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question about exercise?

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  #1  
Old 7th September 2008, 11:40 AM
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Question question about exercise?
Hi to all
suppose i have bought nifty 4300 sep call and at expiry it closes at 4310....
(1)so my position will be exercise to 4300 call oct automatically or i will have to do something(like call my broker to exercise option)?
(2)will i have to pay extra brokerage to exercise my position?
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  #2  
Old 7th September 2008, 01:15 PM
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Default Re: question about exercise?
Quote:
Originally Posted by rinku4142 View Post
Hi to all
suppose i have bought nifty 4300 sep call and at expiry it closes at 4310....
(1)so my position will be exercise to 4300 call oct automatically or i will have to do something(like call my broker to exercise option)?
(2)will i have to pay extra brokerage to exercise my position?
Nifty Futures and options are Eropean style derivatives which means they are excercised only on expiration day and not in between though you can sell them in the market anytime you like.

You have bought Nifty 4300 Sept call and on last Thursday of Sept the Exchange will automatically and Compulsarily excercise and settle the debit/credit in money.You dont have to do anything.You will get 4310-4300 = Rs 10 as profit.

Brokerage is charged on all contracts excercised.It is not charged on contracts which expire worthless.

Best Wishes,

Smart_trade
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Old 7th September 2008, 04:47 PM
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Default Re: question about exercise?
so i won't get october4300 call on expiry if nifty closes above 4300?means exchange will just calculate my profit and debit it on my account?
....one more question what would happen if nifty just closes below 1 point (4299) at expiry?will my call option end worthless?
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  #4  
Old 7th September 2008, 04:52 PM
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Default Re: question about exercise?
Quote:
Originally Posted by rinku4142 View Post
so i won't get october4300 call on expiry if nifty closes above 4300?means exchange will just calculate my profit and debit it on my account?
....one more question what would happen if nifty just closes below 1 point (4299) at expiry?will my call option end worthless?
Even if nifty closes at 4300 you option is worthless.
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  #5  
Old 7th September 2008, 05:01 PM
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Default Re: question about exercise?
Quote:
Originally Posted by rinku4142 View Post
so i won't get october4300 call on expiry if nifty closes above 4300?means exchange will just calculate my profit and debit it on my account?
....one more question what would happen if nifty just closes below 1 point (4299) at expiry?will my call option end worthless?
Yes rinku,Sept call gets excercised on last Thursday of Sept.It does NOT get carried over to Oct. If you are bullish in Oct you have to buy Oct call and pay separate premium for that.For Sept ,the exchange will calculate yr profit and CREDIT the amount to you.

If Nifty closes anywhere at or below the strike price ( 4300 in yr case ) then the call expires worthless and you will loose the entire premium paid while buying this call.

From your questions you appear to be totally new in derivatives. Understand it and do it safely.

Best Wishes,Trade safe !!!

Smart_trade
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Old 7th September 2008, 05:28 PM
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Default Re: question about exercise?
thank you very much for replying me....one more question how higher it should be closed to not to expire worthless as u said it would be worthless even it closes at 4300?can u suggest any link,site to understand call option perfectly?
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Old 7th September 2008, 05:38 PM
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Default Re: question about exercise?
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Originally Posted by rinku4142 View Post
thank you very much for replying me....one more question how higher it should be closed to not to expire worthless as u said it would be worthless even it closes at 4300?can u suggest any link,site to understand call option perfectly?
Above 4300 the call will make you the amount equal to ( Closing price - 4300) x the Quantity. But you must have paid some premium for buying the call. So your breakeven point will be 4300 plus the premium paid. It Nifty closes above this price,you will make profit,and if it closes below this price,you will loose.Your max loss is restricted to the premium paid and it will be if Nifty closes at or anywhere below 4300.

Plenty of option info is available on internet. Search it.NSE's NCFM exam workbook is also good source to learn basics.

Best Wishes,

Smart_trade
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  #8  
Old 7th September 2008, 05:47 PM
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Default Re: question about exercise?
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Originally Posted by rinku4142 View Post
thank you very much for replying me....one more question how higher it should be closed to not to expire worthless as u said it would be worthless even it closes at 4300?can u suggest any link,site to understand call option perfectly?

If you are not confident that Nifty will close above 4300 plus the premium you have paid then it is better to sell this call when the mkt goes up.You will get a chance tomorrow as the mkt likely to open and trade higher tomorrow.You will make good profit tomorrow !!!

Best Wishes,

Smart_trade
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Old 7th September 2008, 08:17 PM
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Default Re: question about exercise?
i haven't bought any option i just wanted to know what i asked thank you very much
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