Please tell me little bit on put options

[sureshd]

Hi Friends

please explain this case :

assumptions :

if a derivative named xyz stock price Rs.300

suppose its premium value is Rs.30

if i found that this is going to down up to Rs. 250 and i purchased put(PE) for 2 lots with expiry date 30-05-2013

by market fluctuations it dropped to 250 say up to 25-05-2013

what will happen? what i have to do with this put ? i have to sell this put option? or it is mandatory to wait up to expiry date?

"And also tell me can a small trader can buy 10,20,30.... instead of a lot of size 125,250,1000 .... as small trader cannot afford that much huge buy to lose big money"

any well known or experienced options trader could explain this , will be appreciated

 

[DSM]

You can always sell the puts even before expiry. If the stock price has gone down, the puts will increase in value.

One thing you need to keep in mind dealing with options, is that it has to be liquid. Else you will pay a premium to buy, and similarly, sell at a discount. Hence deal in only such options which are liquid.

Check the link below to understand Nifty Calls and Puts. You can similarly query options for any other stock.

Good luck.

http://www.nseindia.com/live_market...symbol=NIFTY&instrument=OPTIDX&date=30MAY2013

Hi Friends

please explain this case :

assumptions :

if a derivative named xyz stock price Rs.300

suppose its premium value is Rs.30

if i found that this is going to down up to Rs. 250 and i purchased put(PE) for 2 lots with expiry date 30-05-2013

by market fluctuations it dropped to 250 say up to 25-05-2013

what will happen? what i have to do with this put ? i have to sell this put option? or it is mandatory to wait up to expiry date?

any well known or experienced options trader could explain this , will be appreciated

 

[sureshd]

"And also tell me can a small trader can buy 10,20,30.... instead of a lot of size 125,250,1000 .... as small trader cannot afford that much huge buy to lose big money"

 

[DSM]

Suresh, these are fixed lot sizes. One can choose in minimum lot sizes and in multiples of such quantities. Nifty and BankNifty are available in lot size of 50 & 25, which I think is the minimum of liquid options. If not comfortable, you can trade in OTM (Out of Money) strike prices away from the stock prices.

BTW if you need to study a lot about options before you start trading them. As for now, your questions are just basic. Options has a lot more depth. There is a thread by Danpickup - Trading options with Danpickup. Do go thru it.

Goodluck.

"And also tell me can a small trader can buy 10,20,30.... instead of a lot of size 125,250,1000 .... as small trader cannot afford that much huge buy to lose big money"

 

[Einstein]

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