Factors That Decide An Option’s Premium Any trader will tell you that in order to be successful, you have to understand and, more importantly, master the concept of option pricing and how to figure out its correct value. When you look at all the things that affect an option's price, you can figure out what its real price is. Let's look at oil as an example. The final prices of petroleum depend on consumer demand, the price of crude oil, the time of year, local and state taxes, refinery output, etc. If you want to know or figure out the price of an option before you buy or sell it, you can use a mathematical model like the Black Scholes model. You only need to think about the different parts of the model to figure out the right price. Being a successful trader depends on several things, but most importantly it depends on the kind of platform you use to trade. As a stock broker, we understand this and offer the best trading platform to our users that provides them with the best trading accounts. Putting a price on an option depends on a number of things. The stock's current price: If you're interested in a call option that lets you buy shares of X company for, say, Rs 350 each, you'd probably be willing to pay more for that call when the stock is trading at Rs 320 instead of Rs 350. This is because the call option gets much closer to being ITM at Rs 49 than it would have been if it traded at Rs 40. Put options, on the other hand, do the opposite. The Strike Price: This is the price that a call owner has to pay to buy stock, while a put owner has to pay if he wants to sell his stock. This is like the example that was given above. Most of the time, it costs more to get the right to buy stock at Rs 350 than at Rs 380. The average investor would, of course, like to have the right to buy stocks at lower prices at any time of day. With the strike price going down, this makes calls cost more. In the same way, the value of puts goes up when the strike price goes up. Time before expiration: It's important to remember that all options have a set amount of time they can be used and usually end on or after a certain date. Because of this, the value of an option goes down as time goes on. The more time there is until expiration, the more likely it is that you can make moves that will make you money. Interest rates: This is not a very important factor when figuring out the price of an option. When interest rates go up, so do the prices of call options. When the trader chooses the call option instead of the stock, any extra cash in his account should, at least in theory, earn him interest. This doesn't really happen in the real world, but the basic idea makes sense. Dividends: When a stock trades but the owner doesn't get any dividends, this is called "ex-dividend," and the price of the stock goes down by the amount of the dividend that was due. When dividends go up, put values go up and call values go down. Volatility is thought to be the most important variable. In simple terms, volatility is the difference between the prices of stocks from one day to the next. It can also be called swings in the price of a stock. When compared to stocks that are less likely to change, volatile stocks are more likely to have a different strike price level. When investors make big moves, their chances of making money go up. So, options on stocks that change a lot are definitely more expensive than options on stocks that change less or not at all. So, it's important to remember that even small changes in estimates of volatility have a big effect on the prices of options. Volatility is usually thought of as an estimate, and if you only have an estimate, especially of future volatility, it's almost impossible to figure out the right option value. As we mentioned earlier being successful as a trader depends on several things, but most importantly it depends on the kind of platform you use to trade. As a stock broker, we understand this and offer the best trading platform to our users that provides them with the best trading accounts.
Jun 22, 2022
Even if you don't invest in the stock market often, you are likely to get calls and texts from unknown brokers trying to sell you penny stocks. What are penny stocks, anyway? On the US stock market, stocks that are trading for less than $1 are called "penny stocks." Penny stocks are usually stocks that are trading for less than Rs.20 in the Indian market. Another definition is stocks that are trading for less than their par value or face value. The main point of the story is that these penny stocks are shares of companies that most people have never heard of and whose business models aren't very good. Here's why you shouldn't fall for the allure of penny stocks, even if they look very appealing. As experienced share brokers we want to offers the best online trading platforms, and the best trading accounts for our users. 1. Penny stocks are cheap because they might not be worth much. Penny stocks are usually quoted at very low prices because that is what they are worth. Some penny stocks are sold as good investments because their P/E ratio is low. That can be hard to understand. The P/E ratio shows how much people trust and care about a stock, and a low P/E usually means that people don't trust the stock. Most of the time, these companies also use creative accounting to make their profits look bigger than they really are. Don't get tricked by a low P/E. 2. It's easy to trade in circles with them, and you could get caught. What does it mean to trade in a circle? Here, a group of brokers make a deal with the promoters to drive up the price of the stock by making fake demand for it. Most of the time, if A, B, and C are all trading in the stock, one of them will be either the buyer or the seller. But when the markets see that the stock is consistently being bought and its price is going up, a lot of small investors tend to become interested. As soon as there is enough interest from retail investors, these "circle traders" get out of the stock, leaving retail investors with worthless paper. 3. Penny stocks tend to move in areas that are doing well. This is where the game of penny stocks gets pretty easy. During the height of the technology boom, a lot of "fly-by-night" companies changed their names to sound like IT companies. Not only did these companies manage to get people interested in the market, but they also sold shares in their IPOs and private placements at prices that were too high. You don't realise you've been taken for a ride until the dust settles. 4. Volumes can be created and taken away quickly. This is something that happens a lot with these cheap stocks. You may buy a stock because it has a lot of trades, but as soon as you do, buy orders are pulled. What is going on? Let's get back to our question about penny stocks and how they are traded. Most of the people who buy and sell at the counter are the same people who do business in circles. When they see that retail buyers are pushing prices up, they will just cancel their buy orders at lower prices. This makes the selling/buying order book look off, which makes people want to sell more. This is bound to happen when only a few traders control most of the volume. 5. Illiquidity is a major risk This again has to do with the last point. What does the term "basis risk" mean? It is the difference between the buy price and the sell price, also called the spread. This is important because it makes your costs go up when you buy and makes your advantage go down when you sell. You'll also notice that these stocks are always in the lower circuit or in the upper circuit. Since the volume and float are completely controlled by the circular traders, it may become very hard to buy and sell the stock. Most of the time, they will continue to be interested in these stocks only after they have sold all of their stock to other investors. 6. A lot of them could be "shell" companies Most of the time, these companies whose stocks are worth only a penny are just "shell" companies. That means that the company is no longer doing business or that all of its assets have been taken away. At the end of the 1990s, there were a lot of software companies that were really just fronts for laundering money through exports. Such businesses have a negative enterprise value, so it doesn't make sense to buy them at any price. Worse, if SEBI starts an investigation into one of these companies, you may have to answer embarrassing questions as well. Last but not least, you don't have to do that with your hard-earned money. Lastly, buying penny stocks is probably not the best use of your hard-earned money. These stocks are high risk and have a low chance of making money. Most of the time, they are just tricks to get people to buy. Instead of buying these penny stocks, you would be better off buying shares in good companies that have been well researched. Remember that the market is full of stories about how your neighbour became a millionaire by investing in penny stocks. But there are also stories of people who put everything they had on penny stocks and lost everything. Penny stocks are not worth taking a chance on. You can do a lot more with your money. Better to be safe than sorry! As experienced share brokers we want to offers the best online trading platforms, and the best trading accounts for our users at all times.
Jun 21, 2022
Here are two more phenomenons traders and investors fear about the stock market and a few tips to avoid them. If you are a regular investor or a trader, you know how important the tools are. And as a share trading company, we understand that you need the best share trading platform so we are here to give you just that along with the lowest brokerageoptions. 3. Don't listen to the crowd What is the government like and how is it like the stock market? Everyone has an opinion on them, no matter how much they know or how high up they are. People talk about the stock market as if they know everything about it, even though they don't. In a corporate office, people talk about all kinds of things, and one person's opinion might have been the start of a rumour. Don't blindly agree with these points of view. It is very important that you do market research for your portfolio. "Be fearful when others are greedy and greedy when others are fearful," says a famous quote from an investing genius. 4. Diversify into multiple asset classes We just can't say this enough. This is the most important thing you can do to lessen the risks of the stock market. To diversify means to put your money in different things so that if one doesn't work out, the whole portfolio doesn't lose money. The first rule of investing is to do this. Investing in different things comes with different kinds of risks. Having both high-risk and low-risk products in your portfolio gives it a sense of balance. Because of this, the best portfolios are made up of a mix of equity, debt, and cash. It could even have land or gold in it. But having one thing out of all of them is a big problem. 5. Figure out the risk Risk appetite is how willing you are to take risks. It depends on the person and what stage of life they are in. If you're a student or young person, you don't have to worry about feeding anyone or taking care of a home, so you can take risks. But as people age, their responsibilities grow. One needs to plan for getting married, sending their kids to school, and finally, retiring. Over time, people become less willing to take risks, which makes them afraid of the stock market. So, before you invest your money, you should carefully look at the product you want to buy, its risk model, and whether or not it fits your risk tolerance. The stock market has its own risks, but if you are careful, you can make good money from it. Conclusion Investing in the stock market is definitely scary and full of big risks. But if you stay calm, learn to make decisions that make sense, and use these strategies, you can have a smooth sail. Successful investors have made a lot of money by making the right choices at the right times. How would you know you're not one of them if you're always afraid of the stock market? So, don't wait until tomorrow; start now and see what happens. As a share trading company, we understand that you need the best share trading platform so we are here to give you just that along with the lowest brokerage options.
Jun 20, 2022
The fear of the stock market is real, and why wouldn't it be? How can someone trust the market cycle and go with it when there are so many unknowns and the market will always be volatile? Especially when our hard-earned money is at stake! Before we get into understanding the various types of fears in the stock market, it is important to understand that the technology you use is as important as the strategy. And as a share broking company, we offer the best trading accounts with the lowest brokerage for intraday trading. At the end, who wants to lose? People have lost tens of thousands of rupees in the past when the stock market went down. Because of this, when the stock market crashes, people tend to pull their money out of fear, which leads to even more losses. It's a never-ending loop. So, what should we do? To stop further capital loss and deal with stock market fear, you need patience and tried-and-true strategies. How to Deal with Stock Market Anxiety Let's look at some of the best and easiest ways to deal with this fear of the stock market: 1. Don't try to catch the bottom of the market. Value investing is the most basic way to put money into the stock market. The one backed by Warren Buffet is a strategy in which you just buy stocks when their value goes down and sell them when it goes up. This sounds like a good way to deal with fear about the stock market. But when they do this, some people invest a large amount of money all at once. This should be avoided at all costs. There are many different ways to trade and invest in stocks, so you must be very careful. You need to put some money at one low and some at the other until you reach the lowest point and the recovery begins. 2. Have patience. When markets start to go down, people tend to panic and get rid of their stock market investments out of fear. When you invest in stocks for the long term, you do so with a specific time frame and goal in mind. If you take these away when things are bad, you lose in both ways. First, the capital value goes down, and second, the goal of the investment is no longer met. For example, you could buy a house in 5 years if you saved Rs. 5,000 per month in a SIP. Some of the money in your portfolio lost value, so you took it all out of fear. Where does it leave you? With a loss of capital and unfinished goals, and if the fund starts going up again (which it usually does in the first year after a drop), you would feel like you missed the bus. So, unless it's an emergency, you can try not to sell your equity investments unless you have to. Giving your investments time to grow is a hard thing to do. The stock market is NOT a quick way to make money. For wealth to start and grow, you have to keep at it. As we mentioned, it is important to understand that the technology you use is as important as the strategy. And as a share broking company, we offer the best trading accounts with the lowest brokerage for intraday trading.
Jun 19, 2022
What Is All The Hype About A Trading Edge? In theory, a trading edge is a strategy, observation, or special technique that gives a trader an edge over other traders in the market and helps them make more money. There are a lot of books and papers on different trading techniques, but since many people learn and use the same information, the chances that it will give a trader an edge quickly go down to almost nothing. Finding an edge and understanding what that really means can help you decide if it's worth your time to look for one or if it's even possible or useful. The Common Thought Most people think that an edge is something that a trader knows or uses that gives them an advantage over the market or all the other traders. For example, a trader might think that using a certain indicator (like the Relative Strength Index, or RSI), in a certain way (like making short trades when the RSI is above 84), gives them an advantage over traders who don't use the same indicator in the same way. Many new traders spend years trying out different indicators or different settings for indicators (like a length of 10, then a length of 15, etc.). They also try out different chart settings, like time-based charts, tick-based charts, or volume-based charts, to find the combination that gives them an edge. Getting Your Way Some traders have never heard of the term "edge." When they do, they might start to wonder if they have an edge or if they need to find one. A few rules can help traders find trading edges, if there are any: The edge must be based in reality and can't be based on assumptions. A trader needs to know that an edge might not work all the time. It is possible to make a lot of money with an edge, but then the edge might stop working for a while. If you think you have an edge, you should test it by clearly defining the rules and then applying them to historical market data and "paper trading." A wake-up call In reality, there are traders who think they have an advantage and traders who think they need an advantage. Some traders laugh every time someone talks about an edge while they make another trade that makes them money. In other words, you might find and use an advantage or you might not. Many traders think that good training and instruction give them an edge. In fact, this could be the edge that people looking for an edge are looking for. To trade well, you don't have to compete with the market or other traders. In fact, the opposite is true. Good risk management and a healthy dose of patience are more likely to lead to success in trading. Retail traders often do better when they focus on controlling their own decision-making processes instead of making decisions based on things they can't change. This is not what many new traders will say. If you are one of them, think about this: Traders who think they have an edge will never tell other traders what trade they are about to make. These traders think that if they talk about it, they might lose their edge. Professional traders, on the other hand, won't think twice about telling other traders what trade they are about to make. This is because it doesn't change the potential of the trade if other traders know about it or make the same trade. Prices can change over time based on supply, demand, and investor sentiment as a whole, but just because one investor thinks they have an edge won't change anything. If you are a new trader who is just starting to look for your edge or if you are an experienced trader who has been looking for your edge for years, you should stop. Markets change so quickly that an edge you find today is likely to be useless tomorrow. In the short term, looking for a trading edge might help you make quick money, but it's more likely to waste your time and cause you to miss out on opportunities and money.
Jun 18, 2022
There are many ways to become a professional trader, and a person needs a lot of skills to do well in a field with a lot of stress and competition. When financial firms hire people for trading jobs, they usually look for people with degrees in math, engineering, and hard sciences instead of just people with backgrounds in finance. There are also different kinds of trading jobs, some of which require communication skills with customers as well as knowledge of charts. So, let's take a look at some of the skills that all traders need. Skill at analysing Every trader needs to be able to look at data quickly and figure out what it means. Trading involves a lot of math, but charts with indicators and patterns from technical analysis show what the data means. So, traders need to improve their analytical skills so they can see trends in the charts. Research Traders need to have a healthy thirst for information and a desire to find all the important data that affects the securities they trade. Many traders make schedules of economic reports and news that affects the financial markets in a way that can be measured. By keeping up with these sources of information, traders can act on new information while the market is still processing it. Focus Focus is a skill, and the more traders use it, the better they get at it. Because there is so much financial information out there, traders need to be able to focus on the important, actionable information that will affect their trades. Sector-based traders also focus on one particular industry. This helps them learn more about a certain sector, industry, or currency, which gives them an edge over traders who don't specialise as much. Control Control and, more specifically, self-control go hand in hand with being able to focus. A trader needs to be able to keep their feelings in check and stick to a plan and strategy for trading. This is especially important when using stop losses or profits at set points to manage risk. Many trading strategies are made so that the trader loses less when things go wrong and makes more money when things go right. Strategy goes out the window when traders start to get emotional about their trades, whether they are good or bad. Keeping a record Keeping good records is one of the most important parts of trading. If a trader keeps careful records of how his or her trades turn out, all that's left to do to get better is to try out different strategies and change them until one works. If you don't keep good records, it's hard to show real progress.
Jun 17, 2022
How To Keep Your Emotions In Check While Trading On their way to becoming market masters, stock traders go through different stages. One of the hardest things to learn is how to trade without letting your emotions get in the way. You can be good at picking stocks and managing risk and still fail as a trader if you can't keep your emotions in check. When you know how to control your emotions, you can be patient with your winners and not at all with your losers. Even though it seems easy to say that you should stick to your trading plan, it is actually much harder to do so. Most of us have strong feelings about money, which makes it hard to stick to our rules. To do this, you have to take the money out of the picture. Financial risk can't be a factor in making decisions. It might be hard to incorporate this ideology while trading but you can remove the emotions from trading only if you are able to get this right. Here are some ways to trade without letting your emotions get in the way: 1. Don't put yourself in more risk than you can handle. Most traders keep their losers too long and sell their winners too soon because they take on too much risk. Taking on too much risk ties down your risk management, making it harder for you to make trades with a positive expected value. This is something you can change by taking less risk. Then, many traders find that the upside isn't enough to make them want to trade at all. If a trader doesn't have a way to make good profits with the money they have, they may start to take on more risk to try to get better results. But you can make your trades more likely to go up without taking on more risk if you scale into your positions. As the trade goes in your favour, add to your winners. You don't need to put yourself in danger by doing this. You can lower the risk of your other positions by using the money you made from your first positions. Add to the list of winners. Don't throw money at your losers. 2. Change how you think about money We often tell people that it's best not to look at the summary of their trades' profits and losses. When you do this, you get too caught up in the current gain or loss on your positions, which makes your fear or greed about the trade worse. Instead of making decisions based on the chart, think about the money. People can't be expected to trade without checking to see if they are making or losing money. So, if you have to look at your trades, instead of focusing on how much money you are making or losing right now, think about how much money you will make or lose if your trade hits the stop loss levels. If you buy 1,000 shares of a stock for Rs 100 and the stop is at Rs 90, you could lose Rs 10,000. That's how much you could lose when you leave. Let's say that this stock goes up to Rs 120 and you move your stop to Rs 110. Even though your position is up Rs 20,000 right now, if you get out on the stop, you will only make Rs 10,000. You need to pay attention to the number that matches your exit point. Don't think too much about where you are now. If you congratulate yourself on making Rs 20,000 on a trade, you start to feel something about that number. If so, you are less likely to sell the stock if it goes back down to Rs 110, where you would only make Rs 10,000. You thought you would make Rs 20,000 and hoped it would be more. It hurts to leave at a lower price, so many people stay and wait for things to turn around. Count on what you already have, not what you want. 3. Make a plan on paper and trade it Some people can lose their minds because of how they feel about a trade. When you make a trade, your feelings can make you break your trading rules. Having a plan written down will help you stay on track when you get lost. The plan doesn't need to be long or hard to understand. A trading plan shouldn't be longer than one page, in our opinion. It should include your rules for entry, risk management, scaling, and leaving the business. There should also be a review process so that you can work to make your rules and how they are carried out better. When you write down an idea, it gives it more value. Before you make another trade, take the time to write out a plan.
Jun 16, 2022
In a stock market, what are "sectors"? The Indian share market is extremely vast with several thousand companies listen on the exchanges. India's National Stock Exchange, for example, has more than 1900 companies on its list (NSE). And they are divided into 11 sectors. The firms work in many different fields. Sectors are a way to group companies on the stock market by the type of business they are in. Read on to find out more about the different stock market sectors, with a focus on the Indian equity space. Sector-wise separation Before putting money into a stock, investors have to do a hard job. It is to carefully analyse the stocks and understand how the stock as well as its sector is performing. When you know which books are on which shelves in a library, it's easier to walk over and pick the book that fits your interests the best. In the same way, when stocks are put into groups called "sectors," they are easier for investors to find. In the same way, sectors help investors figure out where they don't want to put their money. For example, when there is a pandemic and air travel is limited, investors might not want to put their money in the tourism or aviation industries. What are the stock market's different sectors? Some of the most important parts of the Indian stock market are: Agriculture & Commodities Aviation Automobiles Financial services and banks Electricals & Electronics FMCG Gas & Petroleum Infrastructure for Information Technology Pharmaceuticals Real Estate Telecommunications Textiles Tourism What are some of the most important sectors of the Indian stock market? Some companies are very well-known, while others are not. The good thing about sectors is that they help investors find hidden gems. Here are four of the most important stock market sectors that you need to know about: Automobile Sector There are more than just carmakers in this sector. It is also where commercial vehicles, two-wheelers, three-wheelers, and tractors are made. Since India is an agricultural country, people who invest in tractors and other commercial vehicles tend to be serious about them. Examples of leading automobile companies are Maruti Suzuki, Ashok Leyland, Bajaj Auto and Escorts. Banks and Financial Services The Banking sector is well known because it makes money from money. The banks' top line is made up of the cash flows of every other company on the market as a whole. This is because almost every other business borrows money from a bank to manage its capital structure. This is why profits from financial companies are different from profits from other types of companies. So, if you take a sectoral approach to investing, you can take this difference into account. Non-Banking Financial Companies (NBFCs), Asset Management Companies (AMCs), Ratings and Research Institutions and Insurance Players, as well as public and private banks, are all part of this huge sector. NBFCs work with people who don't have bank accounts. Mutual Funds are taken care of by AMCs. Rating agencies work on credit ratings and make money in other ways, like by selling research. Insurance companies pool small amounts of money from many people to cover the losses of a few. Examples: ICICI Bank, Bajaj Finserv, Nippon Life, AMC CRISIL This sector is worth keeping an eye on because it is about to get one of the biggest players in the insurance and fintech industries. Fast moving consumer goods In the FMCG sector, companies make things that we buy and use every day. These things are used up quickly. FMCG products guarantee a steady stream of income, which leads to steady profits and a strong return on investment. Examples: Hindustan Unilever, Britannia Manufacturing, Colgate Palmolive, Procter & Gamble The FMCG industry can handle a recession. So even when the economy as a whole was bad, the grocery stores near you would still be busy selling FMCG products. Pharmaceuticals Sector Some of the products that come from the pharma industry are biologicals, active pharmaceutical ingredients, excipients, vaccines, and cures for both common and rare diseases. Investors are learning more about the business because of the COVID-19 pandemic. The industry is heavily regulated because the products affect the health and safety of people all over the world. Examples: Biocon, Sun Pharmaceuticals. Pharmaceutical companies like Pfizer and AstraZeneca have a special advantage: they have unmatched pricing power. It goes without saying that there are rules in place to stop irresponsible behaviour. In short, sectors are groups of stocks that have similar business models. This lets investors focus on a certain industry and find a certain stock. The amount of information that investors have to deal with takes up a lot of their time. When investors use a sectoral approach to investing, they make sure to spend their time on the right group before focusing on the right stock. In addition to helping people learn more, sectors help find hidden gems in the field that might not have been known before.
Jun 15, 2022
Gold is a popular investment choice because it protects against inflation. But when there is more than one way to invest, an investor may not know which one to choose because they all track the price of gold. Tax and investment experts say that the Sovereign Gold Bond and the Gold ETF (Exchange Traded Fund) are best for two different types of investors. Gold ETF is better for investors who want to invest for the short term while keeping liquidity in mind because it lets investors sell their money whenever they want. But for medium- and long-term investors, the Sovereign Gold Bond is better because it guarantees a 2.5 percent return and the maturity amount isn't taxed. Both are investments that protect against risk, but investors with little time to invest should choose gold ETF. For investors who want to be able to sell their investments quickly, Gold ETF is a better choice than Sovereign Gold Bonds, which have an 8-year lock-in period if the investor wants the maturity amount to be tax-free. If you want to invest in gold over a long period of time, the Sovereign Gold Bond is better because it lets you buy gold in small amounts over time. The Reserve Bank of India (RBI) makes these small amounts of gold available from time to time. But it can't be traded for 8 years, or 5 years from the date the bond was bought and 3 years after that. An investor can withdraw their money after 5 years, but if they do, they will lose the exemption for long-term capital gains (LTCG) that the scheme offers. So, under the Sovereign Gold Bond Scheme, an investor must keep their money invested for 8 years before they can get a tax break. In addition to not having to pay taxes, the Sovereign Gold Bond Scheme gives investors a guaranteed return of 2.5%, which the Gold ETF scheme does not. After 8 years, the maturity amount would be sent to the person's bank account automatically. Iin the Sovereign Gold Bond Scheme, the investor doesn't get to choose when the bond matures. Instead, the maturity amount is based on the average price of gold at the end of the last three business days before the redemption date. Gold ETF also charges fees for fund management and brokerage when an investment is made or sold, which Sovereign Gold Bond Scheme doesn't do.
Jun 14, 2022
When we are in our early or middle 20s and get our first job, the pay is not very high. From there, we have to figure out how to pay for things like rent, food, transportation, etc. every month. At this point in our lives, saving money and making investments are the last things we think about. But there are many reasons to start investing early. And we'll talk about all of that in this blog. Here are 5 reasons why you should start investing as soon as you can. Number 1: When you start young, you can start small We all have things we want to do, like buy our favourite car or get married in an exotic place. For example, let's say you want to get married in 5.25 years and you need to save Rs 15 lakh for this. You decide to put your money into equity mutual funds. Even though mutual funds don't offer guaranteed returns, their long-term returns are around 12%. Now, you would have to put away Rs 11,250 every month to save Rs 15 lakh in 5.25 years. Alternatively, if you start saving for the goal 2 years later, you would have to save Rs 18,750 per month to reach the goal on time. You would also have to save more. In the same way, if you start early on any goal, whether it's to buy a house or save for retirement, your monthly investments and total investments will be much less than if you wait. Number 2: It brings discipline to your life If you start saving and investing early on, it will improve your spending habits on its own. We'll tell you how. If you want to save a fixed amount of money from your fixed salary, you will have to limit your spending by making a monthly budget. And making a budget is the best way to change how you spend money because it helps you keep track of how much you spend each month on things like food, utilities, rent, entertainment, etc. And after doing this simple task for a long time, it becomes a habit. Now, to get into the habit of saving put away the amount you want to save each month. Then, use the money you have left to make a monthly budget. If you make Rs 25,000 a month and want to save Rs 5,000, for example. Then, as soon as you get paid, put away the Rs 5,000 first. Use the rest of the money to keep up with your expenses. Number 3: Compounding makes you wealthy The longer you keep your money invested, the more the benefits of compounding will help you. Let's look at two examples of this to see what we mean. Let's say you want to save Rs 8 crore for your retirement. In the first scenario, you start investing in a mutual fund when you are 25 years old. And to do this, you would need to save Rs 12,000 every month until you were 60. And over the next 35 years, you would put away a total of Rs 50.4 lakh. In the second scenario, you put the goal off for 15 years and start saving for retirement when you are 40. The goal amount, which is Rs 8 crore, hasn't changed. Now, because of this delay, the amount you invest each month will be Rs 80,000, and the total amount you invest will be Rs 1.92 crores. So, if you put off investing for 15 years, the amount you put away each month goes up by more than 6 times, and the total amount you put away goes up by 4 times. Over time, this is how compounding works. Number 4: If you stay invested for longer, you can build up a bigger nest egg If you keep your money invested for a long time, you can get the benefit of compounding for a longer time. This means that the amount you have saved over the years will be much higher. To explain this, we can look at the point we talked about before. When we talked about the benefits of compounding, we said that even if you only invest Rs 12,000 per month, you can build up Rs 8 crore if you start investing at age 25 and keep it up until age 35. But if you start investing 15 years later and your savings decrease but deployed capital increases. So, it's best to start early and keep investing for a long time if you want to build up a big nest egg without feeling the pinch in your pocket or lowering your standard of living. Number 5: You are more willing to take risks. When you are young, you have more opportunities to take risks than when you are older. At this age, you don't have as many financial responsibilities, so you don't have to think too hard before putting your money into something risky. Even if you make mistakes with your investments, you'll have plenty of time to fix them and get back on your feet. For instance, a good rule of thumb for investing in stocks is (100 - your age). That is, if you are 30 years old, you can put 70% of your money in stocks and the rest in bonds. The rule of thumb says that if you are 22 years old, you can put up to 80% of your money in stocks. But if you start investing when you're 45, you might not want to take that much of a risk. As a rule of thumb, you should only put 55 per cent of your money in stocks. Even though stocks are riskier than fixed-income investments, they may give you higher returns over time, allowing you to build a bigger nest egg with a smaller investment. Bottom Line So, if you haven't started investing yet, you should do so today. Start small, keep things simple, and continue to learn as you go. Remember that getting rich is a long-term process that can't be rushed. And as a young worker, the best thing you have going for you is time.
Jun 13, 2022
Are there any tips and tricks for trading options that can help you decide when to buy and sell options. What should you do when trading call options? Here's a guide for people who are just starting out with option trading. It tells you what factors can help you decide when to buy and when to sell an option. Price How do you decide if an option is priced too low or too high? Like with stocks, you will have to figure out what the option is really worth. Clearly, you can't figure out the value of an option the same way you figure out the value of a stock. But there is a different model called the Black & Scholes model that has a complicated formula to help you figure out the intrinsic value of any option. If the price of an option is more than what it's really worth, it's overpriced and should be sold. If the price is less than what it's really worth, it's underpriced and you should buy it. Volatility This is an important thing to think about when deciding whether to buy options or sell them. Volatility is good for both call and put options because it makes the option more valuable if the price goes up, but it limits your risk if the price goes down. Even if the stock price stays the same, if volatility goes up, the value of the option can go up. When volatility is likely to go up, it is always best to buy options. When volatility is likely to go down, it is best to sell options. Events Can you imagine what would have happened if you had sold put options before the Lehman Brothers crisis or the Greek crisis? Before big events or important geopolitical risks, it's always better to buy options instead of selling them. When you buy options, your loss is restricted to the premium you pay. If you sell options before something bad happens, you could lose all your money. Trend How you feel about the stock or index is a very important part of whether you should buy or sell an option. It would be ideal if you can determine if the stock will either go up decisively or go down decisively. In that case, you can buy either a call option or a put option, depending on what you want to do. Time decay This is a very important thing to think about when deciding whether to buy or sell an option. Remember that every option contract has a set date when it ends. Time hurts the person who buys the option and helps the person who sells the option. Most of the time, time decay is pretty stable in the first few days of the month. But as the expiration date gets closer, the time decay starts to happen more quickly. That means the value of the option starts to drop quickly. So, it's not a good idea to buy options close to their expiration date unless you really want to take a risk and bet on volatility. A big choice is whether to buy the option or sell it. The more you think about a choice, the better your chances of making the right one.
Jun 12, 2022
Some stocks pay you just to hold them. Stocks that pay dividends can be a good way to make money without doing anything. They can also protect you from inflation. "Buy low, sell high" is a phrase that is often used to describe a good way to trade stocks. But investors can also make money on the market by getting dividends. Dividends, in short, are a way for companies to share some of their profits with their investors. Shareholders benefit because each share of stock they own gives them the right to a set dividend payment. Companies give out dividends on a regular basis, usually monthly, quarterly, or annually. Dividends can be paid out in cash or in the form of more company stock. Because of this, you can almost think of stocks that pay dividends as a way to make money while you sleep. Growing dividends from good companies can make a big difference in a portfolio and reinvested dividends are a much bigger source of growth than market returns alone. Dividend-paying stocks have been getting a lot of attention lately because they do more than just give you a steady stream of income. They also protect your money from inflation, which makes them perfect for the current market. How stocks that pay dividends protect against inflation In an inflationary environment, it's good for big companies that have a long history of paying consistent dividends every year because they can handle higher prices and even benefit from them. As inflation causes prices of goods and services to rise, a company's revenue, earnings, and dividends will also rise. Looking for a portfolio of stocks with strong cash flows that yield an average of 3% to 4% or more and consistently grow dividends by 5% to 10% each year. These are the kinds of businesses that investors should go after. Many companies with high-dividend stocks have used business models for a long time that work well when prices go up, which helps them make money in the long run. People still have to heat (or cool) their homes, drive to work, and eat, even when prices are going up quickly. Generally, companies in the energy, natural resources, and food and consumer staples sectors have strong pricing power and cost management, which lets them raise prices, keep demand up, and make more money. What investors need to remember Beginner investors should definitely buy stocks with dividend growth, but they should be careful when making investment decisions. Portfolio rebalancing, which is reacting to events as they happen in real-time, can be pricey when inflation is going up. Inflation pressures have been growing for a while, and the prices of many high-dividend stocks already reflect this. In general, the best idea is to think long-term, try to build a diversified portfolio of holdings, and resist the urge to try to time the market and shop around.
Jun 11, 2022