Option trading clarification

#1
HI All,

Have been trading in cash from quite some time, got interested in options, pretty much got the idea, but I got a doubt in trading options, hope to get it cleared:

Lets say: LICHSGFIN stock is trading at 195
I buy a call option with strike price of 200 at 8.50

If the stock value goes above ( 200 + 8.50 ) - I will be in profit, provided I sell it.

But what happens if the stock value goes down to 170 ?
( There is still 2 weeks till expiry ), at this stage, am I in loss ?

And, lets say, after two days, the stock price went high to 220 ( from 170 )
( There is still 1.5 weeks till expiry ), does this mean, I am in profit even though the price went down after I purchased ( to 170 ), but still came back up to ( 220 ) above my buying price?

Please help a learner.
Thank you in advance, have learnt a lot from traderji.
 

anup

Well-Known Member
#2
Option has got lot of intrinsic values like gamma,theta,beta etc etc...While buying option IV is most important..Implied volatility...

When Lic is at 195 and 200 Call is at 8 rs. You buy it..Think IV is 60 and As soon as lic crosses 200 but IV has dropped to 40 due to some readon then ur option pricre would be below 7(rough guess)...You will ask why it will be below 8.5 eventhough price has crossed 200..Ask the option expert like danpickup, heath Raj,OT
2.You buy 200 call at 8.5rs wen the price is 195 and suppose the lic stock didnot move even after 2 to 3 days...After 3 days also price is 195 then due to time value decay ur option would have reduced to 8(rpugh estimate)

HI All,

Have been trading in cash from quite some time, got interested in options, pretty much got the idea, but I got a doubt in trading options, hope to get it cleared:

Lets say: LICHSGFIN stock is trading at 195
I buy a call option with strike price of 200 at 8.50

If the stock value goes above ( 200 + 8.50 ) - I will be in profit, provided I sell it.

But what happens if the stock value goes down to 170 ?
( There is still 2 weeks till expiry ), at this stage, am I in loss ?

And, lets say, after two days, the stock price went high to 220 ( from 170 )
( There is still 1.5 weeks till expiry ), does this mean, I am in profit even though the price went down after I purchased ( to 170 ), but still came back up to ( 220 ) above my buying price?

Please help a learner.
Thank you in advance, have learnt a lot from traderji.