Query regarding shorting options

[sahilsri]

Hello members,
I had a small query.
If I have short call and put of current month but do not wish to square it off then what will be the final settlement?
Eg: I shorted call of 5300 @ 200 And Put of 5600 @ 174
Right now they are trading at 176 and 110 respectively giving a profit of around 90 points.Let's assume that the close will be @ 5500.
Now what will happen if I leave it for exercising?

Also tell me what will happen if call will be of 5600 and put will be of 5300?
Any kind of help will be appreciated.

Thanks.

 

[Capricorn]

Both short options u mention are in the money. You pay 300x50 (per lot) + taxes charges on exercise .

 

[Capricorn]

Hello members,
I had a small query.
If I have short call and put of current month but do not wish to square it off then what will be the final settlement?
Eg: I shorted call of 5300 @ 200 And Put of 5600 @ 174
Right now they are trading at 176 and 110 respectively giving a profit of around 90 points.Let's assume that the close will be @ 5500.
Now what will happen if I leave it for exercising?

Also tell me what will happen if call will be of 5600 and put will be of 5300?
Any kind of help will be appreciated.

Thanks.

In this case u keep the premium.

 

[arunpatel]

Hi,

In this case shorting of CE is risky, always short PEs each at 100 level down of strike price. Here is your money if market stays at 5500 on the day of expiry.

5300 CE - your short price 200 - expiry price = 200
5600 PE - your short price 174 - expriy price = 100

So in total you will get 74 rs each lot (default 50 size of 1 lot) + you already paid brokerage for 5300 CE and if you square off you have to pay another piece of brokerage. So effectively with brokerage + tax you will be in loss. So far I know from knowledge point of view European option cannot be exercised.

I usually short PEs at every upmove and stay till expiry. Remember our market has more buyers than sellers. So to stay with them and shorting PE will give you more yield to your capital.

Arun P.

 

[arunpatel]

I may have replied to wrong person as I hit the "post reply" button in the last. I apologize for the wrong answer as I didn't calculated that 74 rupees is for per share in the lot (74 x 50 = 3700). I thought it as 74 for 1 lot, So I got the correct view now after deducting brokerage min 3500 +/- is the profit.

Thanks for correcting me.

Arun P