Yes, But….
Let’s dive in What Options are?
Options are derivative instrument in stock market. Derivative instruments have price dependent on assets like Equity, Currency, Commodity ETC.
Options price is dependent on 5 greeks as below,
- Delta
- Theta
- Vega
- Gamma
- Rho
These I call them as avengers of options valuation. If you can understand these then it is vital for you.
Options have expiry as these are designed for insurance purposes.
Does 5000 rupees are sufficient?
No.
I will suggest to keep more capital as if loose 3-4 trades then your entire capital will be gone.
So measure reason to fail in trading is insufficient capital.
Then question is how much is needed,
In my opinion you should be having a capital 20 times your risk. Means suppose a person is taking 2000 rupees of risk then minimum capital he must have 40000 rupees.
What can be bought with 5000 rupees?
Then if you want to trade with 5000 rupees then you have take OTM options which causes you take more risk .
What is OTM?
ITM – in the money options, these are inside of spot price and have more probability of not expiring Zero.
OTM – out of the money options , these options are away from spot price and have less probability to become in the money so most of the time become Zero at expiry.
Conclusion!
Avoid trading with less capital specially options. Always consider risk associated with options as they can become zero at expiry.
