How to buy back a shorted put option ?

[trader.trends]

You will be charged .50 + brokerage if you buy it back. But you don't have to buy it back as the spot is well above the strike price. Thus you save that .50*50 as well as brokerage. The option will just lapse on the expiry of the series.

 

[AW10]

Mthakkar, Your thinking about selling 4200 Put and keeping whole premium is attractive trade. But please don't ignore the risk involved with such Naken Short Put.
It is fact that, FEAR is stronger emotion then GREED. If you look at any charts, u will see it clearly that drops take less time.. but recovery takes much longer.
Last year we fell from 4500 to 2500 level between august to november i.e. 3 months and it took nov-June to come back to same level again.

Such events /triggers don't come after telling us in advance. So when market falls, it can fall really fast.. and then your short put may shoot in value. and then u will be forced to buy it back at 3 to 5 times or even higher price. Learn to manage the risk before getting into such risky option trades.

Happy and safe Trading.

 

[Mthakkar]

Thanks AW10,

As I said, I am pretty new to Options and just understanding the details of it since last couple of months.
As I observed that the distant PUTs (4000 or 4200 PUT when nifty is 4600 around) is high in the starting of the month series but falls to few paisa towards the end. So thought if we sell at the start of the month and buy at the end.

This was part of enhancing my understanding of Option.

Thanks again for word of caution, I will surely keep this in mind.

Thanks
Milind

 

[AW10]

Plz chk out on what happend to such distant PUTs in the month of Sept-08, Oct - 08.
And for such far distant CALLs in April / May 09, Sept/ Oct - 07.

If your making your opinion based on last 3 months of stable, bullish market then you are taking big risk. Your observation period should cover sufficient data to really risk your money on it.

Happy Trading

 

[mayur553]

Re: Short Selling NIFTY PUT : Quick Question

If you are planning to sell 4200 puts at 32, then of course you will get 32-*50 into your account. And if Nifty stays above 4200 you are in profit by 32. You don't even have to square it off. But you have to block a margin of 4232*50*12 percent or whatever margin your broker charges.

i am confused over here... what will i be paying when i short a put... only the premium of the margin... or both..

 

[sameer999]

Re: Short Selling NIFTY PUT : Quick Question

i am confused over here... what will i be paying when i short a put... only the premium of the margin... or both..

whn u write an option , u need to block a margin amount in advance and this margin is quite high.
margin in your case will com arround ,
= (4200+32) x 50 x 12%

incase market moves against u, this margin is used in MTM adjustments n also to cover the risk of your broker.

wont advice to sell a call/put , thts y its vry risky to sell/write coz the max profit is limited to premium earned with max unlimited risk.