Beginner queries...

[TFL]

I. I buy a lot "Nifty 27 Aug 2009 CE 4000"
II. I short sold a lot "Nifty 27 Aug 2009 PE 4000"

A. Are these equal/equivalent?
B. DO they carry almost equal liquidity all the time?

1. Yes, they are equivalent when they are at-the-money, net you are long in NIFTY. higher margin is block for the PE/PA and only premium is required for the CE/CA

2. When the underlying moves below 4000:
CALL(long): You will loose the right to exercise the CALL.
PUT (short): You will fall into danger 'zone' since the option buyer have the right to exercise and you have are obligated to buy at the lowest price.

3. When the underlying moves above 4000:
You will get double reward, both positions will be in profit. You can square off the call and leave the put as it is or can square of in the last minute of expiry.

The options will have ample liquidity when the underlying near it strike price, the liquidity dries up gradually when underlying moves away from the strike price.

TFL,

 

[priyanvada]

Q77: - Suppose at Aug 3 Nifty meter is reading 4600 and I buy an option Nifty 27 Aug 2009 CE 4000 ... So how can such CALL option exist where strike price is lower than todays Nifty index ?

... Ok it can exist if is created in Jun or July 2009...

but can such a CALL option be created in August 2009 where strike target is less than current meter reading??

Q78: - When a CALL option is created/written, Is it MUST that strike target is MORE that current reading and in coming days the price/index is supposed to hit that strike target??

 

[priyanvada]

Q79:- Please see the images below,,,,

... simple questions observations are,

A. Such an exact chart behavior for all of this (mirror in case it is PUT) but such different volumes... why?

B. Due to almost exact chart behavior, Is it not WISE, that I make my trading decisions in "Nifty 27Aug2009 PE 4300 ", option because of huge and consistent volume and price not too much?

D. Can one make some more noteworthy observations from these charts, in addition to above?

regards,
priyanvada

 

[priyanvada]

Q80 :- Normally, I can short sell a stock for 1 day...so How long can I short sell an option? day ... month ... more than a month?

 

[bijovyppil]

Q80 :- Normally, I can short sell a stock for 1 day...so How long can I short sell an option? day ... month ... more than a month?

Upto expiry date...depends on which month u selected

 

[TFL]

Q75: - If I buy an option "Nifty 27 Aug 2009 CE 4000" and "Nifty 27 Aug 2009 PE 4000" on 3rd Aug ...and if I just keep them till 27 Aug then will they cancel my profit and loss all the time till 27th August ... Or each ones price will change independent with the other?

Simply, they will not just offset each other since option premium depends on several factors.

If you are lucky to get a huge move from the strike price (See the option prices before and after election results day) in a short period of time, you will get a big profit even though the positions are just opposite to each other since option prices cannot go below 0.

TFL,

 

[TFL]

Q76: - what happens when i want to execute Nifty 27 Aug 2009 CE 4000 assuming it is IN money ,... what underlying will I get for that???

You will be getting a punishment from the court and some restrictions from SEBI :lol:.

 

[TFL]

Q77: - Suppose at Aug 3 Nifty meter is reading 4600 and I buy an option Nifty 27 Aug 2009 CE 4000 ... So how can such CALL option exist where strike price is lower than todays Nifty index ?

... Ok it can exist if is created in Jun or July 2009...

but can such a CALL option be created in August 2009 where strike target is less than current meter reading??

Q78: - When a CALL option is created/written, Is it MUST that strike target is MORE that current reading and in coming days the price/index is supposed to hit that strike target??

Q77: -
What's the problem in it? There exists, in the money, deep in the money, at the money, out of money, far money options contracts. Out of money option becomes worth less only at expiry.

Yes you can simply write an option which is out of money if available.

TFL,

 

[TFL]

Q78: - When a CALL option is created/written, Is it MUST that strike target is MORE that current reading and in coming days the price/index is supposed to hit that strike target??

No such restriction to write an option. You can write in money, at money or out of money at any time.

TFL,

 

[priyanvada]

You will be getting a punishment from the court and some restrictions from SEBI

:rofl::rofl::rofl:

Ohh my God!! i am such a stupid girl!
... i wanted to ask that when i want to exercise (not execute!:annoyed:) Nifty 27 Aug 2009 CE 4000
will I get 1 Nifty index stock delivery each for exercise of an each lot of Nifty Call option (assume that option is at or in money) ?

regards,
priyanvaad