short selling options

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chetanbang

Active Member
#1
#1
Is it same as short selling stocks?
I had been thinking last month to short sell Apollo tyres 100 call @ 0.85 and buy back towards expiry @0.10. This is risk free to me as i was sure apollotyres won't go beyond 90rs, could have easily made a profit of Rs.2500. I always have these kind of ideas but i was unsure as to how options work. I remember reading somewher that you will have to buy back from the same person to whom you have sold the option. Is this true? Plz correct me.
 
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chetanbang

Active Member
#2
#2
Instead of buying a Apollotyres 80 put option when the actual price is around 86, i kind of prefer to sell out of money call option. I have mentioned my doubt in 1st post. waiting for reply.
 
smartboy1jan1982

smartboy1jan1982

Active Member
#3
#3
chetanbang said:
Is it same as short selling stocks?
I had been thinking last month to short sell Apollo tyres 100 call @ 0.85 and buy back towards expiry @0.10. This is risk free to me as i was sure apollotyres won't go beyond 90rs, could have easily made a profit of Rs.2500. I always have these kind of ideas but i was unsure as to how options work. I remember reading somewher that you will have to buy back from the same person to whom you have sold the option. Is this true? Plz correct me.
Click to expand...
There is nothing like short selling options. You can only buy options or sell options by writing them. A retail intraday trader is always advised to buy options and never to write them or sell options.

For example - If you are bullish on nifty then you buy a Call option and if you are bearish on the Nifty then you buy a Put option. You can square off them before the expiry date for profit or to stop losses.
 
smartboy1jan1982

smartboy1jan1982

Active Member
#4
#4
The exchange has a automated order matching system and works on the principle of matching the highest bid to the lowest ask. How can you buy back from the same person you sold the option to, when you even don't know whom exactly have you sold the option to. :D
 
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chetanbang

Active Member
#5
#5
smartboy1jan1982 said:
There is nothing like short selling options. You can only buy options or sell options by writing them. A retail intraday trader is always advised to buy options and never to write them or sell options.

For example - If you are bullish on nifty then you buy a Call option and if you are bearish on the Nifty then you buy a Put option. You can square off them before the expiry date for profit or to stop losses.
Click to expand...
If i sell option, can i buy them back before expiry eg: in the case of Apollotyres like i have mentioned in my first post?
 
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chetanbang

Active Member
#7
#7
I was thinking the same but somehow got a little confused that options work differently than stocks. So, now to my understanding buy/sell or sell/buy of options is similar to stocks. Thanks.
 
DanPickUp

DanPickUp

Well-Known Member
#8
#8
smartboy1jan1982 said:
There is nothing like short selling options. You can only buy options or sell options by writing them. A retail intraday trader is always advised to buy options and never to write them or sell options.

For example - If you are bullish on nifty then you buy a Call option and if you are bearish on the Nifty then you buy a Put option. You can square off them before the expiry date for profit or to stop losses.
Click to expand...
Hi

Read this to your own good. A lot about short selling options :

http://www.traderji.com/options/305...g-strategy-option-spreads-116.html#post459952

http://www.traderji.com/options/305...g-strategy-option-spreads-121.html#post478132

Take care

DanPickUp
 
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