In the money option

#1
Hi,

I bought allahabad bank 90 PA some days back for premium of 3.95. Spot is now at 81. But the bid/offer price is at 2.5/11.5 and quantity traded is 0.

Do you think i will get a better selling price ? What would happen if i hold it till expiry.

Appreciate any replies.

Thanks
 
#3
The illiquidity is the biggest concern for options traders, especially when the option goes deep in the money or deep out of the money.
Since it is an American style option, you can exercise the option, and in this case would receive Rs. 9 for it.
If you hold it till expiry, you will be running the risk of the price bouncing back above the 90 level, in which case you may have to book a loss, or let the option expire worthless.
 

rangarajan

Well-Known Member
#4
Can we exercise the option before the expiry date(last thurs day)for contracts "In the money".In the given example,suppose one waits till the expiry for in the money contracts,would the difference in price be credited?If so,what would be the applicable price,whether last price traded or average price after the market as indicated.What is the procedure for exercising the option before expiry.
Shall be grateful for reply
ranga
 
#5
Any REPLY Please ? I have sold a SATYAM DEC2005 700 CA @Rs.20 when the price was 720 . What will the position of this option on end of 29 Dec 2005 trading day if the price closes above 720 ? Are the options compulsorily settled on setlement price or on close price of underlying ? Experienced OPTION PLAYERS , put some light on this .
 
#6
purvija99 said:
Any REPLY Please ? I have sold a SATYAM DEC2005 700 CA @Rs.20 when the price was 720 . What will the position of this option on end of 29 Dec 2005 trading day if the price closes above 720 ? Are the options compulsorily settled on setlement price or on close price of underlying ? Experienced OPTION PLAYERS , put some light on this .
If the price of Satyam closes on 29th December above Rs. 720, you will have to pay the difference. Say it closes at 730, then you will have to shell out Rs. 30/- out of which you have received Rs. 20/- and the rest Rs. 10/- the loss incurred by you.

The options are compulsorily settled on the closing price of the underlying. However, if someone exercises the 700 call option tomorrow and you are assigned, (assignment is done by the computer randomly) then you will have to pay according to the closing price tomorrow.

Hope this helps

Regards,
Karuna
 

vince

Active Member
#7
rangarajan said:
Can we exercise the option before the expiry date(last thurs day)for contracts "In the money".In the given example,suppose one waits till the expiry for in the money contracts,would the difference in price be credited?If so,what would be the applicable price,whether last price traded or average price after the market as indicated.What is the procedure for exercising the option before expiry.
Shall be grateful for reply
ranga
You can exercise any in the money option at any time before expiry. If you wait for expiry the difference between the strike price and closing price will be credited / debited (in case out of money) respectively.
 

Similar threads

Broker Special Offers

Intraday Higher Leverage

Save up to 90% in brokerage and get higher leverage for intraday trades.

Name:Phone:
Email:City:
State:
Are you a day trader?