Options Doubt

[PPM]

oh! weekly expiry.... caused unnecessary loss.

Thank you for clearing the doubt... now onwards i ll be careful selecting the expiry in banknifty... :thumb:

 

[TRADERSM]

what is TICK VALUE price of Nifty ??? & its stable always (eg) 1pt movement 100rs in crude
please help lot of confussion

 

[princy01]

.05 is tick Size in nse lot size in option and future for nifty is 75, so tick in rupees is 3.75 rs

 

[okabira]

clarification needed .... new to options ..
currently , BANKNIFTY : 23500 CE is 99

so if i am bullish for the day then I buy 23500 CE @ 99
40 * 99 = 3960 , so 3960 is the total amount needed to trade ?
right ? #1

my SL is 10 points away .... @ 89 ..
So maximum loss could not be greater than 99-89 = 10 , 10*40 = 400
right ? #2

If i am bearish then I Short 23500 CE @ 99
and my SL would be 109... here also my maximum loss would be 400 ?
right ? #3

-------------------------
Pl. help .. am I understanding it correctly ?

 

[traderniftybull]

clarification needed .... new to options ..
currently , BANKNIFTY : 23500 CE is 99

so if i am bullish for the day then I buy 23500 CE @ 99
40 * 99 = 3960 , so 3960 is the total amount needed to trade ?
right ? #1

my SL is 10 points away .... @ 89 ..
So maximum loss could not be greater than 99-89 = 10 , 10*40 = 400
right ? #2

If i am bearish then I Short 23500 CE @ 99
and my SL would be 109... here also my maximum loss would be 400 ?
right ? #3

-------------------------
Pl. help .. am I understanding it correctly ?

yes,
your thinking is right, in all 3.
But in last case, writing of call option, will be subject to SL being hit, otherwise loss may run for unlimited loss and you need 45-50 K (equal to future trading) less premium received to write an option.

 

[okabira]

yes,
your thinking is right, in all 3.
But in last case, writing of call option, will be subject to SL being hit, otherwise loss may run for unlimited loss and you need 45-50 K (equal to future trading) less premium received to write an option.

#1 ok so anything against the main series (CE or PE) is dangerous ?
i mean if its 23500 CE then .. shorting is dangerous ..
if its 23500 PE then Buying PE is dangerous ?

#2 how can a option run into unlimited loss ??
shorting CE means i am selling call option to the Buyer of CE..
if i am selling at 99 .. and buyer buys at 89 then its difference of 10 points ..
right ? so i will make 10*40 = 400 rs ?
correct ?

suppose option jumps my price of 99 (as i am shorting CE) .. i am having a SL ..109 ... so loss is -400 ... how it gets unlimited loss??

sorry for newbie like question..

 

[Subhadip]

clarification needed .... new to options ..
currently , BANKNIFTY : 23500 CE is 99

so if i am bullish for the day then I buy 23500 CE @ 99
40 * 99 = 3960 , so 3960 is the total amount needed to trade ?
right ? #1

my SL is 10 points away .... @ 89 ..
So maximum loss could not be greater than 99-89 = 10 , 10*40 = 400
right ? #2

If i am bearish then I Short 23500 CE @ 99
and my SL would be 109... here also my maximum loss would be 400 ?
right ? #3

-------------------------
Pl. help .. am I understanding it correctly ?

Do it in a different way.

Like bullish

Buy 21000 CE and sell 23500 CE

Same quantity

Thinking of sideways
Buy. 21000 CE and sell double quantity 23500 CE

Thinking of bearish.

Buy 25000 pe and sell 23500 pe.

 

[Subhadip]

#1 ok so anything against the main series (CE or PE) is dangerous ?
i mean if its 23500 CE then .. shorting is dangerous ..
if its 23500 PE then Buying PE is dangerous ?

#2 how can a option run into unlimited loss ??
shorting CE means i am selling call option to the Buyer of CE..
if i am selling at 99 .. and buyer buys at 89 then its difference of 10 points ..
right ? so i will make 10*40 = 400 rs ?
correct ?

suppose option jumps my price of 99 (as i am shorting CE) .. i am having a SL ..109 ... so loss is -400 ... how it gets unlimited loss??

sorry for newbie like question..

Please read up...zerodha varsity two modules

 

[okabira]

yes,
your thinking is right, in all 3.
But in last case, writing of call option, will be subject to SL being hit, otherwise loss may run for unlimited loss and you need 45-50 K (equal to future trading) less premium received to write an option.

subhadip ji ... how it gets unlimited loss ?

 

[traderniftybull]

#1 ok so anything against the main series (CE or PE) is dangerous ?
i mean if its 23500 CE then .. shorting is dangerous ..
if its 23500 PE then Buying PE is dangerous ?

#2 how can a option run into unlimited loss ??
shorting CE means i am selling call option to the Buyer of CE..
if i am selling at 99 .. and buyer buys at 89 then its difference of 10 points ..
right ? so i will make 10*40 = 400 rs ?
correct ?

suppose option jumps my price of 99 (as i am shorting CE) .. i am having a SL ..109 ... so loss is -400 ... how it gets unlimited loss??

sorry for newbie like question..

Bhai, explaining elementary option trading is not easy (for me atleast),because there are may conditions attached to it. So it will be good for you to read and understand basics of option trading.

In a nutshell,
One will earn from stock market only and only if he is on the right side.

Option buyers will profit only if market moves on his side, (event days may sometime prove exception) and subject to IV, time decay, theta, gamma etc. But the loss will be limited to the amount invested and not more. So you know beforehand your maximum loss. Thats why it is said to be "a trade of limited loss and max profit."

Option writer (at maximum) will get the premium, for which he has sell that option and suppose the trade move against it, he will have to bear the loss till his trade is closed. That why it is called "a trade of limited profit and unlimited loss"

In the example you have quoted, if SL hits then your loss is 400 but suppose price jumps your SL then.

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Not writing any more, otherwise a mad dog may enter into the arena and will start barking and biting.