Newbie's Question on Options

#1
Hi,
Till now I never have traded in Option, so here is my basic question:

Can I square off my option short position anytime before expiry ?
For ex, say I have sold a ACC call option at strike price X and before expiry, can I close my short position by buying the same call option OR I have to carry the obligation till expiry ?
Does it hold for both European and American Options ?

Thanks
Nirmalya
 

Traderji

Super Moderator
#2
YES, you can square off your position by doing a reverse transaction anytime before expiry.

In India all options are of the European type. We can have a European put, call or any other advanced option variants. The question is what is the European Option. We know that an option holder has the right to exercise his option but not the obligation. The question is when can he exercise his right. Should it be on the maturity date or can he exercise it at any time after he has entered the contract. If the option can be exercised on the maturity date only, then the option is a European option.

American Options: The other type of option is known as the American Options. Most option contracts traded in developed markets are of the American type. The biggest advantage with the American Option is that it can be exercised by the holder at any point of time after entering the contract.

Since we still cannot exercise our right and call for or give delivery of the underlying in the options market in India it does not matter if the option you trade in is an American Option or European Option.
 
#3
traderji, where can I get a list of the margin requirements for all the scrips which trade in futures? Is there any thumb rule for the same?
 
#6
Hi Traderji,
Thanks a lot for your reply, but I am slightly confused now on option excercise.

You have mentioned it doesnt matter whether the option is European or American, from all where I have read, all stock options are American and Index options are european.
But according to you, if I have bought a NIFTY Call Option(which is CE) at strike price 2700 and at some point before expiry I saw I will be in profit where NIFTY is 2780, Can I excercise my right even it is not expiry date ?

Thanks
Nirmalya
 

vince

Active Member
#7
You are right . Index options are european whereas stock options are american. However you can square off either type of option at any time before expiry.
you can excercise only american options at any time if in the money.
European options get excercied automatically on expiry if not squared off beforehand.
 
#8
Hi Nirmalaya,

you can squareoff option anytime in intraday or in 2days.keep it in mind, you have to buy call and put then sell.

If you short call option you have to pay extra margin compare to future, then any time your that stock which you short call option can be exercise by anyone, so that is risk.
 

rsg

New Member
#9
Hi,
Can someone tell me where to find the live option quotes on indexes and stocks in India stock market?

Thanks.
rsg
 

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