futures are kitchen knives, options are coffee house dosa knives.
in the hands of professionals with sufficient buffer funds, futures is ok. how would a guy with 50 lacs in bank feel while taking a 3lac bank nifty position in futures? he will feel no blood pressure thumps when there is wild fluctuation. he can hold his position without any ado. he can freely test his technical ability by waiting to see the market turning in the direction of his analyses. (i am assuming that this rich guy is a mature one and has undergone sufficient training and knowledge and experience with his technicals).
on the contrary, how will that guy feel if he has just 5000 in bank account and has already committed 25000 with the broker to take a 3lac position in bank nifty futures? he can stay liquid only for 200 points adverse move. he will be like a bird that will be the first to fly at the clap of the operator.
futures move faster than options. to counter this, one can buy multiple option lots.
future has little time decay threat. out-of-money options has big threat of this.
if the market was to remain tight range bound for some days an option holder may get dissolved in the coffee cup of the option writer.
on the other hand, playing options is like trying circus with safety net.
options are gun-against-ones-own-temple if one does not know technicals. otherwise it is the most rewarding unfair advantage in the world.
safetywise, futures trading is like bungy jumping without the rope - hoping that the parachute of technicals opens in time.
and ninty percent of the time, amateur traders forget to pack in this parachute before jumping.
No comments:
Post a Comment