Simple question to understand the option trading...

hi,

1. suppose i bought put option nifty5200 PE @ 40/- and i know that i have time limit till expiry date. but question is that in between when i book profit considering brokerage rate ? please give an example to understand correctly..


thanks

Sorry buddy I couldn't get you. Can you please write bit more clear?

hi...
Suppose nifty is trading at 5250 level.And i take put NIFTY 50 for 5200 strike price and premium price for it is Rs. 50.My query is that

1. In which condition I will be in profit means below which nifty price should i sell those put options to get profit?

2. say if i m right please. As i took strike price of 5200 and CMP is 5250. so if nifty comes to 5190 at any point of time then 5250-5190=60 - 50 =10 * 50 =500 will be my net profit ? i hope from 500 , i have to deduct brokerage too for net profit ?

3. same will be in reverse case too ? i.e CALL option ? but here strike price will be higher then CMP.

hope now its clear to you, what i actually want to signify...

thanks

Thank you for explaining it clearly.

1. Theoretically, you will be in profit when NIFTY goes below 5200 as you have mentioned in your point # 2.

2. You're right. You'll will be in profit of Rs. 500/- when nifty reaches 5190 and you need to deduct brokerage and other statutory levies to find net profit.
But practically, you would be profit(probably) even before market goes down below 5200. Its based on supply and demand. On the other hand you will still be in loss (probably) even after market goes below 5200. (May be its rare to occur, but its possible). Option experts may explain in detail in this regard. But don't worry much about this supply and demand when you're trading just around CMP.

3. Yes. Its same.

thanks but i didnt get that profit and loss below 5200..

Sorry, I couldn't get you. You didn't get profit and loss??? You should be getting either profit or loss. Not both.

And a small correction its not CMP-Premium, its Strike price - premium i.e. 5200-50=5150. (not 5250-50=5200) When nifty is below 5150 you will be in profit.

i think when you answerd , you didnt noticed my figures i had quoted.please see once again my earlier question. i deducted from the cmp not from the strike price and now as per you i was wrong. you too said 500 profit..

so as per you it if strike price is 5200 @50 premium and cmp is 5250. profit would be below 5200-50=5150 whatever it is?

thanks

For a better picture I take real scenario.

Assume you have bought Nifty PE 5200 April Expiry @ Rs. 50/- on 16th April while underlying value was trading around 5250.

You were on profit on 19th April where underlying value was trading between 5162-5226 and your option was trading between 93.80-61.85.
If you have covered your position @ day's low i.e @ 61.85 you would have earned profit of Rs. 592.5 (61.85-50=11.85*50=592.5)
If you have covered your position @ day's high i.e @ 93.80 you would have earned profit of Rs. 2190 (93.80-50=43.80*50=2190)

I guess I have given you a better picture.

Yeah, I didn't noticed it correctly. And that's the correction I mentioned in the earlier post.

When you are learning option, theory will tell you that you will be in profit when Nifty goes below 5150 but in practical you were in profit even before reaching 5150 that too 87.6% return in just one trading session and in one position (with reference to my last post)

thanks... thats what i actually knew and was expecting too.. i think i need not to see how much nifty is up or down just have to watch the option value up or down as u mentioned and book profit whenevr i feel..


what actually means Nifty PE 5200 ? its a strike price ok i understood and cmp 5250. so with the up n down of cmp the value of option also gets changed, isn't it? is there anythng that if it goes 10 points down i.e(5240) option will also go down that much ?

thanks a lot...