In-the-money Options trade.

MtoM for Options

Hi Guys, I am a new baby for Options trading. I want to understand the risk of MtoM before I start any actual trading. As per 16Jan2012 I am creating following position:

NIFTY 25Jan2012 - Buy CE S.Px: 3300 - Premium Rs. 1533
NIFTY 25Jan2012 - Sell PE S.Px: 3300 - Premium Rs. 0.30

Questions:
1: Does MtoM applicable on to Sell position?
2: If I dont close my position till expiry, do I have to pay/receive MtoM every day?

Thanks in advance.....

Re: MtoM for Options

Till my knowledge works i think for sell option margin is required. for buy the option no margin is required after buy the option .

Re: MtoM for Options

Hello

Buying a CE SP 3300, will give you the same effect that of buying a nifty future, but with a horrible liquidity.

Selling an option costing just 30 paise (PE 3300) is not even worth the cost of brokerage & taxes

Do learn and understand what you are doing before you trade the markets.

Best Wishes

Re: MtoM for Options

Curious to know what is the strategy / plan behind below position? Thanks for sharing the same.

Re: MtoM for Options

Here is something to suckle on... 'New Baby'

'Shorting/Selling' Option is called 'Writing'

Although just an Example cited by You....it is a horrible one to say the least, even more so because you selected the current month....Do You Have A Deathwish????

Will answer your MTM query once you come back with a reasonable
Example....Not that one needs an example to answer it...!!!

Entry in options for Strike Price quoted are suitable ONLY for Long Dated Options of More than 6 months to Expiry...even then it is traded/used by certain type of Traders/Investors not everybody's cup of tea....Do You Like Tea... Suitable perhaps once you become an 'Old Baby'.....!!!

SG

Re: MtoM for Options

Thanks to All for showing such gr8 responses to "New baby".....

First thing to clarify, here I am not showing any strategy. I have read following on the NSE website, so curious to know if this is true or not.

Value 3: Daily MTM Settlement Value -- In the case of options contracts, the value is zero.

(http://www.nseindia.com/content/nsccl/nsccl_forep1.htm)

Thanks in advance.

Any additional premium for Buying Call Option?

If I want to Buy an call options, do I need to pay any additional premium besides what I paid as premium price.

In details - Lets say if I buy NIFTY Jan CE 4200 for 760rs. And I dont want to squre of till expiry. Do I need to pay any extra premium till expiry?

Re: Any additional premium for Buying Call Option?

once you've paid the premium, there is no other payment required from your end.

there are no M2M, no additional funds required.

your choice if you want to keep the option till expiry or sell it off in a few days.

Re: Any additional premium for Buying Call Option?

Thanks for your response.

One more question - If I have Sell Short on Put options, do I have to pay M2M?

In details - I sold PE 5700 @ 724. As I understand options
(1) I need to pay margin - which is (Strike Px + Premium)*0.10 (10%)
(2) I will receive 724 in my account.

Do I need to pay any additional rs as M2M for this?

Thanks in advance.

Re: MtoM for Options

Thanks a lot for such a gr8 response.

First let me clear on thing is - I am not showing any strategy here, I just want to understand the M2M for options when you Sell Put Options. This is because I have read on NSE website that M2M is not applicable for Options and I got confused. (http://www.nseindia.com/content/nsccl/nsccl_forep1.htm - Value 4 description.)

If you can show me the M2M for following options would be gr8. Thanks in advance.

Sell Short NIFTY Jan2012 St Px: 5700 @ 724.10. I dont want to suqare-off this trade. and allow it to exercised on 25 Jan.