If you are reading this post right now, you are certainly looking for a good guide on Options Trading in Upstox. Upstox is an excellent Platform for Options Trading. In this post, I will walk you through the various aspects of Upstox and, more importantly, explain how to do Options Trading in Upstox. Besides, the post will cover Upstox account opening, Upstox charges, trading applications, advanced features, and support.
What is Options Trading?
Options Trading is trading contracts of an underlying asset, which can be an index, stock, or ETF. Many believe that Options Trading involves high risk since Options are highly volatile. Options contracts are cheaper than the underlying asset and are available as Call or Put for a Premium.
While Call is a contract that gives the right to buy an underlying asset at a specific strike price in the future, Put is a contract that gives the right to sell an underlying asset at a certain strike price in the future. Interestingly, you can buy and sell both (Call and Put). However, you need to bear in mind that Options buying is a lot cheaper than Options selling. That's why most Options traders begin as Options buyers and switch to Options selling after achieving some success.
The Premium of an Options contract depends on the strike price of the contract. If the strike price is close to the current price of the underlying asset, the Premium will be pricey. On the contrary, choosing an Options contract with a strike price far from the spot price will cost less. However, according to experts, you must always choose ATM (At the Money) contracts or at least OTM (Out of the Money) contracts with a strike price 100 points away from the ATM's strike price.
A Far OTM contract may be cheaper but may not yield good profits even after the underlying asset makes a big movement. Many traders even prefer buying and selling ITM (In the Money) contracts for more profits.
Upstox is a SEBI-registered discount broker, launched in 2009, which offers trading in different segments comprising equities, commodities, currency, futures, and options. The platform is one of India's most reliable trading platforms, backed by many reliable investors, including Kalaari Capital, Ratan Tata, and GVK Davix. Upstox comes with excellent trading applications and customer support.
Upstox Charges: Account Opening & Brokerage
It's essential to look into Upstox charges, starting right from the account opening charge. You can open an account with Upstox for zero charges. Besides, Upstox charges very minimal AMC, which is as low as ₹150.
When it comes to brokerage charges, Upstox charges low brokerage charges. Here is Upstox's brokerage structure:
- ₹20 or 2.5% (whichever is lower) per order on Equity Delivery
- ₹0 brokerage Charges on Mutual Funds
- ₹20 or 0.05% (whichever is lower) on Equity Intraday, F&O, Currency, and Commodity
How to Open an Upstox Account?
You can open an account with Upstox in just 15 minutes, and the process is entirely paperless. Here are the steps you need to follow to open an account with Upstox:
- To start, you can head over to the Upstox official website, and after you get to the website, enter your mobile number
- Next, you will need to complete your mobile OTP verification
- After that, you will have to create a 6-digit PIN for your Upstox account
- In the next step, you will need to enter your email address and complete your email verification
- Next, you will need to enter your PAN card details and Date of Birth
- Besides, you will need to enter some personal details like Gender, Marital Status, Annual Income, etc.
- After that, you will need to complete your address verification
- Next, you will need to provide the website with your digital Signature by signing in the box under Signature
- Once you provide Upstox with your Digital Signature, you can proceed with your KYC.
- For KYC, you will need to connect your Digilocker with Upstox using your Aadhaar-linked mobile number
- Besides, you will need to all data sharing with Upstox via Digilocker
- Next, you will have to take a live photo of yourself from your device and submit
- After that, you will need to link your Bank Account with Upstox
- Once you link your Bank account with Upstox, you can sign up for the Upstox Free account
- Next, you will need to activate the F&O, Currency, and Commodity segments
- You can skip the next step, which is about adding nominees
- In the last step, you will need to get to the NSDL website to eSign your application and enter your Aadhaar card number
- An OTP will be sent to your Aadhaar-linked mobile number, and you will have to complete the OTP verification using the same OTP
What Makes Upstox a Reliable Options Trading Platform?
Nice Market Overview
Upstox offers an excellent market overview with many essential fundamentals and market news. Upstox's market notifications keep you updated in real-time. It includes the performance of the various sectors, stocks, and indices. Besides, it will keep you aware of upcoming events.
Reliable Trading Applications
Upstox has reliable trading applications for web and mobile devices. The latest Upstox app is called Upstox Pro. I have been using Upstox Pro for the past two years, and I can tell from my experience that it offers a fast and intuitive interface. Besides, I have never encountered any glitches while using Upstox Pro. You can choose between Tradingview and ChartIQ charting tools on both Upstox Pro Web and mobile applications. Besides, you can capitalize on multiple timeframes and technical indicators.
Ready-Made Options Strategies
Upstox's Ready-Made Options Strategies can be very useful for those Options traders who are into two-legged strategies. You can pick from any of the four types: Bullish, Bearish, Volatile, and Neutral. When you click on any of the four types, it will display 3 to 5 strategies along with insights on the Probability of profit, Maximum profit and loss, and Funds needed.
Besides, you can choose between high/low-risk strategies. The app displays a profit and loss graph, and you can increase or decrease your lot size by using the – or + keys. Besides, you can also build your own strategies from what you learn from the Ready Made Options Strategies.
Even when you find a good trading setup, you must backtest your setup with both historical data and real-time data. Sensibull helps you backtest your trading setup in real time, and after you are fully convinced with the results, you can go ahead and try your trading setup with real money. Upstox comes with Sensibull integration, and you can get to the Sensibull website and log in with your Upstox account credentials.
GTT Order Type
Options trading requires you to be proactive and responsive. GTT order eliminates a lot of extra hard work and time that you usually have to put into place Stop Loss and Target orders. Usually, you need to place your buy or sell order first and then place Stop Loss and Target orders individually. However, with GTT, you can place the Buy or Sell order, Stop Loss, and Target in just one order.
It also offers you perfect peace of mind since once you place the GTT order, you can be sure that either your Stop Loss or target is going to hit. It means after you place a GTT order, there is nothing much to do on your part, and you can continue with your other work. However, it's worth mentioning that you can modify your order anytime in case you want to trail your Stop Loss.
Excellent Customer Support
Upstox undoubtedly has the best customer support team in the entire industry, and I can say this from my past experiences. Encountering technical issues in trading is normal, but having them resolved quickly is most important. This is where customer support plays a huge role. Upstox Customer Support team offers technical assistance through live chat, phone, and tickets. While ticket response usually takes 15 minutes, live chat and phone support is much faster in Upstox. Besides, the executives are knowledgeable and dedicated.
How to Do Options Trading in Upstox?
To trade Options in Upstox, you will first need to determine which Options you want to trade. For example, you can choose an Equity Options, or an Index Options, like Nifty50 Options, or Bank Nifty Options. It's worth mentioning that most Options traders in India prefer trading mostly in Nifty50 and Bank Nifty Options.
Once you determine what you want to trade, the next best thing to do is determine your trading setup. You can choose between single legged strategy and double legged strategy. Besides, you will have to find your own convenient trading setup for which you can use price-action and different technical indicators.
How to place an order in Upstox?
Placing an order in Upstox is simple, and you must first add your desired contract to the watchlist. Next, you need to click on Buy and specify the lot size. After that, you can choose between market or limit price and click on Buy again. It should get your order placed.
Next, you will need to put a Stop Loss, which you can do by going to the Positions tab. When you click on your position, you will get the button to exit, and you need to click on it. On clicking the exit button, you will need to select SL and put your price and triggered price.
Which strike price to choose?
Choosing the right strike price is an essential factor in Options trading. Even though most experts believe that choosing an ATM contract or a contract at a strike price close to the current market price is the best thing to do, you can be a little innovative sometimes, especially when the market is highly volatile.
A volatile market can yield faster profits with an ATM contract, but again, it can hit your stop loss as well, even with a slight fluctuation. Hence, at times like these, it's wise to choose a good OTM contract; however, you must ensure that it is not a far OTM contract. Doing this will balance out the volatility to ensure your Stop Loss is not hit quickly.
Options Chart vs. Spot Chart
One of the most common confusion for any beginner in Options trading is whether to refer to the Options chart or the Spot chart (Underlying asset) for technical analysis. Most traders plan their entries based on their technical analysis of the Spot Chart. However, others would do their technical analysis on the Spot chart but plan their entries based on their Options chart.
Another way of looking at it, if you are only referring to the Spot chart, like most other traders, is knowing that an ATM Options contract will ideally have half of the movement you see on the Spot Chart. For example, if Bank Nifty moves 100 points in your favor, you can expect a 50 points move in your ATM contract.
In the same way, a 100 points move on Bank Nifty against your trade means 50 points move against your trade in the ATM contract. Many traders use the same logic to plan their Stop Loss. For example, if you want to place a trade with a Stop Loss of 10 points, you have to place a Stop Loss of 20 points on the Spot Chart while analyzing and planning your entry.
Where to place the Stop Loss?
Placing a Stop Loss can be tricky, and if, like every other beginner, you are wondering where to place the Stop Loss ideally, the answer is behind a technical barrier. A technical barrier can be a major support or resistance level. The whole point is when you place your Stop Loss behind a technical barrier, the price will, at the most, hit the technical barrier and start moving in your favor as long as you have taken the trade in the right direction. However, the price may sometimes still hit the Stop Loss and continue moving in the expected direction. It happens due to high volatility.
Options Trading Analysis
Options Trading Analysis can be comprehensive, from price-action and technical indicators to options chart analysis. However, it all depends on your trading setup. While some traders like to keep their trading setup very simple, relying primarily on price-action, and technical indicators, others prefer Options chart analysis in addition to price-action, and technical indicators, which involves OI analysis, PCR, positions of FII, and DII.
One important thing to bear in mind is that institutional traders and not retail traders move the market. Hence, it's essential to sync your trades with the market movers. Besides, it's always wise to analyze the strength of Call Writers and Put Writers.
Importance of Money Management
Despite technical analysis, it's normal to go wrong in Options trading. Even experts have good and bad days since predicting the market isn't always easy. This is where money management comes into play. Money management involves determining your profit and loss and the number of trades for your trading sessions. It can also help you avoid overtrading.
Another way of looking at it is if you earn profits today, you have to ensure that you don't lose the entire profit earned in your next trading session. Further, you have to be very clear with your Stop Loss and Target points for every trade. For example, if you have set a Stop Loss of 10 points and a Target of 40 points for every trade, you must stick to it.
FOMO, and Overtrading
FOMO stands for Fear of Missing Out, and FOMO trading is one of the biggest hurdles for any beginner. When you trade without a good trading setup, it's normal for you to get deceived by every small or big move. Besides, FOMO can lead to over-trading, wiping off your entire capital. However, keeping your capital intact is essential; the only way to beat these demons is to have excellent technical analysis and proper money management in place. Besides, staying practical in the market and staying calm with profits or losses is important.
Learn to Lock Your Profits
Even when you are trading with a good trading setup, you will still be at the losing end if you don't know how to lock your profits. Locking your profits is slightly different from booking your profits, and it's done by trailing the Stop Loss. When you place a Stop Loss order, you do it to control your losses. However, when the price moves in your favor, and you are at some good profits even though it hasn't reached your target, it's important to ensure you lock your profits. It's an interesting concept and can help a lot if executed accurately.
You must not start trailing your Stop Loss too fast since it would be like inviting the price to come and get you out of your position. The best time to trail your Stop Loss is when you are at some good profits. However, it's equally essential you trail your Stop Loss to a point where the price is unlikely to come, and even if it does, you will still be out of the trade with some good profit. Further, it's not wise to exit the trade when your target is achieved since it can go further in your favor. Hence, you must trail your Stop Loss to your target price, wait for the price to move further, and keep trailing it until it hits the Stop Loss.
Do we always have to follow the Trend?
The popular saying goes like this: “Trend is your Friend,” and it's totally up to you how you want to capitalize on it. There are two ways most traders go about trading the Trend. Conventional traders like to enter positions in the direction of the Trend alone since they believe that big moves in the market will only occur in the direction of the Trend. On the contrary, some traders prefer capitalizing on both sides after being completely aware of the Trend.
Such traders usually enter positions based on demand and supply. Another way to look at this is when the price is close to the trendline in an uptrend. For example, they go with the Trend, and when the price is far from the trendline, they plan on going against the main Trend since the price is overbought and has to return to the trendline.
I have walked you through the various aspects of Upstox with an emphasis on Options trading, and there is absolutely no doubt that Upstox is one of the finest platforms for Options trading. However, I strongly feel that Upstox needs to work on providing quick order placement since it's still not as quick as in Zerodha.
I have explained the Upstox charges and how to open an account with Upstox. Besides, Upstox comes with dedicated features for Options trading. Further, Upstox has the best customer support, and by trading on this platform, you can undoubtedly improve your Options trading skills.
What is Upstox and how does it facilitate options trading?
Upstox is an online brokerage platform that offers various trading services, including options trading. As a stock broker with a reputation for offering the lowest brokerage fees, Upstox provides users with a demat and trading account, enabling them to engage in options trading seamlessly. Many options traders believe Upstox is the best trading app for Options trading.
What are options and how can I start options trading with Upstox?
Options are financial derivatives that give you the right but not the obligation to buy or sell an underlying asset at a predetermined price within a specific timeframe. With Upstox, you can start options trading by opening an account, funding it through online trading, and then executing orders.
You can trade stock options or Index options. However, it's important to bear in mind that Upstox charges a brokerage fee on every trade. The broker charges a flat fee of ₹20 per executed order.
Can I engage in intraday trading with options on Upstox?
Yes, Upstox supports intraday trading with options. You can take advantage of short-term price movements by executing option trades within the same trading day.
Are there any additional features or tools for options trading available on Upstox?
Upstox trading account offers a variety of features for options traders, including real-time market data, technical analysis tools, ready-made Options strategies and educational resources to help you make informed decisions.
How can I ensure good returns in options trading with Upstox?
While returns in options trading are subject to market fluctuations, Upstox provides a platform that equips you with the necessary tools and information to make strategic decisions, potentially enhancing your chances of achieving good returns.
How does Upstox facilitate investment in mutual funds and stocks alongside options trading?
Upstox not only supports options trading but also offers the ability to invest in mutual funds and stocks. You can easily invest in any desired mutual fund scheme through Upstox demat account. Upstox also supports futures trading, and commodity trading.
What is margin trading?
Margin trading facility allows you to trade with borrowed funds. Upstox offers the feature for trading, to help you leverage your trading value while adhering to margin requirements.
How can I assess the liquidity of options when trading on Upstox?
Upstox provides features to help you gauge the liquidity of options. This includes bid-ask spread and trading volume information, enabling you to make informed decisions.