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| Discuss Newbie's Question on Options at the Options within the Traderji.com - Discussion forum for Stocks Commodities & Forex; Hi, Till now I never have traded in Option, so here is my basic question: ... |
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#1
12th December 2005, 04:50 PM
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Newbie's Question on Options
Hi,
Till now I never have traded in Option, so here is my basic question: Can I square off my option short position anytime before expiry ? For ex, say I have sold a ACC call option at strike price X and before expiry, can I close my short position by buying the same call option OR I have to carry the obligation till expiry ? Does it hold for both European and American Options ? Thanks Nirmalya 
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#2
12th December 2005, 05:10 PM
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Re: Newbie's Question on Options
YES, you can square off your position by doing a reverse transaction anytime before expiry.
In India all options are of the European type. We can have a European put, call or any other advanced option variants. The question is what is the European Option. We know that an option holder has the right to exercise his option but not the obligation. The question is when can he exercise his right. Should it be on the maturity date or can he exercise it at any time after he has entered the contract. If the option can be exercised on the maturity date only, then the option is a European option. American Options: The other type of option is known as the American Options. Most option contracts traded in developed markets are of the American type. The biggest advantage with the American Option is that it can be exercised by the holder at any point of time after entering the contract. Since we still cannot exercise our right and call for or give delivery of the underlying in the options market in India it does not matter if the option you trade in is an American Option or European Option.
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#4
13th December 2005, 10:18 AM
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Re: Newbie's Question on Options
Quote:
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#5
13th December 2005, 11:19 AM
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Re: Newbie's Question on Options
Hi,
the site http://www.bsplindia.com/files/index/futures.htm posts margin requirement for Futures and updates every week. However please note individual DP/Broker can ask for more margin. I have seen ICICIDirect asks for 21% margin for NIFTY Fut whereas 5paisa asks only 10.10% percent as prescribed by NSE. - Nirmalya
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#6
13th December 2005, 11:39 AM
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Re: Newbie's Question on Options
Hi Traderji,
Thanks a lot for your reply, but I am slightly confused now on option excercise. You have mentioned it doesnt matter whether the option is European or American, from all where I have read, all stock options are American and Index options are european. But according to you, if I have bought a NIFTY Call Option(which is CE) at strike price 2700 and at some point before expiry I saw I will be in profit where NIFTY is 2780, Can I excercise my right even it is not expiry date ? Thanks Nirmalya
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#7
13th December 2005, 12:45 PM
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Re: Newbie's Question on Options
You are right . Index options are european whereas stock options are american. However you can square off either type of option at any time before expiry.
you can excercise only american options at any time if in the money. European options get excercied automatically on expiry if not squared off beforehand.
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#8
19th December 2005, 03:25 PM
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Re: Newbie's Question on Options
Hi Nirmalaya,
you can squareoff option anytime in intraday or in 2days.keep it in mind, you have to buy call and put then sell. If you short call option you have to pay extra margin compare to future, then any time your that stock which you short call option can be exercise by anyone, so that is risk.
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#10
6th February 2006, 12:41 PM
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Re: Newbie's Question on Options
You can find the data on the NSE website itself.
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