Friend,
Selling stock option is beneficial to earn profit in option trading, selling index option is also beneficial, buying stock option is also beneficial and buying index option is also beneficial.
The only need is right direction.
The thing to understand is that just buying/selling does not give us profit or big profit. Buying or selling in the right direction can give us profit or say more profit.
As for which can give more profit?
Selling stock option or selling index option?
Don't be in doubt about this. If we pay attention to risk and reward, both are equal. Because if we notice, then due to this reason the exchange determines the lot size according to the price of the share or index in advance. Due to which the risk and reward become equal.
Let us see with an example, then it will become clear to you better. Let us look at a stock option sale and a index option sale with monthly expiry.
Index option:
Suppose a person sells 24600 of May expiry then its current price is Rs.365.50. In which the total margin is Rs.1,97,000.
Now if we talk about profit, then it can go up to maximum zero. Even if it goes to zero, then it will be 365.50 *75 = Rs.27412.5. If we look at it in percentage, then it is about 13.91 percent.
Stock option:
Suppose we sell 145 CE of Tata Steel. Whose current premium price is 3.65 paise. The total margin required for this will be Rs.143000.
Now if we look at the profit, then like the index, this can also be maximum zero. That is, 3.65 *5500 = Rs.18425. If you look at it in percentage, then it is 12.88%.
If you look closely, there is no significant difference between the two. In one, less investment has been made, so the returns in the figure are less. On the other hand, more investment has been made, so the returns in the figure are more. But the profit percentage is the same for both.
Hope the post will be useful for you.
Thank you
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