Nifty options are contracts that give the buyer the right to buy or sell Nifty at a stated price (Or Strike Price) for a limited period of time. It's a derivative (by-product) of Nifty Index. In simple explanation, it's like diesel which is a by-product of petrol and can be used as an alternative to drive cars and machines. Some people prefer diesel because it's cheaper, affordable and does the same work as petrol. Likewise, some investors/traders who can't afford to trade Nifty futures which requires around Rs.660/- (For a Spot Nifty price of around Rs.4700/-) can trade with Nifty options which will require 1/6th or Rs.100/-of the Rs.660/- capital that will be used to trade Nifty Futures.

Figurative example:-

To buy 1 Nifty Futures you will invest Rs.660/-(Approx) and let's say you get a return of Rs.60/- from a 60 points rise in the Nifty Index. The investment:reward ratio is 660:60 or 11:1.

Whereas under the same scenario.

To buy 1 Nifty In-The-Money Option, you will invest round Rs.100/- and you will get a return of Rs.20 (min) from the same rise of 60 points in the Nifty. Now, the investment:reward ratio here is 100:20 or 5:1. This means that you just need half the capital to earn the same amount of profit.

Furthermore, there are so many reasons why Nifty options are a better product to trade than Nifty futures. Some of them are:-

1) With Nifty options, you do not need to have a big amount to trade. A minimum Rs.10,000/- can be the starting capital.

2) The possibility of earning 50% to 300% in a month.

3) It is very easy to trade. Buy Call options if you speculate the market to be rising. And buy Put options if you speculate the market to be falling.

4) Trading 2-4 times a month can give you the same return or even more than what you get by trading 10 times a month. The more trades you do, the risk of losing increases.

5) Limited risk with unlimited reward. You will be risking only a few amounts by keeping a stop loss trigger.

6) It takes lesser time to set-up a trade.

7) High liquidity investment product.

8) The difference between an equity trader and an option trader is that, option trader takes a position only when the risk reward ratio is 1:2 and the probability of winning becomes 75% or more.