Help Needed on options

Hi Friends,

I have bought DLF CA 560 @40, 3lots.

Now the situation is that the Strike price is around 516 as on Friday (6/6/08) and the current price is @13.45.

Now my question is what happens when it reaches 1 and will it go down further. can I still hold it or should I book loss right now? Your help is highly appreciated.

Regards,

Srinivas

The strike price is 560. 516 is the Current Market Price (CMP). Strike price does not change, whereas CMP does. Yes, you can book loss, but do it early if you think the option would not be of much worth near the expiry (or before). The closer you are to expiry (which you have not mentioned), the less the time value for the option. Also, while booking loss do take into account the relevant expenses and whether the CMP of the option (rather than the CMP of the underlying i.e. DLF) makes sense selling. The option value can theoretically go down to 0. You might want to look up options strategies.

Hi...I'm not familiar with the symbols there, so could you tell me what the underlying is and in what month the options expire? You do own calls right? Also, what is the price increment between strike prices ($5, $10)? I will try to give you some suggestions but since I am in the USA I need a little more detail on what exactly you are trading.

buy july 480dlf call

buy 480call of july

1) 480 July call has not seller so you can't buy it.
2) Why should one get stuck in such a illiquid stock option when there are better choice available.

Happy Trading.

Hi Srinivas,

Option premium varies with the underlying price and time left for expiry.As your call purchased has gone out of money ( the current stock price is less than the strike price ) the premium must have gone down.The premium can become zero as the expiry date comes near,The premium will erode fast as the expiration date is approached.

If your view is bullish and if you feel the mkt will make a upmove and go above yr strike price you may hold but if you feel that the trend is changed and it is not likely to reach yr strike price,sell fast and try to recover some money as it will be zero at the expiry if the price at that time is less than strike price. ------Afterall Rs 13=75 is much better than Rs 0 !!!

Happy trading

Who initiates new options ?
There are many strike prices which are far away from CMPs, and where volume is zero. Now, how volume generates there when theres no buyer and no seller.

From Nse India
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The Exchange provides a minimum of seven strike prices for every option type (i.e Call & Put) during the trading month. At any time, there are three contracts in-the-money (ITM), three contracts out-of-the-money (OTM) and one contract at-the-money (ATM).

The strike price interval would be:

Price of Underlying Strike Price interval (Rs.)
Less than or equal to Rs. 50 2.50
> Rs.50 to less than or equal to Rs. 250 5
> Rs.250 to less than or equal to Rs. 500 10
> Rs.500 to less than or equal to Rs. 1000 20
> Rs.1000 to less than or equal to Rs. 2500 30
> Rs.2500 50

New contracts with new strike prices for existing expiration date are introduced for trading on the next working day based on the previous day's underlying close values, as and when required. In order to decide upon the at-the-money strike price, the underlying closing value is rounded off to the nearest strike price interval.

The in-the-money strike price and the out-of-the-money strike price are based on the at-the-money strike price interval.
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Naresh

Seller initiates the option premium by putting ASK price. Then it is upto the buyer to either accept that ASK price and put the MARKET order to buy. If Buyer doesn't agree to ASK price then it can put BID price. And then we have kicked off the auctioning process. If more sellers jump in, then ASK price will keep fluctuating and if there are more Buyer then BID price will fluctuate. In illiquid options, you will find big gap between BID and ASK as both parties are not ready to negotiate.

Ideally, Buyer can also place a BID price for new option strike price, but it needs a seller who is willing to accept that BID price.

Happy Trading.