Nifty basic query

[megapixel]

And regarding options, the risk involved is that your option premium can become zero!! For eg: you buy Nifty 5100 call at lets say 20. If Nifty falls steeply, the premium can even become zero - so in options you can lose all your money.

..so I see in Option there is Limited loss ...right ? maximum loss is my premium even if Nifty falls to zero.....correct ?

By the way ... suppose If I had purchase Stock option instead of Nifty Option ... how much is the maximum loss there ?

 

[timepass]

..so I see in Option there is Limited loss ...right ? maximum loss is my premium even if Nifty falls to zero.....correct ?

By the way ... suppose If I had purchase Stock option instead of Nifty Option ... how much is the maximum loss there ?

In options, the stoploss is zero. All out of money options expire at nil value at the end of the series. The chances of the index becoming zero are extremely poor. So, the losses may be limited in futures. Similarly, the options may give out huge gains as compared to the futures. Also, the margin requirements are favorable.

 

[megapixel]

In options, the stoploss is zero. All out of money options expire at nil value at the end of the series.....So, the losses may be limited in futures.

I am now confused ... because I find the other way ...I find losses may be limited in options !


I found an an example ..it says loss is limited in options and its the maximum premium amount ...one can not loose more than this...

see this text [ source : http://www.financial-guide.ch/ica/derivatives/focus_on_options/fundamentals/weba1.html ]...
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Suppose a call option with an exercise/strike price equal to the price of the underlying (100) is bought today for $1.
At expiry, if the security’s price has fallen below the strike price, the option will be allowed to expire worthless and the position has lost $1. This is the maximum amount that you can lose because an option only involves the right to buy or sell, not the obligation. In other words, if it is not in your interest to exercise the option you don’t have to and so – if you are an option buyer – your maximum loss is the premium you have paid for the right.
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