LEAPs in Indian options
- Thread starter oping
- Start date
Though NSE has introduced LEAPs (far expiry month contracts).. but we still have issues with them
1) They have extremly poor liquidity, even options that are just 2 months away are not sufficiently liquid. In general, liquidity is main problem with them
2) Many brokers don't allow trading on illiquid options so you might have problem placing the ordres.
US markets don't have this issue liquidity. Unfortunately, we have to wait for some more time, years before we reach that maturity in options trading.
Happy Trading
1) They have extremly poor liquidity, even options that are just 2 months away are not sufficiently liquid. In general, liquidity is main problem with them
2) Many brokers don't allow trading on illiquid options so you might have problem placing the ordres.
US markets don't have this issue liquidity. Unfortunately, we have to wait for some more time, years before we reach that maturity in options trading.
Happy Trading
Primarily though not always, exercise is done by the holder whereas square-off by the seller.
So if you hold a option, you can exercise it based on whether its European (exercise only at maturity) or American (exercise anytime till maturity).
Conversely if you are a seller for a call and realize that it can go in huge loss, you can buy a put and limit your losses, i.e. square off your call.
Regards,
BJ
So if you hold a option, you can exercise it based on whether its European (exercise only at maturity) or American (exercise anytime till maturity).
Conversely if you are a seller for a call and realize that it can go in huge loss, you can buy a put and limit your losses, i.e. square off your call.
Regards,
BJ
Bhuppi, Here is the clear picture..
Support you have bought an option and would like to close the position. You have following 3 choices to close it
1) Exercise it
2) Square off it
3) Let it expire
Exercise = Uses the end-of-day settlement process of exchange to close your position. For this, you need to instruct your broker (either thru their platform or by calling them), that you want to
exercise your option position. He will pass this request to exchange. Exchange will use that day's settlement price and close your position. In US market, you will have to give / take delivery of
stocks depending on PUT / CALL option. ln Indian market, where options are settled in cash, depending on the strike price of option and that day's settlement price, net profit or loss will be credited/debited to you account.
This can be done only by Option buyer.
Only American style Options can be exercised before expiry. European style option can't be exercised before expiry.
Option seller has no rights in his hand, hence there is no question of exercising their rights. Exchange will randomly assign such exercised option to any option seller. Based on the assignment received, the broker of option seller account will be debited / credited for delivery of stocks or Cash.
Square-off = Here you go to open market during trading hour and place sell order for the option that u hold.
Option buyer as well as seller can use this approach to close their option position.
Let it Expire = In this case, option holder doesn't take any action till last day of option contract. On final settlement day, exchange settle all the option. In-The-Money options are exercised and all Out-of-Money options expire worthless.
Happy Trading
Support you have bought an option and would like to close the position. You have following 3 choices to close it
1) Exercise it
2) Square off it
3) Let it expire
Exercise = Uses the end-of-day settlement process of exchange to close your position. For this, you need to instruct your broker (either thru their platform or by calling them), that you want to
exercise your option position. He will pass this request to exchange. Exchange will use that day's settlement price and close your position. In US market, you will have to give / take delivery of
stocks depending on PUT / CALL option. ln Indian market, where options are settled in cash, depending on the strike price of option and that day's settlement price, net profit or loss will be credited/debited to you account.
This can be done only by Option buyer.
Only American style Options can be exercised before expiry. European style option can't be exercised before expiry.
Option seller has no rights in his hand, hence there is no question of exercising their rights. Exchange will randomly assign such exercised option to any option seller. Based on the assignment received, the broker of option seller account will be debited / credited for delivery of stocks or Cash.
Square-off = Here you go to open market during trading hour and place sell order for the option that u hold.
Option buyer as well as seller can use this approach to close their option position.
Let it Expire = In this case, option holder doesn't take any action till last day of option contract. On final settlement day, exchange settle all the option. In-The-Money options are exercised and all Out-of-Money options expire worthless.
Happy Trading
Hello everybody, i want to add to this ongoing question.
If i square off my stock option , that means i will become a writer ,is it not risky because the buyer can exercise his right on me if the spot prices go up than the strike price?
So please tell me what is better to do exercise or squaring off the in the money call option?
If i square off my stock option , that means i will become a writer ,is it not risky because the buyer can exercise his right on me if the spot prices go up than the strike price?
So please tell me what is better to do exercise or squaring off the in the money call option?
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