Picking up nickels in front of steamroller!!

[simple_trader]

Dear Jvblogger,
What are your views on writing deep in the money calls. Is it beneficial to write deep in the money calls when the market is at the top end? According to nseindia the writers who are in the money on expiration are chosen randomly to be exercised upon. What are the chances to not to be assigned?Thanks

I wanted to discuss this in another thread. But could not find any one to join me.

In stead of writing Deep ITM call, consider writing pair, i.e. deep ITM call and PUT. You will get 100 points time value if you write around expiry (next series option). If we hold for 10 days around, it can give 50 points. and If you are lucky and NIFTY is range bound, then hold for another 5 days, time value can come down by 70 odd. Better to cover max at that point.

I personally do not do this trade, but I have a friend, who does it. He is doing it successfully.

Happy trading!

 

[Capricorn]

Dear Jvblogger,
What are your views on writing deep in the money calls. Is it beneficial to write deep in the money calls when the market is at the top end? According to nseindia the writers who are in the money on expiration are chosen randomly to be exercised upon. What are the chances to not to be assigned?Thanks

Options are a zero sum game , a winner for every looser, if your short option is ITM on expiry u will be assigned.

 

[p81]

The exchange chooses the writers upon assignment randomly.Now it is very hard to say that there are equal number of assigned writers against the number of options buyers who opt for exercising their contract rather than squaring off. Well this is my understanding , i may be wrong.

 

[rrmhatre72]

I wanted to discuss this in another thread. But could not find any one to join me.

In stead of writing Deep ITM call, consider writing pair, i.e. deep ITM call and PUT. You will get 100 points time value if you write around expiry (next series option). If we hold for 10 days around, it can give 50 points. and If you are lucky and NIFTY is range bound, then hold for another 5 days, time value can come down by 70 odd. Better to cover max at that point.

I personally do not do this trade, but I have a friend, who does it. He is doing it successfully.

Happy trading!

Hi ST,

Margin required for this will be higher.
What is ROI expected?

 

[MaxX]

Deep ITM options have low liquidity/high spread between bid/ask.. its doable only if trading small quantities.. also the question of high margin as rrmhatre pointed out..

 

[rajsingh]

The exchange chooses the writers upon assignment randomly.Now it is very hard to say that there are equal number of assigned writers against the number of options buyers who opt for exercising their contract rather than squaring off. Well this is my understanding , i may be wrong.

The random assignment part is true only for early exercise.

At expiry all ITM options writers are assigned.

 

[simple_trader]

Hi ST,

Margin required for this will be higher.
What is ROI expected?

No it is not correct. margin requirement for deep ITM option writing are very less compare to OTM options. This is because we get higher premium credit.

Returns are good. But like any trading this also carries risk, and all advantages of option writing. The basic rule of "no free lunch in market" applies for this as well.

Happy trading!

 

[alroyraj]

No it is not correct. margin requirement for deep ITM option writing are very less compare to OTM options. This is because we get higher premium credit.

Returns are good. But like any trading this also carries risk, and all advantages of option writing. The basic rule of "no free lunch in market" applies for this as well.

Happy trading!

But what is the purpose of this trade since margin will be blocked and the buyer will get the entire premium from our side?

 

[cool_kk]

Hi

No tips for this scheme ?

I think, I panic last time market hit 5450 and sold my 5500 CE for August bought @ 58 and sold at 87.

4600 PE is still opened for August .

Any suggestion for August trade... using this strategy.

Any idea, Is it good to book profit in mutual fund or always its long term.
I took out after 3 years...

Scheme Franklin High Growth Dividend scheme(No dividend received anytime, looks wrong selection)

Investment was 25k
profit 5k

I sold today to get out of this and enter later.

Thanks

 

[simple_trader]

But what is the purpose of this trade since margin will be blocked and the buyer will get the entire premium from our side?

Buyer will pay some time value, which sellers can earn (usually 100+ time value for a pair). We get a good price range in favor of writers.

Happy trading!