Index options can yield fixed deposit-like returns

Aditya Singhania, Co-Founder of Vaidya Stocks & Finance Pvt Ltd, shared insights on using index options in a recent interview. He explained how these options can provide steady returns similar to fixed deposits, even though they are often viewed as risky. During the conversation, Singhania described index options as a way to participate in market movements without owning individual stocks. These options are linked to major indices like Nifty and Sensex. He emphasized that they are cash-settled, which reduces delivery risks. For traders looking to minimize risk, Singhania suggested using a mix of strategies that benefit from time decay while managing exposure to market fluctuations. Techniques like credit spreads and covered calls can help traders earn returns without high risks. He pointed out that while no investment strategy is entirely risk-free, well-structured options trades can yield predictable returns. With proper management, traders can aim for annualized returns of 10-12%, making these strategies appealing compared to traditional fixed income options. Singhania highlighted how institutional and retail investors approach index options differently. Institutions focus on hedging and complex trading strategies. Meanwhile, retail traders often use options for quick income or risk management through short-term trading techniques. He also addressed common misconceptions, noting that properly managed options trading can be less risky than many believe. A blend of strategies, rather than just a single approach, can lead to success in options trading. To navigate volatile markets, Singhania recommended using strategies like iron condors or calendar spreads. These techniques can help traders adjust their exposure and maintain returns. Finally, he explained how investors can hedge their portfolios with protective puts or covered calls, ensuring they can still earn steady returns while protecting against potential losses.