🧾 Introduction
Options trading has become one of the most popular trading instruments in India due to its flexibility, limited risk strategies, and leverage benefits. However, without a clear understanding of contracts, pricing, risk management, and taxation, traders can face significant losses.
This Saving Mantra guide explains the step-by-step process for options trading in India, covering basics, execution, strategies, risks, and tax compliance—ideal for beginners and professional traders alike.
📘 What Is Options Trading?
Options trading involves a contract that gives the right, but not the obligation, to buy or sell an underlying asset at a predetermined price before or on a specific date.
There are two main types:
- Call Option – Right to buy
- Put Option – Right to sell
Options are traded on:
- Equity stocks
- Indices (NIFTY, BANK NIFTY)
- Currencies & commodities (as permitted)
👥 Who Should Trade in Options?
- Beginners using limited-risk strategies
- Traders seeking hedging opportunities
- Professionals with risk management expertise
- Portfolio managers & institutions
⚠️ Options trading is complex and requires proper knowledge.
📝 Step-by-Step Process for Options Trading in India
Step 1: Learn Options Basics
Understand:
- Strike price
- Expiry date
- Lot size
- Premium
- Intrinsic & time value
💡 Options pricing depends on volatility and time decay.
Step 2: Open Trading & Demat Account
You need:
- Trading account
- Demat account
- Linked bank account
Complete KYC with:
- PAN
- Aadhaar
- Address & bank proof
Step 3: Activate F&O Segment
- Request broker to enable Futures & Options (F&O)
- Sign risk disclosure documents
- Complete suitability requirements
Step 4: Understand Margin & Risk
- Option buyers pay premium only
- Option sellers require higher margin
- Risk differs for buyers vs sellers
⚠️ Option selling carries unlimited risk.
Step 5: Select the Right Options Strategy
Common strategies:
- Long Call / Long Put (beginners)
- Covered Call
- Protective Put
- Bull Call Spread
- Bear Put Spread
- Iron Condor (professionals)
Step 6: Analyze Market Direction
Use:
- Technical analysis
- Support & resistance
- Volatility indicators
- Market trend & news
Professionals combine strategy + discipline.
Step 7: Place the Options Trade
- Choose underlying asset
- Select strike & expiry
- Enter lot quantity
- Place market or limit order
- Monitor premium movement
Step 8: Risk Management Is Essential
Always:
- Use stop-loss orders
- Limit position size
- Avoid overtrading
- Monitor time decay (Theta)
💡 Survival matters more than profit.
Step 9: Exit or Square Off Position
- Book profits before expiry, or
- Exit when stop-loss is hit
- Avoid holding risky positions till expiry
📊 Taxation on Options Trading in India
- Options trading income is Non-Speculative Business Income
- Taxed as per applicable slab rates
- Losses can be carried forward for 8 years
- Tax audit may apply based on turnover & profit
📌 Options traders usually file ITR-3.
❌ Common Options Trading Mistakes to Avoid
- Trading without understanding Greeks
- Selling options without capital buffer
- Ignoring risk–reward ratio
- Over-leveraging positions
- Incorrect tax filing
✅ Benefits of Options Trading
- Limited risk strategies available
- Flexible trading opportunities
- Hedging against market volatility
- Lower capital requirement (buyers)
- Income generation through option writing
🤝 Why Choose Saving Mantra for Options Traders?
- F&O tax & compliance expertise
- Accurate turnover & audit assessment
- Trader-focused advisory
- Loss carry-forward planning
- End-to-end ITR & compliance support
👉 Trade confidently and stay compliant with Saving Mantra.
⚠️ Disclaimer
This article is for educational and informational purposes only and does not constitute investment, trading, or tax advice. Options trading involves significant risk. Please consult a SEBI-registered advisor or qualified tax professional before trading or filing returns.