When you are interested in investing in the Indian stock market one of the first things you will need is a reliable and affordable stockbroker. At one point in time, a stockbroker was seen as a very high priced professional that was extremely hard to converse. With advent of online stock trading, stockbrokers have become more approachable, they offer their services at cheaper fees and in such a convenient way that it is easier to understand. This is an extremely wonderful change for the simple reason that you will not be able to trade in any way, shape, or form without a stockbroker.
Rules of Stock Market
One of the major rules within the stock market is that no person is allowed to trade within the stock market unless they are a certified stockbroker. There are over 320 major stockbroking companies in India registered with SEBI and different stock exchanges. There are more than 3,600 broker-dealers in India according to the most recent data from the Financial Industry Regulatory Authority (FINRA).
So you are probably now wondering, what exactly can a stockbroker do for me? There is a wide range of abilities and services that any stockbroker can offer you, at the same time there are also various ranges of fees that will be collected from them. Typically, a stockbroker will charge a commission, a set fee, or some combination of the two. In regards to the services a stockbroker can offer you, there are three basic levels that include only execution, portfolio management, and advice. A stock broker assists in buying and selling stocks including dematerialisation of securities, options, futures and derivatives.
Buying and Selling Positions on Options
When a stockbroker only deals with the selling and buying of particular option shares, per the instructions you give them, this is generally called execution only or in softer terms dealing only. With this type of service, they do not offer you any type of advice on any action you want perform. Typically, investors that are experienced or novice in investing will use this type of service. Execution only is cheaper and extremely efficient the fees the stockbroker charges can range anywhere between ₹20 to hundreds of rupees, this will depend on the specific stockbroker you choose and the services rendered based on the amount assigned.
Portfolio management service
Portfolio management of options trading is extremely detailed and the most expensive type of service performed and dealing with advice is typically a little more expensive than execution only, because the stockbroker will offer advice and views on what is happening within the stock market. The stockbroker at this level of service will also take the time to explain anything you may not understand very well.
Option trading is complex for beginners. Stock broker help in understanding these complexities. Stock brokers advice Investors to look carefully at the open interest and volume when considering which option contract to buy. A low volume/open interest will generally result in large spreads between the bid/ask prices and thus reduce profits, plus it may make it difficult to sell the option contract.
Another consideration in selecting the option contract is volatility. Stocks with high swings in prices will translate to more expensive options since the options will have a greater likelihood of being in the money. If you have a reliable method of forecasting stock movement, this higher price may not be a consideration.
Segregation in obtaining broking service
Within the portfolio management service for options trading, you can separate these into two other categories these are advisory options and discretionary options. When under the advisory category, the stockbroker will create a proposal of a portfolio for you; however, he or she will not take any action without express permission from you. Within the discretionary category, your stockbroker will completely run all aspects of your portfolio and will give you reports as needs on how the options portfolio is working. Here, you can download online stock trading app.
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