What is the difference between Nifty futures and options contracts? Which is better for short term, intraday trading?
Nifty futures and options contracts are derivative securities based on the Nifty 50 index, which measures the performance of the top 50 firms listed on India’s National Stock Exchange (NSE). While both futures and options provide chances for short-term and intraday trading, they are not the same.
Nifty Futures
Nifty futures are standardized contracts that bind the buyer or seller to acquire or sell the Nifty 50 index at a fixed price on a future date. These futures are used to speculate on the Nifty index’s future direction. Traders can go long (purchase) if they expect the index’s value to rise, or short (sell) if they expect it to fall.
Nifty Options
Nifty options provide the buyer with the right, but not the duty, to purchase or sell the Nifty index at a preset price (the strike price) before or on the expiration date. Traders can profit from various market circumstances by placing directional bets, hedging existing holdings, or employing tactics such as spreads and straddles.
For short-term intraday trading, options are often preferred due to their limited risk and flexibility. It also enables traders to employ strategies that capitalize on price movements, volatility changes, or time decay, catering to various intraday trading styles.