Help me in options

[myidarunk]

I am new to options . I don't have much idea about it. I have an account with india infoline. As per the brokers request I have traded in
NIFY CALL OPTION. When I log into my terminal i can see the following details
Symbol : NIFTY
Instrument : OPTIDX
Strike Price : 4800
Expiry Date : 25 Feb 2010
Option Type : CE
Buy QTY : 50
Sell QTY : 0
Net : 50
Average Price : 0
Closing Price : 87.95


When I look at my ledger it shows a transaction
05/02/2010 To FO BILL FOR Rs4547.90 Cr

Can somebody explain me in details and whether i will book profit or loss and how? Please explain in details

 

[rkkarnani]

I am new to options . I don't have much idea about it. I have an account with india infoline. As per the brokers request I have traded in
NIFY CALL OPTION. When I log into my terminal i can see the following details
Symbol : NIFTY
Instrument : OPTIDX
Strike Price : 4800
Expiry Date : 25 Feb 2010
Option Type : CE
Buy QTY : 50
Sell QTY : 0
Net : 50
Average Price : 0
Closing Price : 87.95


When I look at my ledger it shows a transaction
05/02/2010 To FO BILL FOR Rs4547.90 Cr

Can somebody explain me in details and whether i will book profit or loss and how? Please explain in details

Why should you risk "real" money on an instrument/asset that you do not understand!! No harm in paper trading the Calls by your Broker and after understanding it fully , use real money.
It seems from your FO Bill that you have bought the 4800 call at a Net cost of around Rs.91.00 (91X50=4550.00)
If you carry it till Derivative closure, you gain only when Nifty closes above: 4800+91=4891..... however even before that when Nifty rises from the present level the price of your Nifty Call shall also rise slowly. However after second week if the price rise is not Rapid, the Call price may not rise much as Time decay would be more rapid!!!
You can sell it any day till Expiry to Book profit or Loss!!!
Here is a link to a word file where a simple write up about FnO is gievn. If interested have a look. It is really educating for a newbie!!

http://www.4shared.com/file/44137389/8397b5a5/Step_By_Step_L
earning.html

 

[Aman1]

rkk
Suppose nifty is at 5091 on feb 20, 2010 and 4800 call is at 191 and myidarunk squaresoff his call option what will be his profit ?

 

[AW10]

Profit is always calculated by = Qty * (Sell price - buy price).
His Sell price = 191, buy price = 91 and Qty = 50 for 1 lot.

We all have learnt that in schools. I haven't seen any new formula for this so far.

Happy Trading

 

[rkkarnani]

rkk
Suppose nifty is at 5091 on feb 20, 2010 and 4800 call is at 191 and myidarunk squaresoff his call option what will be his profit ?

Hello Aman1, You also need to download the file from the link I have provided above!!!
When Nifty is 5091 , the 4800 Call on 20th Feb shall be more than 291!!(not 191) ..... (5091 minus 4800=291) need I say more... if you still want more, than follow my advise to have a look at the basics!!!! Believe me you need to do it if you are serious about trading Options!!!

 

[nilesh80]

Hi !
I am also new to options and i have been reading threads from many senior members here and my sincere thanks to all of them. I have some queries about options and want to know if i can put those in this thread or i have to start a new thread ?

Regards,
Nilesh

 

[rkkarnani]

Hi !
I am also new to options and i have been reading threads from many senior members here and my sincere thanks to all of them. I have some queries about options and want to know if i can put those in this thread or i have to start a new thread ?

Regards,
Nilesh

You can put the same in any relevant thread....members here are quiet helpful. I am sure someone will s=surely help you resolve your queries!!
If you so desire you can also start a New Thread!!

 

[nilesh80]

Thanks rkkarnani for your reply and sorry for being late in responding. Currently i am doing paper trades in options and few days back i thought of short strangle trade in nifty but i need some clarifications in that.

sell 4900 call & 4700 put , net inflow 130
breakeven upside 5030 & downside is 4570

I want to know what will happen if mkt crosses any of these two levels ? I was told by one person that i will loose on both legs in that case.But i think if mkt crosses 5030 i loose on short call but gain on short put and if crosses 4570 then i loose on short put but gain on short call. Am i right ?

Before expiry in such trade if i am in profit or loss can i close my position ? If i wait till expiry and mkt doesn't cross both levels how much one will gain ?

Regards,
Nilesh.

 

[trader.trends]

sell 4900 call & 4700 put , net inflow 130
breakeven upside 5030 & downside is 4570

I want to know what will happen if mkt crosses any of these two levels ? I was told by one person that i will loose on both legs in that case.But i think if mkt crosses 5030 i loose on short call but gain on short put and if crosses 4570 then i loose on short put but gain on short call. Am i right ?

Before expiry in such trade if i am in profit or loss can i close my position ? If i wait till expiry and mkt doesn't cross both levels how much one will gain ?

Regards,
Nilesh.

Nilesh you have to get your options basic correct before putting on any kind of trade including paper trade. When you short options your maximum profits are fixed and is equivalent to the premium recd. The total premium recd by you is 130. You have calculated the break even correctly at 5030 and 4570. If NF moves beyond these ranges you will lose one point for one point move on Nifty. If Nifty expires at 5100, you have to pay back 200/- to the guy who bought 4900 call from you. If the market ends at 4600 you have to pay 200 to the guy who bought 4700 put from you. So in either case if the market moves beyond the break even point you start to lose money.

 

[rkkarnani]

Thanks rkkarnani for your reply and sorry for being late in responding. Currently i am doing paper trades in options and few days back i thought of short strangle trade in nifty but i need some clarifications in that.

sell 4900 call & 4700 put , net inflow 130
breakeven upside 5030 & downside is 4570

I want to know what will happen if mkt crosses any of these two levels ? I was told by one person that i will loose on both legs in that case.But i think if mkt crosses 5030 i loose on short call but gain on short put and if crosses 4570 then i loose on short put but gain on short call. Am i right ?

Before expiry in such trade if i am in profit or loss can i close my position ? If i wait till expiry and mkt doesn't cross both levels how much one will gain ?

Regards,
Nilesh.

Above and below the break even level you loose a rupee for a rupee!!

Assuming you sold at close today Nifty March 4900 Call at Rs.140.00 and Sold 4700 Put at 110.00
Net in flow 140+110=250
Breakeven between 4450 and 5150
If Nifty closes at say 5200:
You retain the amount Rs.110 you received for the Put sold, and you pay Rs.300 for the 4900 Call sold(5200 -4900), i.e extra Rs.160(300-140)!! So net you received 250 and paid 300 loosing Rs.50.00 (5200 was +50 above the breakeven point)
If it closes at say the current level of 4850, you retain the entire amount received becoz the closing is above your PUT sold and Below your Call sold!!
Any close between 4700 and 4900 will give you the entire amount received as Profit!!!
Beyond this range you gain less a Rupee for any increase or decrease in Nifty Close by a point.
At 4950 you Profit 250 -50 = 200 (4950-4900)
At 4600 you profit 250 -100 = 150 (4700-4600)
I am not a good teacher and have tried to explain it as I have understood, pray and hope that there isnt any errorin my input above!!
Thanks