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| Discuss option trading on illiquid stocks!!!!!!!!!how at the Options within the Traderji.com - Discussion forum for Stocks Commodities & Forex; I JOINED OUR SITE IN LAST SEPTEMBER , LEARNT LOT FROM YOU & REMAINED LOT ... |
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#1
23rd February 2007, 09:43 PM
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option trading on illiquid stocks!!!!!!!!!how
I JOINED OUR SITE IN LAST SEPTEMBER , LEARNT LOT FROM YOU & REMAINED LOT TO LEARN. NOW I AM GOING TO DO OPTION TRDING SOON.
I LEARNED ITS BASIC STRATEGIES TOO FROM THIS SITE , FOR THIS I AM THANKFULL TO ALL SR & CO-MEMBERS. TODAY I APPROACHED WITH SOME DIFFERENT QUERIES OF OPTIONS. SUPPOSE I PURCHASED ANY CALL OR PUT IN THE MONEY OPTION OF ANY SHARE & BECAUSE OF ITS LOW VOLUME I CANNOT TAKE REVERSE POSITION THEN ON EXPIRY DATE ON WHAT BASIS MY ACCOUNT GET CREDITED WITH DIFFERENCE. & SUPPOSE IF I WANT TO TAKE ITS REVERSE POSITION BEFORE EXPIRY DATE THEN WHAT SHOULD I DO IF IT IS ILLIQUID STOCK? I OBSERVE SOME STOCKS ARE STILL ILLIQUID FOR OPTION TRADING, THEN HOW TO TRADE &* REVERSE THE POSITION ON THAT? Kindly help againnnnn kedar 
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#2
24th February 2007, 12:06 PM
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Re: option trading on illiquid stocks!!!!!!!!!how
Kedar,
What do you mean by taking a reverse position? Square off? Options on stocks are not liquid, and if at all you want them, stick to the big ones. On the other hand, I will suggest you to only trade Nifty Options - no problem there, plenty of liquidity and action. ss 
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#3
24th February 2007, 05:39 PM
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Re: option trading on illiquid stocks!!!!!!!!!how
Thanks SS , i will trade only nifty options
My understanding is that when nifty goes up , premium on put should go down & vice versa also premium on call should go up & vice versa. that is the relation is that when stock price increases premium on call also increases & premium on put decreases. Right But i observed that when nifty went down day before yesterday premium on some put options closed with decrease & premium on call options closed with rise. Is this not ???  How this is possible??? Kindly see the attachment , i marked the contracts red having contraversial behaviour & share your knowledge & experience please Thanks in advance Kedar Last edited by kedarvb; 24th February 2007 at 05:46 PM.
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#4
25th February 2007, 09:50 AM
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Re: option trading on illiquid stocks!!!!!!!!!how
The valuation of Options invloves some complex calculations, based on say the Black-Scholes Option Pricing Model etc.
Suffice to say, that the longer the duration of an Option, higher the premia, as there is a time value. This is what kills most Option buyers, ie, when one buys a say a Put Option, the underlying must tank within a very short time say a couple of days, otherwise, as time goes by, the premia of that Put will erode. Option writers are benefited, because every passing day, favors them. You can use Bollinger bands to trade Options, because these bands tell you a lot about volatility. When the bands contract, less volatility, less premia, so buy Options, when the bands expand, higher volatility, higher premiums, so write Options. ss.
Last edited by Linus; 25th February 2007 at 09:51 AM. Reason: spelling
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#5
25th February 2007, 11:38 AM
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Re: option trading on illiquid stocks!!!!!!!!!how
Thanks SS
Few words more, you mean to say after modyfing nse bhavcopy of options, i have to plot its chart ( i am using fiobotrader) & then see BB indicators , right i am really newbie to options , so keep helping meeee thanks.. kedar
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