The Giant thread of options

[oilman5]

hi beginner av,
u said well regarding biased openion to trade by using call and put. say i have upbias ..now when to buy call..@ around market price...when time value premium is less ....higher intrinsic value creates bullish sentiment..
normally av2-2.3% premium observed @ the start of new month......now strategically which one is better...when in cash section price comes down to support level ,expecting a fall is temporary....BUY CALL THEN ?
SCENARIO 2....cash price showing upbias , chance of break out high[rare event]...can visualise[from predictive model on ta based] 8-10% up in cash...
hence buying nearest out of money call in anticipation of break out ?
......every body knows first one is less riskier,...but 2nd one more profit if right.
...from your mastery of option trade...would u suggest which works better?
i am asking ur personal openion based on actual trade and return......
say for year 2005...2006....2007[till date]
hope ur answer shall open a new front for many beginner trader
with regards
oilman5

 

[oilman5]

hi beginner av,
...................would u throw some answer?

 

[paisapower]

Hi all,

I have bought huge positions in 1500 Nifty option 4550 Call@88 on last friday and got stuck, now Nifty option 4550 Call is @66, so down 22rs and Monday market opening looks bleak, can some one guide me what should i do, is there any counter stratergy to adopt to minimize losses.

Nifty option 4550 Call@88
CMP(closing) 4550 Call@66

 

[beginner_av]

very busy. just saw it. will post a reply by tomorrow. just remember money mgmt etc applies to options equally as in other forms of trading

 

[beginner_av]

hi beginner av,
now when to buy call..@ around market price...when time value premium is less ....higher intrinsic value creates bullish sentiment..

buy when you expect the market to go up, or expect sudden increase in volatility, price direction can be any.

normally av2-2.3% premium observed @ the start of new month......now strategically which one is better...when in cash section price comes down to support level ,expecting a fall is temporary....BUY CALL THEN ?

if you analysis says so, go ahead, but make sure that as soon as you see that your opinion no longet holds good, you square it off.

SCENARIO 2....cash price showing upbias , chance of break out high[rare event]...can visualise[from predictive model on ta based] 8-10% up in cash...
hence buying nearest out of money call in anticipation of break out ?

i prefer deep in the money, cos delta approaches 1. but same principle, first sign of market not going as per analysis, get out.

......every body knows first one is less riskier,...but 2nd one more profit if right.
...from your mastery of option trade...would u suggest which works better?

all i can say is both and none. hint - timeframe, no of days trade held and percentage of return expected.

i am asking ur personal openion based on actual trade and return......
say for year 2005...2006....2007[till date]

my personal opinion? well trade very liquid stuff...or else you will be in trouble when market turns.

 

[oilman5]

thanks for ur nice explanation..it clarifies....
mm..accuracy of directional bias ...is key
..........
...with time i can learn.....again ..coming back to stock trade..
liquidity...a key hints
............
with regards
oilman5

 

[umesh dani]

to dear all

wish you happy trade

i am newer in stock market since last 4 month I am in tuch with market,
i have no technical knowledge hence i am not able to share any knowledge to you.

but i hope, in tuch with foum will become sound and then i will also share my knowlege,

i think IFCI future can by at 64- 66 price ,, target is 72-74

thaks to all
umesh dani

 

[learningcurve]

Hi, I am having basic concepts doubts on Options .Can beginner_av or some of the members of this forum clear them out for me in detail :

Let say I have written CIPLA 190 CA for Rs 5

1) Does the premium received on call written varies from time to time say I have received Rs 5 as premium?.

2) Can the premium come down to Rs2 or is it only for buy call that premium varies?

3) After I have written a call ,is it possible to sell it to someone else before expiry?
Or do I have to keep till expiry and I cannot sell before expiry?

4) In the newspaper we get the open , high , low and close of the call but from where do we get the written call premium rates?

With regards,


Learningcurve

 

[learningcurve]

dear simplestuff,

i know that writting a call means selling a call. actually you have not been able to clear my doubts.any ways thanks.

with regards,

learningcurve

 

[THETRADER]

Hi, I am having basic concepts doubts on Options .Can beginner_av or some of the members of this forum clear them out for me in detail :

Let say I have written CIPLA 190 CA for Rs 5

1) Does the premium received on call written varies from time to time say I have received Rs 5 as premium?.

2) Can the premium come down to Rs2 or is it only for buy call that premium varies?

3) After I have written a call ,is it possible to sell it to someone else before expiry?
Or do I have to keep till expiry and I cannot sell before expiry?

4) In the newspaper we get the open , high , low and close of the call but from where do we get the written call premium rates?

With regards,


Learningcurve

I thought Simplestuff's answer is just right, and, I'm surprised at your answer. I'm trying hard to figure out what clarification you require. I still elaborated on this. Option premium is the price at which the option is sold or bought, and, this should clarify your doubt.

You have sold CIPLA 190CA @ Rs.5. This option price is called the premium. You have recd the premium, and, this is credited to your a/c, period. When selling an option, you have to pay a margin as fixed by your broker. Premium is not fixed by anybody, but the market that includes you. Everybody can sell/buy options like you, and, these are the buy/sell quotes.

1. What you have recd does not change any more. But there can be buy/sell quotes for CIPLA 190CA.
2. Well, if someone is willing to sell 190CA for Rs.2, yes, it can come down.
3. After you've written a call (sold the call option), you can buy it back and close this position, and, you do not have to wait for expiry. When you have written a call, you've already sold, how can you sell it again? You can sell more, though.
4. Selling options is writing the options. OHLC prices are the traded prices of the options. And, these prices are the premiums (premia).
Hope this clarifies.