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Options trading is one of the highly rewarding segments in the stock market. Making the most of this attribute requires the traders to enter and exit the trade at the right moment.

The volatility in option premiums gives traders a chance to win big. But if the right opportunity to capitalise on the gains is missed, a trader can lose profits and sometimes it can lead to an actual loss as well.

It is a common challenge faced by many in their trading career. Therefore, in this article, we will try to understand the cause-and-effect relationship of the time factor on options premium. So, let’s get started!

Importance of Timing in Options Trading

Many intraday option buyers place trades that last for a few seconds to a few minutes. This technique is called scalping. The objective of scalp traders is to make quick profits from price momentum by placing high-volume orders.

As scalp traders aim to benefit from minor price movements, every tick is important for them. A short delay in order execution can expose a trader to unplanned losses. Due to such a concentrated plan of action, they require very strict entry and exit points for each trade.

Whether you’re a scalp trader or an intraday trader, you must be aware of how quickly the options premium can move. This is where the role of a reliable trading platform comes into play. Insta Trade by Angel One is one such feature which allows you to experience options trading like never before. Insta Trade is a one-stop destination for quick charts, watchlists, positions, and Live P&L at your fingertips.

Why Option Premiums are so Volatile?

If you have been actively trading in the Indian derivatives market, you must be aware of how volatile Bank Nifty options are. Oftentimes, a Bank Nifty option shoots up to Rs.100 within a minute. A movement of Rs.100 within a matter of a few seconds is how price-sensitive premiums can be.

On some expiry days, options worth Rs.10 go up to Rs.200. Although this does not occur very frequently, many options traders wait on the sidelines to capitalise on such spikes.

Here are some of the factors that directly cause option premiums to move suddenly:

• Value of the underlying asset
• Investor Expectations
• Political or geopolitical events
• Economic data like GDP, inflation, etc.
• Change in interest rates
• Prices of other financial assets like currency, commodities, etc.

How is your profitability affected?

It is now beyond doubt that timing is the most crucial element in options trading. The quality of trade is directly affected by the time it requires to place and execute the order. So as an options trader, you must focus on reducing this gap to take your trading to the next level

Better timing will not only ensure prompt entry into a trade but also confirm quick exit when you wish to exit the trades

Thankfully, with the help of Angel One’s Insta Trade, you can now trade in options like never before. It offers an agile, fast, and dedicated platform for buying and selling options contracts with ease. You can place your orders in a few simple clicks and trade like a Pro. Never miss a great opportunity again. Click here to learn more.

Happy Trading!

Disclaimer:

1. This blog is exclusively for educational purposes

2. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Brokerage will not exceed the SEBI prescribed limit. https://bit.ly/2VBt5c5

3. Insta trade is not an exchange approved product and any dispute related to this will not be dealt on the exchange platform.

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