Can I sell 1000 call option of strides, currently trading at 4, when i have 50000rs?

#1
Can I sell 1000 call option of strides, currently trading at 4, when i have 50000rs with me? Lot size is 500.

I am new to option trading.So i have above query?

Do selling call option needs the money to be available in account like 1000x500 i.e 5lakhs should be available with me? Or can i do selling CE with just 50000?

And while expiry if strides doesnt reach 1000, what will be profit for me ?

if strides trade at 1100 on expiry, what will be the loss for me?
 

praveen98

Well-Known Member
#2
Re: Can I sell 1000 call option of strides, currently trading at 4, when i have 50000

Can I sell 1000 call option of strides, currently trading at 4, when i have 50000rs with me? Lot size is 500.

I am new to option trading.So i have above query?

Do selling call option needs the money to be available in account like 1000x500 i.e 5lakhs should be available with me? Or can i do selling CE with just 50000?

And while expiry if strides doesnt reach 1000, what will be profit for me ?

if strides trade at 1100 on expiry, what will be the loss for me?
Hi,
Yes you can sell that call if you have 50K. No,50K is sufficient to sell one lot you don't require 5Lakhs. If the Underlying doesn't reach 1000 or above by expiry your profit will be 500X4=2K minus commissions. If it closes @1100 by expiry you will loose (100-4)X500=48K+commissions.
As you are saying you are new to options please study the basics of options,understand the implications then only put your real money on the trades.From your questions it seems you have to go a long way in studying options basics before trading...
All the best:thumb:
 
#3
Re: Can I sell 1000 call option of strides, currently trading at 4, when i have 50000

Thanks for your reply.
Hmm I studied at many places but confused with the sell call of CE.
Because in icicidirect they showed to sell, I need to have some margin in account.

So suppose I sell 10 lots by investing 20000.
If it doesnt reach 1000 I gain 20000 rs as profit. So that will be credited to my account on expiry day automatically, right?

But if it reaches 1100, I loose 4.8 lakhs. That money I need to pay to broker on expiry day?
As soon as it reaches 1010, can I square it off to prevent further losses, by buying ?

When i look at options, it looked for me like easy money making, but i dont understand why everyone lose their money. May be I am wrong in understanding? Please correct me in below analysis if its wrong.

When i checked CE price of strides, 850ce trading at 35, 900ce trading at 22 and 1000ce trading at 4.

So I buy 1 lot of 850ce at 35 and sell 10 lots of 1000 ce at 4 --
current price of strides is 845

if price is anywhere below 885 at expiry date-- I make 2500 profit
if price is between 885 and 1000 -- thats amazing i make profit from both trades.
if price is about to reach 1000, i sqaure off my sell ce and still i am profitble.

Then how can i lose money? please correct the above analysis.
 

praveen98

Well-Known Member
#4
Re: Can I sell 1000 call option of strides, currently trading at 4, when i have 50000

Thanks for your reply.
Hmm I studied at many places but confused with the sell call of CE.
Because in icicidirect they showed to sell, I need to have some margin in account.

So suppose I sell 10 lots by investing 20000.
If it doesnt reach 1000 I gain 20000 rs as profit. So that will be credited to my account on expiry day automatically, right?

But if it reaches 1100, I loose 4.8 lakhs. That money I need to pay to broker on expiry day?
As soon as it reaches 1010, can I square it off to prevent further losses, by buying ?

When i look at options, it looked for me like easy money making, but i dont understand why everyone lose their money. May be I am wrong in understanding? Please correct me in below analysis if its wrong.

When i checked CE price of strides, 850ce trading at 35, 900ce trading at 22 and 1000ce trading at 4.

So I buy 1 lot of 850ce at 35 and sell 10 lots of 1000 ce at 4 --
current price of strides is 845

if price is anywhere below 885 at expiry date-- I make 2500 profit
if price is between 885 and 1000 -- thats amazing i make profit from both trades.
if price is about to reach 1000, i sqaure off my sell ce and still i am profitble.

Then how can i lose money? please correct the above analysis.
Dear Yashu,
Waht you are talking about is called a ratio spread....buying less quantity of lower strike call and selling more quantity of higher strike call -your view is sideways to bearish as your view is that ....you will make money if the stock goes down or moves sideways but you will loose money if stock goes up...
Think what will be the 1000CE price if the price is @1010 or higher by expiry,people lose money if the stock goes against their view in pure dirctional strategies...
By the way you didn't get my point of margins to short call...you can not short 10 lots 1000CE with 20000...it will take around 3 to 4 lakhs...but you can buy the same strike with 20000 ; 500X10X4
After entering the short trade money will be credited to your account by M2M in the evening...
For 1100 price situation you will receive a margin call from your broker or if funds are not sufficient the position will be squared off by your broker....
I think You have to study option strategies further...please go through option traders hand book by Jabbar and Budwick ...

Yes you can square off and exit from your short position @1010.
All the best:clapping:
 
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