Selling Puts

#1
Looking at the Puts options data for the Nifty, I see there is volume for the 4100PE, 4200PE, 4300PE..... The chances of Nifty going below 4300 by 28th Jan expiry are probably less than 1%. So, what is the logic here? Why do people buy these puts? It seems that one can sell these puts with 99% probability on your side?
 

MurAtt

Well-Known Member
#2
Hedge for crashes ... i.e just in case there is a crash ... these are bot by Big funds who have millions invested in short term / long term investments.

What would your profit be if you sell at say 3/- or 4/- re? 200 bucks on margin money of 25000 from which broker would charge you 100 bucks brokerage.

Silly trades for traders .. good for hedging only ...
 
#3
If Big Funds are buying these puts to protect millions, then surely they would buy a large quantity of puts to hedge their investments possibly 10,000 plus. But the volume, buyqty, sellqty data suggests that people are buying quantity of 50 - 1000. It looks like these are retail traders who are doing this.

Just to illustrate my point further, 4200PE have volume of 4350, 4300PE have volume of 11600, 4400PE have volume of 12600 at time of writing. If big funds were involved, we would see larger volumes.
 
Last edited:

MurAtt

Well-Known Member
#4
So maybe its hedging by the retailers ... :lol:

Sometimes it just does not fit at the moment BUT at hindsight its always 10/10 ..
So maybe I am missing something here now ....
 

trader.trends

Well-Known Member
#6
If big hedge fund wants to buy in large qty, they will not reveal their hand. They will buy bit by bit. You are looking at volumes on a single day. Take a look at the OI. 4200pe has an OI of 243600, 4300pe is 534900. If they need one lakh puts, they will split and accumulate rather than buying on a single day. That way they will also get it at the price that they want. There will also be retail buying it as a form of lottery.

Apart from this some funds/individuals believe in playing for a Black Swan Event. If every month you buy PE/CE that is say 800-1000 points away, if you get an event once/twice a year, you reap huge profits.

It would be simplistic to attribute a single reason for any activity.
 

MurAtt

Well-Known Member
#8
I think a lottery buying is better than buying these puts bcz there is a much better chance.... :)

But buying before major events becomes something like guaranteed prize (big or small depends though :))

Like say election ... expecting 3200-2900 and buy 4000CE @ 40, 2-3 days later 200/- !!!!!!!

So before .. say budget ... buy at least 200/300 pts OTM put and call, rather seeing the condition and expecting a very good friendly budget (bcoz of stimulus and recession effect) would rather only buy PEs as hedge against LT portfolio ...
For those without portfolio too can buy those PEs in case of Black Swan or equivalent (chinese duplicate :D) event ...

:thumb:
 

s^3

New Member
#9
First, I am a novice.

I read somewhere that if u sell put which in ITM and let is expire then u gain at expiry !!!!

Is it true??

I tried to simulate it with options oracle and it shows that if I sell 5300 put and let it expire the the gains r 45%

But there must be some catch somewhere ... does the exchange penalize u for not squaring off a sold option??
 

Capricorn

Well-Known Member
#10
Ya mate u gain if expiry value is < premium u got. U don't have to square of it will be excercised by the exchange although it would be better to square off. :)

Go thru another thread where some poor soul was shafted by STT because he did not square off.
 

Similar threads