Understanding option basics

Hi

I have a query regarding options. Its a very basic one.
Suppose I buy a nifty 4500 Aug call@25 then a premium of Rs.1250 is debited from my account. Spot nifty is 4350. For eg on 4th Aug spot nifty is 4425 and call value is 35 then can i make profit of Rs.500 (Rs.35-25=10*50=500) by suqaring off at Rs.35. In that case what happens to Rs.1250 initially debited?

regards

Sumaant

Hi, Sumaant:

Welcome to the forum.

If you sell the call at 35, 35 x 50 = 1750 - brokerages & other charges will be credited to your account.

Hi

But what happens to Rs.1250 initially debited. I have icicidirect account

You get it back (+ profits/-losses) if any.

The 1750 u get includes the amount of 1250 you were debited when you bought. Thats why ur profit comes to 1750 less 1250= 500 !!!

Would you ask : If i buy one reliance share at 2000 and sell it at 2200 i gain 200/- but what will happne to my initial 2000 that was debited to my account when i bought 1 share!!!
Its exactly the same!!!!

RK Sir:

I am adding a Thank you for so many of your sensible, helpful posts.