If you are considering trading in Nifty futures and Nifty options but first want to know what are the benefits of trading in Nifty futures and options, then this blog post is for you.
About 75% of the total turnover in NSE F&O market comes due to Nifty. Nifty futures and options have very liquid contracts and are less volatile compared to stocks; also trading in Nifty F&O can benefit you in many ways.
Below are the key advantages that will definitely convince you to trade in Nifty.
- Simple to predict: Tracking and predicting moves in Nifty is comparatively easy. For nifty you just have to look for technical analysis. Nifty generally follows global sentiments.
- Far month liquidity: As there is sufficient liquidity in far month contracts of Nifty futures compared to stock futures, it becomes easy to take positional view by buying mid and far month Nifty contracts.
- Hedge against stock portfolio: Nifty is a benchmark index and most of the stock show the price moment based on the Nifty moment, therefore it can be used as a hedging tool against your equity portfolio.
- Highly liquid options: Because of high liquidity in Nifty options it becomes simple to research and take a trading call by studying in-the-money and many out-of-the money stroke price and simultaneously hedging against your long or short positions with it becomes very simple.
- Less margins: For Nifty futures the margin needed to take position is only 8% as compared to stock futures where on an average 13% of margin is needed to take positions in it. Some brokers allow you trade nifty futures with only 10,500 for intraday positions.
- Well diversified: Nifty 50 index is well diversified, it consists of 50 stocks which represents more than 10 different sectors. This diversification provides stability and thus protects you when your view goes wrong. Also, because of this diversification you get the bigger picture of the market for short and long term.
- Lower spreads: The spread is the difference between bid-ask price. It is the price difference in the quote of buyers and sellers which is vital for traders who use scalping trading techniques. Lower the difference the better will be trading experience. As Nifty F&O are commonly traded, the spread is relatively better, therefore giving you better prices to buy or sell.
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