Dear all,
Options trading can be described as many things - fun, challenging, engaging, and interesting. But in between that, what is missed is - Options Trading is inherently risky.
If you are into Options Trading or someone who is taking interest in it and wants to get started with either learning or trading in Options, Dhan as a platform wants you to be aware of some of the risks associated with it.
At Dhan, we adopt industry-leading features like PIN & Biometric login, and more for your Dhan account. But beyond just the measures taken by us, your active participation in keeping up with the best practices is necessary.
These are some of the pointers that you need to keep in mind:
1. Don’t Share Credentials of Dhan
Your Account Details, Password, PIN are the key to your trading account. Think of it as the key to your home - you wouldn’t share it with anyone.
Furthermore, if you don’t have biometric login enabled for your Dhan app, it would be good practice to switch it on for extra security.
2. Learn the Essentials of Options Trading
Options trading is generally considered to be for advanced traders, ones who know the ins and outs of options and derivatives. That’s because a leveraged product like options requires a nuanced understanding of how calls, puts, premiums, and other essentials work.
If you’re a beginner, it would be wise to learn how options trading works before, starting with the basics that you can understand with this blog.
With that note, also a reminder that Dhan has a dedicated Options Trading app - a first in the stock broking industry for India.
3. Don’t Trade Based On Tips
Do your own research and avoid trading in calls or puts based on tips from anyone, including armchair experts, social media experts, and likes who don’t know the difference between theory and practice. This is one way to rely on your own expertise to make informed decisions based on your research and due diligence.
4. Avoid Giving or Receiving Unsolicited Tips
Do not engage in unsolicited tips on various social media platforms like Whatsapp, Telegram, YouTube, Facebook, or even SMS and calls.
5. Don’t Be Influenced by Influencers and unauthorised Investment Advisors
An influencer is a paid promoter who may not have a vested interest in your well-being. Thus, avoid taking tips from influencers or any other unauthorized entity who claims to be market expert or investment advisor.
6. Monitor Trade Information from Exchanges
Stock Exchanges will send you trade information within 24 hours of execution of trades in your account. This will come to you on Email and SMS, keep a tab on these and check for trade irregularities if any, and bring this to the notice of your Stock Broker.
7. Monitor Communication From Depositories
Depositories like NSDL and CDSL will send you emails and SMS for transactions on your Demat account. Keeping a tab on these communications can help you spot any irregularities in your Demat account.
8. Check Contract Notes Regularly
A contract note is a snapshot of your trades. Your stockbroker will send it to you everyday with details like buy/sell quantity, amount per trade, time of each trade, and other information. Reviewing this information can help you spot errors or trades that you may have not made.
9. Not Using a Demat Account? Freeze It.
Depositories allow you to freeze a Demat account if you’re not using it or do not plan to use it for the foreseeable future.
10. Don’t Download Unknown Apps
Verify the apps you download by checking existing reviews and information on the security of data. Refrain from using apps that come from unknown sources as they may potentially tap into important data on your phone.
While we’re on a mission to improve the trading experience for India through technology and security best practices, being mindful of the best practices mentioned above can help you avoid unfavorable circumstances and losses when trading in Options.
Thank you
Kuldeep (Risk Team)