Help me with this call

The broker is telling me to buy a call @92 which has expiry date 26NOvember. It was said it will go upto 109 tomorrow.

I didnt buy becasue I didn't understand. Can anyone explain and help me on this. F&O are a risky game for people like me who dont understand it fully.

Shubhshant, I think you did a good thing by not buying the call.

1. The call might indeed go upto 109 or some other level but you have to keep in mind the expiry date of options (26th November 2009). Usually, the price of option decreases rapidly as the time of expiry occurs (Time Decay). Hence, if the market remains lack luster in next few sessions like it has in previous 2-3 sessions, then the value of your option will fall below 90. This decrease in price will be at a quick pace due to the fact that the option will be expiring by end of this month.

2. Secondly, take into account the volatility (and delta) of the option suggested. If the volatility of the option is too low, then the price of the option will not move to benefit you in less than 7-8 days left to expiry.

3. You have not mentioned the underlying instrument whose option your broker had suggested. But in future have a look at volatility of the underlying instrument as well. (especially useful while writing options)

Option trading is not simple and though it attracts lot of attention due to its pricing, profit making in it is not everybody's cup of tea. Especially not a brokers. :lol:

Good luck and take care!