Once again proved writing options is dangerous

[columbus]

Market buzz- many put writers caught on the wrong foot, in writing put options. They had to short nifty futures/ nifty calls to cover their positions.

Rajesh,

Better not to know in detail what is put writing
and call writing.

 

[prasadam]

They are the best instruments to hedge overnight risks.

Rajesh,

Better not to know in detail what is put writing
and call writing.

 

[rajeshn2007]

Yes Prasad, they were meant for hedging. Actually , it is meant for institutions/ big portfolio holders, to hedge their positions.
And we all know, what everyone have made that into !

 

[ppmatkari]

One of the reasons why options have become more popular these days is because NSE has not revised the futures lot size since long so margin for futures costs a fortune these days & hence the turnover in futures has also decreased. And many of the newbies feel writing options gives free money without doing anything, but their knowledge of options & the involved intricacies is very limited. IV, gamma, theta... are virtually unknown to them.

 

[rajeshn2007]

One of the reasons why options have become more popular these days is because NSE has not revised the futures lot size since long so margin for futures costs a fortune these days & hence the turnover in futures has also decreased.

Yes ppmatkari. But if the futures lot size decreases and that would be another chaotic trading. People would lose more than the options.

 

[prasadam]

IMO, for a day trader there is not much difference between Futures and stocks because of the exposure being given by the brokers.

One of the reasons why options have become more popular these days is because NSE has not revised the futures lot size since long so margin for futures costs a fortune these days & hence the turnover in futures has also decreased. And many of the newbies feel writing options gives free money without doing anything, but their knowledge of options & the involved intricacies is very limited. IV, gamma, theta... are virtually unknown to them.

 

[rajeshn2007]

IMO, for a day trader there is not much difference between Futures and stocks because of the exposure being given by the brokers.

So the conclusion is, very high leverage doesn't work.

 

[ppmatkari]

Yes ppmatkari. But if the futures lot size decreases and that would be another chaotic trading. People would lose more than the options.

Yes People will lose/gain more in futures. But futures are much more like stocks, options is totally different ball game & learning curve is much higher.

 

[ppmatkari]

So the conclusion is, very high leverage doesn't work.

Margin availablilty varies from broker to broker. Secondly futures provides a month or more to square off while intraday is far too short & much more risky. Risk can be decreased in intraday stock trading by trading in small amounts but still the level of monitoring & skill reqd is much higher.

 

[krishna23]

very high leverage can bankrupt an account...
a great example of this would be LTCM...