Difference Between Intraday and Option Trading

Intraday and Option Trading: If you are new to the trading world, then there must be confusion in your mind whether you should do intraday trading or option trading. Unless you understand the difference between these two, you will not understand what is right for you. 

And if you choose the wrong trading then it’s possible that you are doing the right thing but still you are incurring loss. When majority of people enter in the stock market, they do so with the mindset that they can earn money quickly from here. 

But when they start spending some time in the world of stock market then they see that there are different trading styles like option trading, intraday trading and many more which are quite different from each other and many times it happens that knowledge of style doesn’t help you in other styles either. 

So, in this article, the differences between option trading and intraday trading will be explained and along with that, advantages and disadvantages will also be explained through which you can choose your trading style. 

What is Intraday Trading?

Intraday trading means buying and selling of stocks on the same day and it’s also called day trading and its purpose is to make profit through the movement of market indices. Intraday trading is not done for investment purposes but for the purpose of making quick profits.

Intraday trading can be done in almost every type of stock. Suppose a stock is worth ₹1000 in the morning and then becomes ₹1100 in 2 or 3 hours. In such a situation, if you have bought 1000 shares in the morning, then you can trade them till the price increases. But you can sell it at ₹1100 and by doing this you can make a profit of up to Rs 1 lakh in only a few hours and this is called intraday trading.

The condition of intraday trading is that you can do it only between 9:15 am to 3:20 pm i.e. during this time you have to buy shares and also sell shares. Now here the question arises what happens if we forget to sell our shares? 

If you forget to sell your shares, then whatever broker you have through the app which you use, it automatically squares off your position, which means it automatically sells your shares. [Intraday and Option Trading]

Advantages 

• Margin is available in intraday trading, which means that the share whose price is ₹300, you get that share for ₹30, ₹40 or even ₹50. In such a situation, you can buy more and more shares and due to margin, beginners or many traders are able to make good profit, that’s why margin is very beneficial. 

• You can earn money in a single day in this, that means you do not need to wait for a long time to earn money as it happens in equity, you will invest money today and earn money today itself and sometimes you can earn money even in minutes. 

• In intraday trading, you do not earn money only when the price increases, you can also earn money when the price falls, that means if you think that the price of this stock will fall today, then you can earn money by doing short-selling. 

• You can also generate a regular source of income from intraday trading. There are many such traders which make good profits just by doing intraday trading. For this, you will have to learn the market well and do continuous learning. 

• Whatever stock you want to buy, you do not need to have much knowledge about the stock, that means you do not need to do its fundamental analysis, you only care about how this stock will perform today.  [Intraday and Option Trading]

Disadvantages 

• In intraday trading, you can make money in a day and can also lose in a day and it will never happen that you will keep making money every day, a day will also come when you will suffer a loss, so you will have to be ready for this too. 

• Intraday trading is more risky because if you have bought a stock today then you will have to sell it today itself, that’s why it’s very risky. If you are afraid of taking risks, then intraday trading is not for you. But if you like to take risks then you can do intraday trading 

• In this, the possibility of losses is very high because there are many frequent trades you get here and more trade opportunities are available, so the chances of loss are also higher.

• Beginners in intraday trading are not able to manage their emotions. If they see huge profits or losses, they are not able to control their emotions. 

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What is Option Trading?

Option trading gives the right to the buyer but not the obligation to buy (call option) or sell (put option) an underlying asset at a specified price (strike price) before the expiration date.

There are two types of option trading, one is call option which gives the holder the right to buy an underlying asset at a predetermined price before the date of expiry. The other one is put option which gives the holder the right to sell an underlying asset at a predetermined price (strike price) before the date of expiry.  [Intraday and Option Trading]

Advantages 

• You can do options trading with low investment. If you are on the right track, your positions can give you huge profits. 

• In option trading, you can trade on any phase of the market, whether the market is uptrend, downtrend or range-bound market, you can make good profit by trading in all these. 

• Traders can use options to hedge their leveraged positions.

• Those who are traders and investors can earn extra money by using option trading hedging strategy. 

• If you do option trading, you will get to use many strategies so that you can benefit from different market scenarios. 

Disadvantages 

• In option trading, there is high risk of getting the whole premium zero in very less time.

• Options are for short term and expire on a fix date.

• Improper risk management can lead to loss of your whole investment. 

• Short selling in option trading is riskier than option buying.

• Option trading is very volatile and for experienced traders as the trade with quick decision mindset. So Beginners should stay away from option trading because they can lead to huge losses.  [Intraday and Option Trading]

Read Also: How to Become an Expert in Options Trading 2024

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Intraday Vs Option Trading: Which is Better for Beginners?

If we talk about option trading, then there is the highest volatility, and the price of the contract increases and decreases very quickly. That means many times it happens that suppose you bought a contract for ₹10, it’s possible that after 1 hour its price has increased to ₹40, ₹50 and even sometimes to ₹100.

And in such a case if you have bought a lot For ₹4,000, ₹5000 then it can become ₹50,000 in 1 hour. But if you have bought it for ₹10 that it can also become zero in one day and all your money can also be lost.

So option trading is very volatile, there is a lot of risk in it. So those who have a very good experience and those who can take more risk for them option trading is better.

If we talk about intraday trading then in intraday trading you are trading in particular stocks. So you also know that there is no such stock which will become zero in one day. So here the chances of your entire capital getting lost are less.

You can’t get as high returns as you could get in option trading, but because you know that you are getting a margin here, then your returns can increase 5 times and can also decrease 5 times.

In intraday trading, you don’t get as high returns as you get in option trading, but there is also high risk in intraday trading. So if you don’t want to take as high risk as in option trading but still you want to trade then you can consider intraday trading. [Intraday and Option Trading]

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Which is Safe Intraday or Option Trading? 

For intraday trading, you have to learn many indicators, trendline, support and resistance, moving average and many such things, which means you have to learn advanced level chart analysis to do intraday trading.

And for options, you need the most knowledge. You have to learn intraday trading and along with that, you should also know the analysis of option chain and options Greeks. 

Neither we can consider intraday nor option trading as safe, both have high risks, hence whatever you want to trade, whether it’s intraday or option trading, you should do it with proper knowledge and risk management. 

If you are a beginner then you can do intraday trading because it’s less complex and you can control the risk in it. In contrast, option trading is very profitable. For this, along with knowledge, risk management is also very important.  [Intraday and Option Trading]

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Conclusion 

If you are ready to take risk then also don’t go straight to option trading. First, go to intraday trading, do intraday trading, learn and see and when you learn don’t think that I will make a profit on the first day.

That means there will be a loss in the beginning, keep this in mind. If you think that I will start earning money from the beginning, then trading is not for you. So you have to understand that if you can’t take too much risk then swing trading is fine.

But if you are ready to take risks, if you are ready to put your money at risk then you can do intraday trading. And when you think that you can earn money from intraday trading then go to option trading because option trading is very risky. 

I hope you have liked the information we have shared in this article, to know more about trading you can read our other articles too. [Intraday and Option Trading]

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Intraday and Option Trading (FAQs)

1. Which is better intraday or options?

If you have limited capital then intraday trading is better than option trading and both are high risk trading. If you are a beginner then you can learn both with limited capital but if you want to make more profit in less time then option trading will be best for you. 

2. Are intraday and F&O the same?

In intraday trading, you have to buy shares and sell them on the same day between 9:15 am and 3:30 pm. In F&O trading, the trading is done on the price of the underlying through future & option contracts. If seen in this way, both of them are not the same.

3. Is intraday trading very risky?

Yes, intraday trading is very risky, in this you have to buy shares and then sell them on the same day.

4. Which trading is best for beginners?

Paper trading is best for beginners because you can learn trading without earning real money and if you want to do real trading then swing trading will be best for you because it has less risk.