Option plus is a cash leverage product for options trading. It allows you to trade in big quantities of options with small amount in your trading account. This is a great advantage to options writers, especially.
If you are an intraday trader in stock markets and you love trading via options but due to occasional cash crunches you have to limit down your trading positions, here is a product for you. It can take care of all these needs of you. This product is option plus. This product has been launched recently by leading Indian online broker ICICIDirect.
Option plus is just like the margin trading, popular among intraday traders in equity segment. Now derivatives traders can have that luxury of cash leverage through option plus.
With option plus, the margin for options trading is as low as 20-25% of the normally required option premium. It allows buying options on margin as well as writing the options. This helps you to acquire larger position in your trade and leads to higher profit potential with a small capital.
What is more is that you may trade option plus totally free without any brokerage charges. However, for this you have to complete your trade in only 5 minutes. This is available as Bullet Brokerage Plan.
With bullet brokerage plan at ICICIDirect, you can take a large quantity trade and close the trade as soon as you get profit. But finish it off in 5 minutes. The timer is shown there which shows the time of trade initiation and the time when your time is up.
Option plus is quite useful to option writers or option sellers. Option writers are considered the smart option traders than the option buyers. However, writing an option (short selling an option) needs more cash to trade than buying an option. It is almost equivalent to margin required in futures trading. Hence, if you need to short sell several number of options lots for a trade, you can use the option plus facility. It provides you margin for selling options with almost 1/5th of the total cash you would have otherwise required without option plus.
As the option plus provides you with cash leverage in the market and you are, thus, exposed to substantial financial risk due to any kind of unfavorable market movement.
There is an inbuilt tool to lower your risk, however. While you place your order through option plus, you will be asked to put your cover stop loss also. You can not place only your buy or sell order but it is mandatory to have your stop loss order too.
Another thing which is very important and should be kept in mind is that while your cover stop loss order is of course a limit order but the first order you place to create the position will be a market order.
Market orders are the one which are executed at the current market price of options. The price may change in the small time you take to place your order. Hence, trading decisions taken in haste or impulse can expose you to undue loss.
It is quite possible that you may not get option plus tool in all stocks or every contract.
Actually, option plus is enabled while taking liquidity and volume of the concerned stocks into consideration. So, you will need to check that before you decide to go for option plus.
Moreover, we always keep stressing that you should go with high cash leverage products like derivatives only after properly understanding the risks associated with these trades and analysing your risk profile beforehand.
Advantages of Option Plus
1. Biggest advantage is the cash leverage as we talked above. You can trade in large quantities of options with small margin money. This allows you to make large profits with limited cash available. The margin required for option selling is only 10-20% of the trade value with option plus.
2. If you can trade for a very short span of time i.e. 5 minutes, you can reap the benefits of free brokerage trade. This is really awesome but you need to be very smart trader to enjoy the benefit.
ICICI Securities is providing the option plus product to its clients. You can check out with your broker if they are providing the option plus like facility.