enquiry regarding selling an option(writing the option).

#3
1.How much margin requires to write option for nifty?
2.How much margin requires to write option for option scripts?
Margins typically are based on 2 main factors

1. The stock exchange requirements
2. You broker requirements.

Atleast from my experience here in the US- it is standard formula and most option brokers are very good. I am afraid I cant say the same things about India- yet to find a credible options broker.
 
#4
Hello,

margin requiremnt differs frm broker to broker....

howevr c link ..can guide u to the margin calculator

http://www.cboe.com/tradtool/mCalc/default.aspx

hav a look..n ask to ur broker abt ths...may differ for stk option n Nifty options..

In religare..if i write 4500 Put @107...it reqd 18810 Rs margin...(4500 X 50 X10% - premium genertd)...appox...

plz verify

Regards,
sharestrader
 
#5
Hello,

margin requiremnt differs frm broker to broker....

howevr c link ..can guide u to the margin calculator

http://www.cboe.com/tradtool/mCalc/default.aspx

hav a look..n ask to ur broker abt ths...may differ for stk option n Nifty options..

In religare..if i write 4500 Put @107...it reqd 18810 Rs margin...(4500 X 50 X10% - premium genertd)...appox...

plz verify

Regards,
sharestrader
Thanks for sharing! The CBOE may not work for India- ( I wish it did) because here the out of money portion is subtracted- and that makes it meaningful to trade agressively. Not sure if I would writing puts on the Index with the sub-prime melt down going on here!
 
#6
Hello Srikanth,

i know CBOE calculator wont work here..bt to gve tentative idea ..i postd link..

n abt PUT writing..it was just example.;)..i havnt wriiten it...its example of my trade i did few days back..n i noted down margin reqd for tht trade...to understnd how brokers charge margin.......

n abt tht cboe link...u can also find some option strategies...n understand wht exactly u do in particular strategy...

Hope ths will calrify.

Regards,
sharestrader
 
#7
Hello,

margin requiremnt differs frm broker to broker....


In religare..if i write 4500 Put @107...it reqd 18810 Rs margin...(4500 X 50 X10% - premium genertd)...appox...

plz verify

Regards,
sharestrader
Sharestrader

In the example you quoted- how many Put options did you sell- is it just 1? What it the factor "50" you used in the calculation ( 4500x50X 10%- premium)

Also in general for 1 Option contract in India does it cover 100 shares. Not sure because in India Market Lots are all over the place for stocks- which is really irritating ( not sure what the rationale is!).

Say if a stock has a market lot of 500 shares. Do I sell 5 options or is it different- I am guessing it will be different- to cover!
 
#8
Sharestrader

In the example you quoted- how many Put options did you sell- is it just 1? What it the factor "50" you used in the calculation ( 4500x50X 10%- premium)

Also in general for 1 Option contract in India does it cover 100 shares. Not sure because in India Market Lots are all over the place for stocks- which is really irritating ( not sure what the rationale is!).

Say if a stock has a market lot of 500 shares. Do I sell 5 options or is it different- I am guessing it will be different- to cover!
1. 50 is the lot sixe for the Nifty
2. 1 Option contract in India cover a number of shares of the lot size. The rationale for having different lot size is that the minimum amount of any one contract should be Rs. 200k. Higher the stock price, lower the size of the market lot, and vice versa.
3. If you want to sell options equivalent to 500 shares, and the market lot is 100, you sell 5 options. If the lot size is 500, you sell only 1 option.
 
#9
Ivan

Appreciate the pointers. So it is important that I know the market lot size before trading. A lesson learned. Thanks! Do the online trading platforms let you know the market lot info?


So if say I am selling the Nifty 4020 Put at 29.50 ( Assuming a 50 lot). The net premium is 29.50 times 50 ie 1500 rupees! And I put up near 18 K in Margin Correct? This will be about 8% yield! ( if I get it right!)
 

Aman1

Well-Known Member
#10
hello all,
this is interesting thread and I am new to options. I have a practical question .
EXAMPLE:- a trader(AMAN1) buys Nifty august 4050 puts @ 60 say 2 contracts of nifty (50+50=100).
question:- 1) at what price will he break even? and start making profit.
2) what will be his maximum profit?
3) what will be his maximum loss ?
4) can he square off his put option any time before expiry
or he will have to wait for the last expiry day?

MARGIN PAID:- 6000 (3000+3000).

thanks and Regards,
Aman1
 

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