problem in selling options

hi experts .

I have a small doubt plz clarify me.

when i predict that a particular option will rise iam able to buy call option equal to my margin approximately 20 but when i predict that market will fell down and sell the call option it is not allowing me to sell mor than 3 with my margin .

what is the reason for this ?????

Is there any other way that i can sell equal no.of options like i buy when i sell also plz tell mee in detail

For example i have 50 k in my account

if i want to buy icici call option lot size is 350 and price is say 10 that means 3500 per lot like i can buy appox 15 lots but if i want to sellwhat is the process it is not allowing me to sell more than 1 plz tell me in detail


thank u

hi.
when u buy an option, u can loose only the amount that u have paid upfront, whereas if u sell an option, theoritically u can loose an unlimited amount. hence, u have 2 pay the margin as apllicable on selling futures minus whtever credit u receive fr writing the option.
hope this helps

regards

Anurag

If I am not wrong to short sell a Call/Put the value that your broker shall deduct from your account is

Call/Put Premium x Strike Price

Hence in your case its quite possible that all your deposits with the broker are being used up in 2-3 lots.

When u r bearish, you can buy a PUT option!! You will be able to almost match the quantity that you were able to BUY when you were Bullish and bought Calls!!!

When u buy option (call or put), your broker needs only the money equal to the option premium * qty.

But when u sell any option, your obligation is high. One short nifty option gives u obligation of 2.5 lacs.. so broker generally needs 12 to 15% of 2.5lac as margin.
which turns out to around 30k of margin for each contract.

Thats is why you may not be able to sell the equal number of contract.

Frankly speaking, it is good that your broker has not allowed u to sell more then 3 contract .. cause with your question, it seems that u don't know the basics of option trading. And trying to play very high risk strategies..

In US market, each customer's account is given a level (say 1 to 4).. depending on your experience in market, eduation, capital size, trading etc. And in order to execute SELL Option strategy, u need to reach level of 3 or 4.. else u can't even sell 1 option.
I wish, SEBI brings in something like that to our market as well.. for the benefit of novice retail option trader.

So,plz spend time in improving your knowledge.
All the best and happy trading

Great stuff.

Hi AW10

You said that the obligation by selling a nifty option is 2.5 lakhs. Is it same for all options ?. For E.g:

Today nifty is at 5100
Is the obligation same for a put option of 5100 strike and a put option of 4500 strike? How much amount would I need in my ICICI account to sell 1 option of 5100 strike?

Hi,

Can indian domestic funds sell options. I mean naked sell or shorting in specific, or is there a rule that mutual fund companies should not short options in the market

Probably no. There isn't any such rule.

Each mutual fund works within the boundries defined in their investment instrument of schemes prospectus. If they have mentioned the F&O in their prospectus and SEBI has approved it, then they can use F&O. Generally, they also define the max % of portfolio in F&O like they mention limit for equity, cash, bond etc.

But FII, other private fund managers, HNI, hedge funds etc don't have any such restrictions.

Happy Trading