to maximise your returns from the market.

    Here are five simple yet effective methods to manage a volatile market.

    1. Stick to your financial strategy

    That is the first and most important thing to remember. If you look at the VIX chart over the last several years, you’ll notice that it’s been on a secular downward trend. However, if you look at the interim period, you’ll notice that there have been at least 8-10 occasions when volatility has risen significantly. The main point is to stick to your long-term financial plan. This strategy is geared at your long-term objectives and has some built-in safeguards to deal with market volatility. The systematic investment plan (SIP), for example, is meant to take advantage of market volatility. SIPs are critical to ensuring that the power of compounding works in your favour because they are the foundation of your financial strategy. If you look at the performance of SIPs over the last 9 years, you’ll notice that they’ve outperformed the index because they’ve taken advantage of market volatility.

    2. Focus more on quality and less on risk

    This is in relation to your stock and stock mutual fund holdings. We usually add more mid-caps, small caps, sector funds, thematic funds, and so on when the markets are on a roll. When the markets are turbulent, never take on too much concentration risk. Second, look for stocks that have a history of strong levels of transparency and corporate governance. In a volatile market, they’re your greatest bets. Third, concentrate on high-growth equities, high-margin enterprises, and industry leaders. In times of market volatility, they are the most likely to outperform.

    3. Hedge with derivatives

    Futures and options are seen by many investors as a low-margin alternative to cash market trading. They are, in fact, great risk management tools. These derivative products should be used most effectively in volatile markets. When you’re long on equities in a turbulent market, for example, you can use futures to lock in profits while still benefiting from roll premiums. Second, you can utilise put options to hedge your risk, as well as beta hedging with index futures to lower your portfolio’s risk. If you’re ready to be a little more daring and aggressive, volatility tactics like straddles and strangles can help you take advantage of tumultuous markets. In these uncertain times, you have a lot of options.

    4. Make sure your asset mix is well-balanced

    When markets are volatile, how do you manage your asset mix? During volatile times, certain assets do not exhibit the same level of volatility as equities. When equities indexes are turbulent, for example, debt markets tend to be more stable. As a result, having debt in your portfolio gives stability and the security of a steady stream of income. Gold, on the other hand, usually benefits from macroeconomic volatility. In these turbulent times, increasing your gold exposure through gold ETFs or SGBs can be beneficial. The moral of the storey is to keep your asset mix varied to combat volatility.

    5. If in doubt, don’t do anything.

    Traders typically believe that there are only two trading methods to master: when to buy and when to sell. Actually, there is a third option: doing nothing. It is quite easy to be enticed into the market by the prospect of making money off a volatile market. The general guideline is that if you don’t understand the market’s undertone, you should stay out of it. Staying out at the correct time and doing nothing can be a crucial element of strategy in unpredictable markets.

    As a fast-growing online stock broker, we at Zebu always watch out for our investors and traders. If you choose to execute safe strategies during this volatile time, we back you up with the lowest brokerage possible. To know more about our state-of-the-art online trading platform and its features, please get in touch with us now

  • Do You Have What It Takes To Invest In Small-Cap Funds?

    Many small-cap mutual fund investors saw 100% gains in the previous year. It’s no surprise that we receive several inquiries each day from people who want to know if they can still make great returns by investing in small-cap funds. Some investors are also concerned about whether they should sell small-cap funds because the stocks have already appreciated significantly. So, what should your plan of action be?

    Is it possible to invest in small-cap mutual funds in a secure manner? What aspects should you consider before selecting mutual funds? Is it feasible to avoid losses in small-cap mutual funds by playing it safe?

    Investing in small-cap funds comes with its associated risk. However, if you do it with Zebu, one of India’s leading share market brokers, we will give you the best online trading platform and investment platform to perform a comprehensive analysis. With us, you will have access to the to trade and invest in small-cap stocks.

    Before you invest in small-cap mutual funds, keep the following tips in mind.

    Before you go any farther, you should clarify one point. If you invest in equities mutual funds, especially small-cap mutual funds, you simply cannot avoid risk and volatility. Small-cap funds, as you may know, invest in very small companies with a promising future. However, the majority of these businesses have governance flaws and fail to deliver on their promises. If these companies falter even slightly, the stock market will punish them harshly. In a short period of time, the share prices could be reduced to zero. When you invest in small-cap schemes, you are incurring this risk.

    What are your options for dealing with this threat? You can’t completely prevent it, but you can soften the blow with a few safeguards. To begin with, you should only invest in small size funds if you have a very long investment horizon, meaning, you can hold the fund for several years. If you don’t have at least seven to ten years, don’t invest in small-cap plans. This will allow you to recuperate your losses over time.

    Two, small-cap funds should never be the mainstay of your portfolio. Small-cap schemes are notorious for going through extreme swings in prices. As a result, they will not provide you with consistent returns. So, it is better to limit your exposure to them to a fraction of your portfolio.

    Three, choose fund houses and managers who are well-known for their expertise in managing small-cap funds. Always keep in mind that investing in small-cap schemes is really difficult; it requires recognising potential firms, taking significant interests in them ahead of time, and patiently holding on to them in order to profit. Only a few fund managers have been able to consistently give superior performances over time.

    Four, make sure that the fund isn’t too big. In the small-cap space, finding investment opportunities is quite challenging. It becomes exceedingly difficult when you have a vast corpus. This is why many fund houses are forced to stop their subscription programmes after a specific period of time. As a result, select a scheme with a limited corpus.

    Last but not least, do not begin investing in small-cap schemes when you see tremendous gains and then abandon them at the first hint of a downturn. This is a certain way to lose money. If you get concerned about your assets during a market downturn, it is apparent that you lack the essential risk appetite to participate in small-cap schemes. Invest in small-cap schemes frequently over a long period of time, regardless of market conditions, if you have the proper risk profile and a long-term investment plan.

    Finally, small-cap investments are only for the most daring investors. If every market slump gives you the jitters, it’s best to stay away from them.

    As we have mentioned before, small-cap stocks come with an immense amount of risk. But for those brave hearts who back up their investments with authentic research, we at Zebu have the best trading account for you. As one of the fastest-growing share market brokers in the country, we are proud to offer the best online trading platform for our clients. To know more about them and how you can invest in small-cap funds with us, please get in touch with us now.

  • Calendar Spreads In Futures Contracts – A Simple Arbitrage Trading System

    As the name implies, a calendar spread is a spread technique in which you profit from the price difference between futures contracts for the same underlying in different expiries. When compared to taking a directional view on the Nifty or individual stocks, this is considered a lower-risk and more predictable strategy. Calendar spread trades are popular among institutions and HNIs looking for low-risk tactics that allow them to earn significant rupee returns based on volume.

    Executing calendar spreads requires a huge amount of analysis and the lowest brokerages you can find in India. As one of the fastest-growing stock broker companies in India, we at Zebu have created the best trading platform for calendar spreads and other futures and options strategies.

    Let’s take a look at what a Calendar Spread is and how it works.

    What Is A Calendar Spread?

    The Calendar spread is the purchase and sale of two futures contracts on the same underlying for different expiries. By buying one contract and selling the other, you can establish a calendar spread between Nifty June and Nifty July, for example. This way, your calendar spread payoffs depend on the spread increasing or contracting. For example, the Calendar spread definition states that you go long on the Calendar spread when you expect the spread to broaden and short on the Calendar spread when you expect the spread to reduce.

    Calendar spread process flow

    Remember that you can execute a Calendar spread in both options and futures. Both are popular in India, but for the sake of simplicity, we will focus on the calendar spread on Nifty futures. Calendar spreads on options will likewise follow the same logic. Calculate the fair value of the current month contract as the first step in the Calendar spread. The fair value of the mid-month or far-month contract can be calculated in the second stage. You can buy the underpriced contract and sell the overpriced contract once you notice the mispricing. Your Calendar spread is now complete.

    You can either buy the current month contract or sell the mid-month contract based on the relative mispricing. You can also sell the current month contract and buy the mid-month contract as an alternative. There is no restriction on this.

    Let’s look at an example
    RIL June Futures are bought at Rs.2,245 and RIL July Futures are sold at Rs.2,250. Your spread is Rs.5 and you expect it to alter in your favour so that you can benefit. Assume that the RIL June futures rise to Rs.2260 and the RIL July futures rise to Rs.2,257 after a few days. When the calendar is closed, you earn Rs.15 on June futures but lose Rs.7 on July futures. In other words, you made an Rs.8 profit on the calendar spread.

    The spread changed from a positive of Rs.5 to a negative of Rs.-3, resulting in a net profit of Rs.8 on the calendar spread. This is how spread earnings are made. In most cases, the risk associated with such calendar spreads is minimal.

    Key factors to keep in mind

    It’s worth noting that when you buy and sell a calendar spread, you’re buying and selling futures of the same stock, but from contracts with different expirations, like in the example of Reliance Industries. What is supposed to be gained here is the difference between the prices of the two contracts. Of course, in our example, you received a bonus because the calendar switched from a positive to a negative spread, resulting in a significantly larger profit. Calendar spreads have a modest trading risk, so the earnings you make on them are also small. As a result, this is better suitable for risk-averse institutions that rely on volume to generate rupee gains.

    Now we’ll look at the final feature of the calendar spread. What criteria do you use to determine if a contract is underpriced or overpriced? You must use the base approach or the cost of carrying approach for this. The predicted stock price is represented by the futures price. To put it another way, the spot price is simply the current value of the anticipated futures price. You may determine which contract is underpriced and which is overpriced using the cost of carrying method. Then, in accordance, you buy the underpriced contract and sell the overvalued, resulting in a calendar spread.

    Just a word of warning. Only by continuing to hold the position as a spread does a calendar spread remain low risk. If you’re generating money on one leg, for example, it’s not a good idea to record profits on that leg while holding a naked position on the other leg. When the logic of the calendar spread is broken, it becomes a speculative trading position with significant risk. As a result, only a combination approach may be used to open and close a Calendar spread.

    Reverse Calendar Spread

    When trading options on calendars, the reverse calendar spread concept is increasingly prevalent. The reverse calendar spread is when you buy a short-term option and sell a long-term option with the same strike price on the same underlying securities. You might buy a June 1500 Infosys call option and sell an August 1500 Infosys call option, for example.

    The majority of spreads are built as a ratio spread, which means that the investments are made in uneven quantities or ratios. When markets make a large move in either direction, a reverse calendar spread is usually the most rewarding. Because of its complex structure and larger margin requirements, it is more widely used among institutions than among individuals.

    When it comes to executing calendar spreads, you need access to the best trading platform from one of the most reliable stock broker companies in the country. We also complement our platform with the lowest brokerage for trading. Please get in touch with us to know more about our services and products.

  • Common Options Trading Mistakes And How To Avoid Them – Part 3

    In our journey to list the common options trading mistakes that beginner traders make, we are at the very end. In this article, we will cover the final 4 common mistakes that options traders make and how you can avoid them by trading smarter.

    Before we begin though, you need to understand that options can help you grow a small account into a much larger one. However, you can enjoy all of that with the lowest brokerage you can find for options trading. Zebu gives you this and more. As one of the best brokerage firms in the country, you also get the best trading accounts from us. Please get in touch with us to know more.

    7. Failure to Factor Upcoming Events

    When you trade options, there are two things you need to keep an eye on: the earnings and dividend dates for the stock you’re betting on.

    If a dividend is coming up and you have sold calls, there is a higher chance that your premium will rise due to positive market sentiments. As the holder of an option, you are also not entitled to the dividends of the company. Therefore, you have to cover your call option and buy the underlying stock.

    The smarter way to trade

    Be sure to factor in upcoming events. Also, unless you’re ready to take a larger risk of assignment, avoid selling options contracts with upcoming dividends.

    Trading during earnings season usually means you’ll see more volatility in the underlying stock and pay more for the option. If you want to buy an option during earnings season, you can create a spread by buying one option and selling another.

    Understanding implied volatility can also help you make better decisions about the current price of an option contract and its anticipated future fluctuations. Implied volatility is calculated from the price of an option and reveals what the market thinks about the stock’s future volatility. While implied volatility cannot predict which way a stock will move, it can help you determine whether it will move significantly or only slightly. It’s important to remember that the bigger the option premium, the greater the implied volatility.

    8. Legging Into Spreads
    Most rookie options traders attempt to “leg into” a spread by purchasing one option first and then selling the other. They’re attempting to reduce the price by a few pennies. It simply isn’t worth taking the chance.

    This scenario has also burnt many seasoned options traders, who have learnt their lessons the hard way.

    The smarter way to trade

    If you want to trade a spread, don’t “leg in.” Spreads can be traded as a single deal. Don’t take on unnecessary market risk.

    You might, for example, buy a call and then try to time the selling of another call to get a slightly higher price on the second leg. If market circumstances deteriorate, you won’t be able to cover your spread, so this is a losing strategy. You can be stuck on a long call with no plan to follow.

    If you want to try out this trading method, don’t buy a spread and wait for the market to move in your favour. You may believe that you will be able to resell it at a greater price later, but this is an unrealistic expectation.

    Always treat a spread as a single trade rather than try to deal with the details of timing. You have to get into the trade before the market starts going down.

    9 Ignoring Index Options for Neutral Trades

    Individual stocks can be quite volatile. For example, if there is a major unforeseen news event in a company, it could rock the stock for a few days. On the other hand, even serious turmoil in a major company that’s part of the Nifty50 probably wouldn’t cause that index to fluctuate very much.

    What’s the moral of the story?

    Index-based options trading can protect you from the massive swings that single news items might cause in individual stocks. Consider neutral trades on big indexes, and you can minimise the uncertain impact of market news.

    The smarter way to trade

    A short spread (also called a credit spread) on an index could be a good way to make money when the market doesn’t move. In comparison to other stocks, index moves are less dramatic and less prone to be influenced by the media.

    Short spreads are typically designed to profit even if the underlying price remains unchanged. Short call spreads are considered “neutral to bearish,” whereas short put spreads are considered “neutral to bullish.”

    Remember, spreads involve more than one option trade, and therefore incur more than one count of brokerage.

    As we have mentioned before, avoiding these mistakes while starting on your options trading journey can go a long way in protecting your capital. While you take care of your options trading strategy, we take care of the rest. As one of the fastest-growing brokerage firms in the country, we provide our clients with the best trading accounts as well as the lowest brokerages for options trading. To know more about our services and products, please get in touch with us now.

  • Common Options Trading Mistakes And How To Avoid Them – Part 2

    In the previous article, we saw 3 of the most common mistakes beginner options traders can make and the smarter ways to overcome them. This article is a continuation of the list and we will cover 3 more common mistakes that can be avoided by trading smartly.

    But do people make mistakes only with strategies? No, it is important to choose the right technologies as well. As one of the top brokers in the share market, we at Zebu offer trading accounts with lowest brokerage, and an online trading platform to help you focus only on executing your strategies efficiently.


    4. Not Trying Out New Strategies

    Out-of-the-money options and in-the-money options are two types of options that many traders say they won’t buy or sell. These rules don’t make sense until you’re in a trade that’s going against you.

    We’ve all been there. A lot of people break their own rules when they face this situation.

    You can find several options trading strategies that can be integrated into your own system. The most important point here is that buying a call option is so much different than buying a stock or its futures. But it can be a lucrative career if you are starting out with a smaller capital.

    The smarter way to trade

    Be willing to learn new ways to trade options. Remember that options aren’t the same thing as stocks. This means that their prices don’t move the same or even have the same properties as the stock they’re linked to. Time decay always needs to be taken into account when you make plans.

    Find a new trade that makes sense to you. Options can be a great way to get a lot of leverage on a small amount of money, but they can also quickly lose value if you dig yourself in too far. Be willing to lose a small amount of money if it gives you the chance to avoid a disaster in the long run.


    5. Trading illiquid options

    Liquidity is all about how quickly a trader can buy or sell something without creating a big change in the price. A liquid market is one with ready, active buyers and sellers at all times.

    Here’s another way to look at it: liquidity is the chance that the next trade will be done at the same price as the last one.

    It’s simple: Stock markets are more liquid than option markets because they have more people buying and selling them. Stock traders only trade one stock, but options traders may be able to choose from dozens of options contracts.

    If you want to trade stocks, you’ll only be able to buy one type of TCS stock. Options traders, on the other hand, can choose from 3 different expiration dates and a wide range of strike prices to trade. With these many options, the options market will probably not be as liquid as the stock market.

    Stock or options traders don’t have to worry about having enough of a stock like TCS because it’s usually a lot bigger than that. There is more of a problem with small stocks.

    If the stock is illiquid, the options of the same stock will likely be even more inactive. This is usually going to make the spread between the bid and ask price for the options look a little too big.

    For example, if the bid-ask spread is Rs 0.20 (bid = Rs 1.80, ask = Rs 2.00), and if you buy the Rs 2.00 contract, that’s a full 10 percent of the price paid to establish the position.

    It’s never a good idea to start your trade with a 10% loss right away, just by choosing an option with a wide bid-ask spread.

    The smarter way to trade

    It costs more to do business when you trade options that aren’t easy to sell. A simple rule you can follow is to make sure that the associated open interest for the strike price is at least equal to 40 times the number of contracts you want to trade.

    For example, if you want to trade a 10-lot, you should have at least 400 open orders. Open interest represents the number of outstanding options contracts of a strike price and expiration date that have been bought or sold to open a position. Any opening transactions increase open interest, while closing transactions decrease it. You can trade options that are easy to buy and sell. This will save you money and stress. Plenty of liquid opportunities exist.

    6. Waiting Too Long to Buy Back Short Options

    There is only one piece of advice for those who do not buy back short options and it is as straightforward as it gets: Be willing to buy back short options early.

    There are a lot of times when traders will wait too long to buy back the options they’ve sold. There are a million reasons why. For example:
    You don’t want to pay the commission.
    You’re betting the contract will expire worthlessly.
    You’re hoping to make just a little more profit out of the trade.

    The smarter way to trade

    Know when to buy back your short options. If your short option becomes OTM and you can buy it back to take the risk off the table profitably, do it.

    A Rs 100 premium option might go down to Rs 2 at expiry. You wouldn’t sell a Rs 2 option to begin with, because it just wouldn’t be worth it. Similarly, you shouldn’t think it’s worth it to squeeze the last few paisas out of this trade.

    Here’s a good rule of thumb: If you can keep 80 per cent or more of your initial gain from the sale of the option, you should consider buying it back. As one of the top brokers in the share market, we at Zebu offer trading accounts with lowest brokerage, and an online trading platform to execute your strategies. To know more, please get in touch with us now.