Writing Options

T

tigerji

New Member
#1
#1
Hi Fellows,

I am a newbie in "writing options". Let me give an example and then i'll post my questions.


Current Nifty Price is 4200

i am Writing Nifty Put options at Strike Price 3500 which costs Rs10(premium price) a lot.

I get premium of 500Rs. Now due to time-decay the premium for the same strike price 3500 is only Rs1 after 10 days.

So, now my question is:

1) If I square of or lets say buy the lot back at Rs1, will i get the difference in premium prices. For this ex. Will i get Rs 5000, since i sold it at Rs10 and buying back at Rs1. Similar to short-selling formula.

2) Or will i just get the initial premium which was just Rs500.

Thanks in advance for your response to my thread....:thumb:
 
Smart_trade

Smart_trade

Moderator
#2
#2
tigerji said:
Hi Fellows,

I am a newbie in "writing options". Let me give an example and then i'll post my questions.


Current Nifty Price is 4200

i am Writing Nifty Put options at Strike Price 3500 which costs Rs10(premium price) a lot.

I get premium of 500Rs. Now due to time-decay the premium for the same strike price 3500 is only Rs1 after 10 days.

So, now my question is:

1) If I square of or lets say buy the lot back at Rs1, will i get the difference in premium prices. For this ex. Will i get Rs 5000, since i sold it at Rs10 and buying back at Rs1. Similar to short-selling formula.

2) Or will i just get the initial premium which was just Rs500.

Thanks in advance for your response to my thread....:thumb:
Click to expand...
Answers to your questions are as under :

1) When you sell option,the premium received will be credited to your account...so Rs 500 will be credited and when you buy the same at Re 1=00 Rs 50 will be debited....so you get 500-50 =Rs 450 on 1 lot (50) of nifty( less brokerage and other charges on both transactions of course)....dont understand how you got Rs 5000=00 as profit figure.

2) Answered in 1 above....

Best Wishes,

Smart_trade
 
V

vijayrathod2006

New Member
#3
#3
Hi,

Thanks for opening this thread.. I have been trading in option recently, i have been only buying the option but have not tried writing it.. Can you please let me know how much amount is required to write an option? for example if i have to write a 4500 CE @ Rs.60 then how much do i need to have the pay the margin? I have been searching for this information but not able to get... would be obliged if you could just clear my doubt...

Thank in Advance!!!!!!:thumb:
 
Smart_trade

Smart_trade

Moderator
#4
#4
vijayrathod2006 said:
Hi,

Thanks for opening this thread.. I have been trading in option recently, i have been only buying the option but have not tried writing it.. Can you please let me know how much amount is required to write an option? for example if i have to write a 4500 CE @ Rs.60 then how much do i need to have the pay the margin? I have been searching for this information but not able to get... would be obliged if you could just clear my doubt...

Thank in Advance!!!!!!:thumb:
Click to expand...
One lot of nifty ( Qty 50) will require approx.Rs 30,000 ( including basic margin + volatility margin and some provision for M to M ) as margin if you want to write/sell options contracts.

Smart_trade
 
praveen taneja

praveen taneja

Well-Known Member
#5
#5
A small advice from another newbie in options to all of you
options writing is like riding a tiger u r safe only if trade is going ur way but if it turn u down it is more then danger so pls get thorough knowledge about options then think of writing all the best god bless u
http://888options.com/
 
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