10 Best Stocks for Options Trading

Options trading, more than any other type of trading can generate more wealth for traders. It works on the mechanism of buying a stock and selling it based on an option contract. Investors can predict on the future direction of the stock market globally and individual securities, like stocks or bonds, through options trading. It allows traders to purchase and sell a particular asset at the predetermined price within a specific time frame. Though individuals have no obligation to buy or sell underlying assets, users can profit when the underlying stock rises and falls.

The two basic types of options contracts are called and put options. A call option gives the contract's buyer the right to acquire the underlying asset at a later time and at a fixed price. It is known as the exercise price or special price. When purchasing a put option, the buyer gains the right to sell and buy the underlying asset at a future date and price. We'll talk about the best stocks for options trading. Before that, let's examine some distinguishing features and basic strategies that a beginner options trader must employ to minimize risk.

What Are Options and Options Trading?

Options are tradable contracts that allow investors to make predictions about whether the price of a stock will increase or decrease at a specific point in the future. There is no purchase of the asset in question throughout the process. For instance, Nifty 50 options let traders guess the future course of this benchmark stock index, which is frequently used to represent the whole Indian stock market. Options may seem a little paradoxical at first, but they are easier to understand than they would appear. To comprehend options, you only need to be familiar with the following key phrases:

Call and put options: A put option enables you to sell security on the future date and price, whereas a call option allows you to acquire it at a predetermined price by a specified date.

Derivative: Options are referred to as a "derivative," meaning their value is derived from another asset. Contemplate stock options, where the underlying stock's price determines the contract's value.

Profitable and unprofitable:  Based on the price of the underlying securities and the time remaining until expiration, an option is said to be profitable (in the money) or unprofitable (out of the money).

Date of expiration and strike price: A strike price is the previously mentioned preset price. The option may be executed at the strike price up until the option contract's expiration date.

Premium: The cost of purchasing an option is known as a premium. It is regulated by computing the underlying security price and values.

Intrinsic and extrinsic value The difference between the strike price of an option contract and the current value of the underlying asset is known as intrinsic value. Extrinsic value corresponds to additional elements that impact the premium outside those taken into account by intrinsic value, such as how long the option is valid.

In the end, the only factor that matters is profit. The best stocks for options trading are only chosen once they are clear on all definitions and terms. For the investor, a thorough understanding it is necessary. They can obtain excellent profits from options trading in this way.

10 Best Stocks to Trade Options On

Options trading allow investors to build more wealth than they could through other forms of trading. Because it requires less financial commitment, it may be less risky for investors than equities. These are safer than stocks since they are the most reliable type of hedging. So, having a comprehensive understanding of the best stocks for options trading is non-negotiable. The top ten stocks among options traders in terms of trading volume over the last few years are listed below.

Bajaj Auto

India-based Bajaj Auto Limited is a producer of motorbikes as well as three- and four-wheeled vehicles. The company develops, produces, and distributes automobiles, including commercial trucks, two-wheeler with electric motors, motorcycles, and their parts. Automotive, Investments, and Others are among the company's business segments. In 1965, Rahul Bajaj, the current Chairman of the Group, assumed control of the company. Under his direction, the Bajaj Auto flagship company's revenue increased from INR 72 million to INR 120 billion. Its product line was broadened, and the brand found a market on a global scale. He is well regarded on a global scale for his commercial savvy and entrepreneurial zeal. He is one of India's most illustrious business executives. It is exhibited in the best option stock for trading.

HDFC Banking

HDFC Bank Limited (the Bank) is a private sector bank with its headquarters in India. The bank provides a variety of banking services, including transactional and branch banking for regular customers. They even offer commercial and investment banking for wholesale customers. Investors consider this stock option for various reasons. The Bank's Treasury division mainly consists of net interest income from its portfolio of investment, money market lending and borrowing, gains or losses on investment operations, and transactions in foreign exchange and derivative contracts. The retail banking segment provides services to consumers through bank network and other channels.

Adani Enterprise

Adani Enterprises Limited is a successful holding company. It is frequently discovered to be among the best stock for options trading. This company's diversified infrastructure includes gas distribution, power generation and transmission, edible oils, and agricultural commodities trading. They also have deep roots in oil and gas exploration, ports, multi-modal transportation, and the production and distribution of coal. Some segments include Integrated Resources Management, Mining, Solar Manufacturing, Airports, and Others.

FUTU Holdings Limited (FUTU)

Option Stock Price Volatility

Leaf Li is the founder of FUTU. It is a holding company with a focus on financial goods and services. The business specializes in digital brokerage and wealth management products. He created this company after mastering all the trade secrets while working for Chinese internet juggernaut Tencent. In March 2019, FUTU held its IPO and quickly raised $90 million in funding. The US affiliate of FUTU, Moomoo, provides many of the same services. Investors can access Hong Kong stocks, Chinese stocks, US stocks, ETFs, and options with Moomoo. The price of FUTU shares has fluctuated wildly, and no end to the volatility is in sight. Because of this, FUTU is a wise selection for options traders looking for attractive underlying assets.

Moderna (MRNA)

Option Stock Price Volatility

Moderna's significant role in the coronavirus has garnered much recent media attention. It was one of the first biotech companies to develop a potent COVID-19 vaccine. The messenger RNA therapy class of drugs is a new area of research for Moderna. The company is working hard to develop solutions that will prevent, treat, and ultimately cure some of the most crippling diseases in the world. For stockholders, the price of Moderna shares has been on an up-and-down roller coaster due to COVID-related news, including competitor wins and failures. It is the best solution for investors interested in purchasing and selling options.

Celsius Holdings (CELH)

CELH: Option Stock Volailty

Celsius Holdings, Inc. (NASDAQ: CELH) is a multinational corporation with a proprietary, medically validated formula for its flagship brand, CELSIUS®. It was founded in 2004. They are unique, clinically validated, or patented in their field and provide substantial health advantages. Celsius Holdings, Inc.'s business goal is to lead the world in branded portfolios. Regardless of the state of the economy, their specific goods will consistently sell. On that list, food and drink are fairly high. It is also a beverage firm that uses its proprietary formula to create a variety of still and sparkling beverages. Although Celsius drinks are sold alongside energy drinks, they don't belong in the same category. The collection avoids sodium, high fructose corn syrup, artificial colors, and artificial sweeteners because it is meant to provide health advantages. Of course, this industry experiences some volatility, and if we compare it to its rivals, Celsius experiences more volatility than its fair share. Celsius Holdings (CELH) is the best stock for options trading for traders who can profit from this firm’s ups and downs.

Nvidia (NVDA)

Option Stock Price Volatility

Nvidia produces some of the most innovative graphics processing units (GPUs) on the market.NVIDIA invented accelerated computing.Its cutting-edge product line particularly impresses gamer. Many professional businesses select Nvidia GPUs to enhance workflow. For instance, Nvidia hardware is used by construction, engineering, and architectural professionals. Although GPUs aren't NVIDIA's only claim to fame, they significantly impact the company's reputation. Their main goal is to take on unattainable challenges and solve difficult problems. Their work in AI and the meta-verse is revolutionizing the biggest industries in the world and creating a significant impact on society.

HDFC Bank 

HDFC Limited, The Housing Development Finance Corporation, A private sector bank with headquarters in India, is HDFC Bank Limited (the Bank). The Reserve Bank of India (RBI) gave "in principle" clearance to this bank. It is one of the first financial institutions in India to establish a bank in the private sector. The Bank provide both transactional and branch banking services for regular customers as well as commercial and investment banking for wholesale customers.Net interest income from the bank's investment portfolio, borrowing and lending in the money market, gains or losses from investment operations, and transactions in foreign currencies and derivative contracts make up the majority of the segment's Treasury earnings. It is considered one of the best stocks for options trading. The bank's branch network and other channels are used by the retail banking business to provide services to retail clients.

Dalmia Bharat

Dalmia Bharat Limited is based in India. It has been around for more than 80 years and now holds leadership positions in key industries like sugar, cement, and refractories. Cement and its related products, as well as refractory goods, are the company's primary lines of business. The group's businesses currently employ more than 8,500 people in total. The Hirakud Dam, the Dhola Sadiya Bridge, the Kochi Metro, and the Chennai Metro are just a few examples of the group's significant contributions to nation-building. The Dalmia Bharat Group was established to contribute to building India, and its prosperity has always been interlinked with that of the country. Cement and other divisions are among the company's segments. The cement division produces various types of cement and related goods. This group meets all requirements, making it the best stock for options trading. The group's sales have increased over the past sixteen years at a CAGR of 24%, reaching over 13,800 Cr in 2021, and its market capitalization has increased as well, reaching 31,191 Cr.

Apollo Tyres  

Apollo Tyres Ltd. is India's top-selling tyre brand. The Automobile Tyres, Tubes, and Automobile Flaps division is where the company conducts business. Now, it's a worldwide tyre producer. It is based on the fundamental idea of generating value for stakeholders through trustworthiness in its relationships and dependability in its products. The company operates six manufacturing copanies, four in India and one in the Netherlands and Hungary. Andhra Pradesh will soon rank fifth in India and seventh overall. Its headquarters lie in India. APMEA, Europe, and Others are its geographical divisions. The APMEA segment comprises companies in the United Arab Emirates, Thailand, Malaysia, and South Africa, as well as manufacturing and sales operations in India. Manufacturing and sales activities are included in the Europe division through European businesses. Their sales operations in the Americas and other business entities are included in the other division.

Factors need to be Considered Before Choosing Stocks for Options Trading

It's important to understand the factors to consider while choosing the best stock for options trading. We assume that you have already chosen a financial item to trade using options, such as a stock, commodity, or ETF. You may have selected this underlying asset based on a stock screener, your own analysis, or third-party research. Regardless of the selection procedure, there are six steps to choosing the best stock for options trading once you have determined the underlying asset to trade:

Range of Maturities

India has one of the largest options markets in the world. Options trading on the spot market is accessible in more than 100 different varieties. It includes many exotic and complicated contracts like short straddles, iron condors, and calendar spreads. This makes it simple to select a contract that meets your needs, whether you're searching for an exotic or simple contract.

Volatility

The fact that options trading is more volatile than conventional stock trading strategies is one of the key reasons why individuals choose it in India. Options are suitable for investors who want to gain an advantage from unforeseen events like geopolitical events, and any economic ups and downs that could cause prices to vary unexpectedly before their expiration date. This gives the company an edge over the competition.

Intrinsic Value

An intrinsic value is a financial instrument's value. It is independent of its current market price. It is precisely referred to as the "intrinsic" value as it has nothing to do with the price the market is now charging for an instrument. Future cash flows from the option contract, which are generally estimated using an option payoff chart, determine its intrinsic value.

Time Value

The rate at which an option's price increases over time is known as its time value. The buyer of a call option has more time before they must exercise their right to acquire anything at a specified price, and consequently more time to earn their profit from the choosing option before any expiration date rolls around again. It has more time value than a put option.

No Obligation

Option trading cannot be a long-term investment because options trading are a relatively new industry in India. So, you must only trade options if you're willing to take chances. You must understand that there are no promises or duties in this business, and you are accountable for any losses resulting from your trading actions. In fact, some experts believe that there is no other good way to collect money than by using options to speculate on volatility levels (which are usually within three months).

Best Stocks for Trading Options: Final Thoughts

Options trading in India are becoming incredibly popular over the past few years. It also requires expertise and knowledge to locate the best stock for options trading.For traders looking for the ideal volatility level, options are an excellent place to start. To use options as a tool for profit, you must understand how to trade them correctly. When looking for options stocks, take into account the industry, past volatility, and market circumstances that could affect future price swings.

Individuals are gaining profits by investing in the best stocks for options trading. The circumstances for spectacular earnings for those who purchase and sell options are created by volatility.Its high volatility can produce positive portfolio returns for investors. However, volatility can also have unfavourable effects on option traders, so we caution you to engage in this type of trading at your own risk.