My first option buy

#1
Hello All,

I am new to option world. for past few weeks, I was studying option and did some paper trade...

finally, couldnt stop myself buying one option..here it is

Suzlon Rs. 105 29th October at the premium of Rs. 8.85 (Call).

I guess within the given time limit, this share can reach to that level....

What do you say ?? Till today there was only 6000 qty was traded ( including mine 3000)....This option was introduced today...

Though the closing rate was Rs. 7.75:annoyed:
 

findvikas

Well-Known Member
#2
Hello All,

I am new to option world. for past few weeks, I was studying option and did some paper trade...

finally, couldnt stop myself buying one option..here it is

Suzlon Rs. 105 29th October at the premium of Rs. 8.85 (Call).

I guess within the given time limit, this share can reach to that level....

What do you say ?? Till today there was only 6000 qty was traded ( including mine 3000)....This option was introduced today...

Though the closing rate was Rs. 7.75:annoyed:
It's advised to trade in current month F&O before 20th of that month, otherwise time decay will eat your premium if the option does not get in the money.

Suzlon on the other hand is my favorite for options trading, I would advise to pick 110CA for September tomorrow around 2-3rs and exit 10-12

Spot will go as big as 115-125 in very near term, it is high time you buy it. May be tomorrow morning.

I paper trade Reliance 2010CA when spot was at 1965 and 2010CA at 38... today it closed at 170
 
#3
It's advised to trade in current month F&O before 20th of that month, otherwise time decay will eat your premium if the option does not get in the money.

Suzlon on the other hand is my favorite for options trading, I would advise to pick 110CA for September tomorrow around 2-3rs and exit 10-12

Spot will go as big as 115-125 in very near term, it is high time you buy it. May be tomorrow morning.

I paper trade Reliance 2010CA when spot was at 1965 and 2010CA at 38... today it closed at 170
Thanks Vikas... Can you please explain with example how and why time decay will impact on my option after 20th...

Being new one, I dont have that much in depth knowledge... I thought this is great time gap , so suzlon will cross that strike price as per the current trend within that time..
 

findvikas

Well-Known Member
#4
The premium you pay today is calculated on the days remaining till expiry of the contract.
After 20 there are hardly many days left for the expiry in current month and people start to roll over to the next month's contract and you may face difficulty in finding buyers for the current month.

Suppose you bought the contract today for the next month's expiry and there are around 30 work days left so the premium is high as there are more time available hence more probability of the contract actually getting into the money, but if it stays out of money for another 5-10days then there will be less days to calculate the value of option and less probability of the contract getting in money compared to today... so it starts losing its value every day..
 

tvrssvk

Active Member
#5
The premium you pay today is calculated on the days remaining till expiry of the contract.
After 20 there are hardly many days left for the expiry in current month and people start to roll over to the next month's contract and you may face difficulty in finding buyers for the current month.

Suppose you bought the contract today for the next month's expiry and there are around 30 work days left so the premium is high as there are more time available hence more probability of the contract actually getting into the money, but if it stays out of money for another 5-10days then there will be less days to calculate the value of option and less probability of the contract getting in money compared to today... so it starts losing its value every day..

Hi Vikas,

What would be the best time frame then???
 

findvikas

Well-Known Member
#6
The best time to enter in an option is when you think there will be an immediate move in the stock, max 3-5days and you will see a significant move in the stock's spot price. At least 3-5% move in spot price can fetch you handsome amount in the near money call.

If you are not sure about the future of the underlying security then you should not buy it. You buy options to either leverage or hedge your current positions.
 

findvikas

Well-Known Member
#8
Since the September expiry is coming quite early... 24th and 20 being the holiday (Sunday)
people will start rolling over their long positions to the next month from 17-18(rollover typically means closing the current month's position and taking the same position in next month's contract.) I would advise not to play naked in options after 18 and close your out of money long options on 18th itself.