Basic question on Selling Call Option

#1
Suppose I short sell a nifty call @100Rs.

1. When is the premium credited to my account ? T+1 ?

2. If the market moves down and I buy back the nifty @90Rs and close my position, what is my net profit ?

Similarly if I am forced to close my position by buying back the nifty @110Rs, what is my net loss ?

3. What sort of margin requirements does NSE demand and how much margin will the avg online broker squeeze till I close out the position ?

I obviously don't know enough to short sell niftys, I am asking here to learn about options.
 

leo_3455

Active Member
#3
Suppose I short sell a nifty call @100Rs.

1. When is the premium credited to my account ? T+1 ?
Your account is credited with 100 x 50 = Rs. 5000 immediately
2. If the market moves down and I buy back the nifty @90Rs and close my position, what is my net profit ?
Your profit is (100-90) * 50 = Rs. 500
Similarly if I am forced to close my position by buying back the nifty @110Rs, what is my net loss ?
Loss of (110-100)*50 = Rs. 500
3. What sort of margin requirements does NSE demand and how much margin will the avg online broker squeeze till I close out the position ?
At the current rate of nifty and volatility, margin of around 28,000 will be blocked. This will a small degree from broker to broker. Contact your broker for exact amount.
I obviously don't know enough to short sell niftys, I am asking here to learn about options.
My reply in bold. All the best.
 
#4
Thanks leo, excellent straight fwd answers. One follow-on question.

Is the full blocked margin amount released immediately when the trade is covered or is some portion of the margin cut by the broker+exchange as interest for "borrowing" the NIFTY
 

leo_3455

Active Member
#5
Thanks leo, excellent straight fwd answers. One follow-on question.

Is the full blocked margin amount released immediately when the trade is covered or is some portion of the margin cut by the broker+exchange as interest for "borrowing" the NIFTY
The blocked margin amount is released immediately. Other than the usual brokerage and other charges, there is no borrowing cost or interest
 
#6
The blocked margin amount is released immediately. Other than the usual brokerage and other charges, there is no borrowing cost or interest
suppose i sell a nifty call 5800 at rs 2....and i dont square it off and let it expire by 31 march and nifty went up and call value went up to 7.

Then at expiry suppose nifty is below 5800 then will i have to incur loss of 7-2=5 or the contract expired worthless and i gain rs 2*50
 

leo_3455

Active Member
#7
suppose i sell a nifty call 5800 at rs 2....and i dont square it off and let it expire by 31 march and nifty went up and call value went up to 7.

Then at expiry suppose nifty is below 5800 then will i have to incur loss of 7-2=5 or the contract expired worthless and i gain rs 2*50
You sold nifty 5800 CE at 2. Call value goes to 7. Your loss is 7-2 = 5 * 50 = 250.

If nifty is below 5800, you get 2 * 50 = 100 as profit in the trade.
 
Last edited:

anuragmunjal

Well-Known Member
#8
You sold nifty 5800 CE at 2. Call value goes to 7. Your loss is 7-2 = 5 * 50 = 250. Also since it becomes In-The-Money, you will have a huge STT of 7 points if you let it expire. So your loss will be 250 + (7*50) = 250 + 350 = 600

If nifty is below 5800, you get 2 * 50 = 100 as profit in the trade.
hi Leo

stt of 7 points will not be applicable here as he has sold the call..it would be applicable only if a call or put u have 'bought' expires in the money..

regards
 
#10
suppose i sell a nifty call 5800 at rs 2....and i dont square it off and let it expire by 31 march and nifty went up and call value went up to 7.

Then at expiry suppose nifty is below 5800 then will i have to incur loss of 7-2=5 or the contract expired worthless and i gain rs 2*50
Rephrasing Anurag's question - as I didn't fully understand the question and the answers :(

If I sell a NIFTY 5500 call at Rs100 and:

1) The call goes on to expire "out of the money" (nifty at 5490) what is my net profit and margin requirements ?

2) The call is "in-the-money" at expiry (nifty at 5510) what is my net loss and margin requirements ? Will the auto-exercise of the NIFTY cause extra margin squeezing beyond the regular NIFTY margin already blocked by the broker+exchange.
 

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