Can We Do Option Trading in the U.S. Stock Market?
By Space Coast Daily // May 30, 2022
Have you been looking into options trading? Well, first things first – option trading is when you buy or sell an underlying asset at a pre-negotiated price on a future date. We all know options trading could be a little complex. But – once you know your way around the lanes, you will know how to work this out.
But, just remember, it requires understanding advanced strategies – and more. Now, if you were wondering if you could begin trading US options right from here – the answer to that lies in this article.
Before we go to that, it is first right to get the foundation straight.
What are the Options?
Option contracts are a sort of conditional derivatives rule that allows the owner to purchase or sell a particular fund at a pre-determined price before or after the contract expires. Because the value of the underlying asset is generated from options, they are referred to as derivatives. Options are considered influential since they have the potential to raise the value of anyone’s portfolio.
Individuals can buy a call option and sell a put option on this commodity. A ‘call option’ allows you to purchase an option that will enable you to purchase shares later, and a ‘put option’ allows you to sell an option that will allow you to earn shares later.
How to Trade in the United State’s Stock Market?
Have you been thinking about diving into the US stock market? No worries – this is all you need to know.
Diversifying investments across geographies, especially the US stock market, makes it a good starting point for any investor. But, the major question is how to do it from here.
To your surprise – this process is actually very simple. You can invest in US options from India – and everything from the comfort of your very own home.
Before you may trade in US equities from India, you’ll need to go through five crucial stages with a standard worldwide investing platform, which could be the greatest brokerage account for international trading. They are as follows:
Step 1: Open your Account
The very first step would be in registering for your account online once you’ve found the best brokerage account in India for buying US equities. It’s a straightforward, straightforward, and quick procedure. To get started – simply enter your name, email address, and phone number. Your brokerage account is immediately generated once the account is created.
Step 2: KYC is the Enroute to International Investments
You will be required to supply various papers to prove your identification and give proof of address during the account establishing procedure. The documentation required is minimal, consisting of a mix of a photo ID and proof of address. Voter ID, PAN card, valid driver’s license, passport, or voter registration card and photo are all acceptable forms of identification.
As proof of address, you can use a utility bill, a cell phone bill, or even a bank or credit card statement. A valid driver’s license with an address or a government-issued photo ID with an address, such as an Aadhaar card or a passport, may also qualify.
Step 3: Add the Best Options to your List of Options (Pun intended)
After your account has been approved, you can fund your brokerage account and check out the best options in the market.
Step 4: Finish the Forex Formalities
Before you start adding cash and investing abroad, you should familiarize yourself with the RBI’s forex guidelines, which is what the Liberalized Remittance Scheme (LRS) is all about. As an Indian resident, you must purchase dollars (or any other currency) from an authorized dealer (the bank) in India using Indian rupees (INR). The funds can then be spent or remitted abroad to purchase real estate or other assets such as stock.
Currently, any resident individual, including a juvenile (countersigned by a guardian), is authorized to remit up to 2.5 lakh US dollars (USD 2,50,000) per financial year under the LRS guidelines. It is approximately Rs 1,82,50,000 or Rs 1.82 crore at a rate of Rs. 73 to the dollar.
So here’s some paperwork for you. Before you begin trading, you must complete the requirements associated with the LRS form.
Step 5: Make Sure you Keep an Eye on the Forex Rates
The foreign exchange rate is important when moving rupee funds from your Indian bank account to your US brokerage account. Some foreign brokerage sites where you open an account have tie-ups with large nationalized banks to obtain your good low FX rates. Alternatively, you can transfer funds by contacting your banker.
You are all set with your US investment now!
Though there are some things that you might want to know before you start investing in the US stock market, and one of the very first things you would be sure of is -your risk appetite.
What is the Meaning of Risk Appetite?
The very first attribute you should know about risk appetite is that it’s one of the first things you should figure out. Why? Because knowing your risk appetite will help you figure out how much risk you can “live with” and how much of risks you need to manage. Risk appetite refers to the amount of risk that a business is ready to accept while pursuing its goals and before taking any action to mitigate the risk.
Now that you know what risk appetite is – you need to know how much risk you are ready to take in terms of your investment.
This is so you would not lose more than you can afford in your investments. The same stand when you start investing in the US stock market; you will need to choose funds that suit your risk appetite and will also serve your financial goals.
So, you’ve set up a brokerage account and transferred funds into it. You are good to go whether you wish to buy NASDAQ stocks from India or start trading overseas. But, before you start your investments – make sure you have the best strategies up your sleeve.