need help in option(fno)!

ravi1967 · #61 24th May 2006, 09:18 PM

whenever you write a call or a put, it is like shorting the market. the buyer of your sale, has the right to enforce the sale. so the stock exchange require you to pay margin upfront to cover any shortages.
bye

vince · #62 25th May 2006, 06:29 AM

Yes narayan, you need to have margin in your trading account to write options, which can be in the form of cash or securities in your demat account.

narayan78 · #63 5th June 2006, 02:16 PM

thanks everyone for clearing my doubt

jarjis_sk · #64 12th June 2006, 09:58 PM

hi

1) you can sell any time either put or call
2) if you buy put call today one position will be opened .. tomorrow if you sell the put option y'day position will close.

regards
SJS

takechance · #65 20th June 2006, 10:59 PM

If someone has to short Nifty he can either sell call or buy put. My question is which one is more profitable because as the days pass the put will loose time value whereas there is no such time decay when one writes a call.

aca_trader · #66 20th June 2006, 11:30 PM

Quote:

Originally Posted by takechance

If someone has to short Nifty he can either sell call or buy put. My question is which one is more profitable because as the days pass the put will loose time value whereas there is no such time decay when one writes a call.

Odds always favour the option writer. But you need real deep pockets to write options.

Best Regards,
--Ashish

Agilent · #67 21st June 2006, 01:15 AM

Quote:

Originally Posted by takechance

If someone has to short Nifty he can either sell call or buy put. My question is which one is more profitable because as the days pass the put will lose time value whereas there is no such time decay when one writes a call.

How can u ignore the price trend in the underlying , tiill expiry ?

There can be 3 scenarios in this context, each with a different outcome
- Nifty rises
- Nifty falls
- its stays in a narrow groove (moves sideways)

U can work out the different outcome in each case

And by the way, if u had bought Nifty June Put 2900 yday, u would have gained a paper profit of 35% by today ... so your statement above (red) is an incorrect generalisation.

AGILENT

takechance · #68 21st June 2006, 08:50 AM

Okay, so I have shorted Nifty by buying puts and lets assume Nifty is going downwards making it ITM. So the intrinsic value of the put increases.

But who benefits from the time decay. The seller of the put or me?

aca_trader · #69 21st June 2006, 10:04 AM

Quote:

Originally Posted by Agilent

And by the way, if u had bought Nifty June Put 2900 yday, u would have gained a paper profit of 35% by today ... so your statement above (red) is an incorrect generalisation.

AGILENT

The option theory makes this generalization and it's not incorrect. An option is excercisable onlywhen a particular price level is achieved. The probabilities of prices crossing above/below a specific level decrease with the passage of time. I fail to understand how some unexpected windfall may put this game of probability into the category of incorrect generalization!! Nothing in the markets is Gospel Truth in absolute terms but the moment you start expressing it in probabilities it becomes so.

Regards,
--Ashish

amitt29 · #70 24th June 2006, 04:13 PM

U need to be really good at ur TA and need to have read pulse of the market very well.Also its about timing the market,which is very tough,but possible.
understanding Options,its highly profitable.Theorywise,an option writer has limited upside but unlimited downside.Best way is to square off ur option with 10%(leavin aside brokerage).Also in a trending market(bull or bear)try buyin 100 points out of the money options.Ppl use it well as a hedging mechanism.Sometimes they use futures to hedge options also.

Also important is index options are European(ie excercisable only on date of expiry and if in the money)and Stock Options are American(excersable on any date b4 expiry,if in the money).A thumb rule to get an idea of ur profit will be add the premium to ur option strike price(in case of calls)and subtract the premium(in case of puts)Of course i am implying that ur buying options.
Always remember
Option profit is directly proportional to time.As time decreases ur profit decreases and vice versa.
Option Profit is also directly proportional to whether its in the money,out of money.
It never depends on one of above factor only.Both of them count.

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