PUT and CALL options

[columbus]

Re: Feb series-Day7 ,NiftySpot:5362 (+36)

Thanks for making me understand my queries

Now just a point in this image effective zone should not be in btw 4900-5600 as till strike price 5600 calls are above Rs. 10?
Does it bcz we are calculating btw PUT n CALL common zone and the common are btw 4900 and 5400 ... other strikes are outside the common area?

One more thing ... what this effective zone represent? Does it represent that nifty will move in btw these level till expiry till there is NO CHANGE?

Correct me pls if i am taking it wrong.

Thank You Again

Regards

Hi valuable_earner,

effective zone should not be in btw 4900-5600

Effective Zone is common to both CALL window and PUT window.Hence
4900~5400 is appropriate for your example.

strike price 5600 calls are above Rs. 10

Values in white indicate a value of option less than Rs.10.As on date,there
is LIKELYHOOD of going for less value.It is not hard & fast rule that
they will go penny ,because a reversal will see them grow.But it is a mere
warning.In the example shown by you 50% of PUTs (4300~4800) are
in white indicating remote chance of falling to such levels.Puts in this window
have derived strength not because of their intrinsic value but because of
low value.

One more thing ... what this effective zone represent?

As a thumb rule NiftySpot 300.The value keeps on reducing as expiry
is nearing.

 

[columbus]

The calls are losing premium, and the puts are also losing premium. Kya chakkar hai ?? TP bhai is also losing premium, it seems

EXAMPLE:

http://www.traderji.com/options/53702-nifty-options-trade-why-what-if-3.html#post632444

 

[AUSTIN11]

Hey guys,
quick question - I am a newbie and trying to get my self acquanited to options.
here is a hypothetical situation of what im trying to figure out

Situation 1. Lets suppose on 20th of a month I buy a 5300 PE @ 80 when NIfty is at 5350 , assuming expiry is on 26th. Now on the 26th the Nifty stands at 5100 and i forget to sell my option how much would IT BE AUTOMATICALLY closed for - or at what rate would the transaction be closed ?

Sitution 2. On the 20th of the same month I sell a 5400 ce @ 80 while nifty is at 5350, assuming expiry is on the 26th. Now on the 26th the Nifty stands at 5100 and i forget to buy back my option how much would IT BE AUTOMATICALLY closed for - or at what rate would the transaction be closed ?

Thanks,
Austin

 

[columbus]

Situation 1. Lets suppose on 20th of a month I buy a 5300 PE @ 80 when NIfty is at 5350 , assuming expiry is on 26th. Now on the 26th the Nifty stands at 5100 and i forget to sell my option how much would IT BE AUTOMATICALLY closed for - or at what rate would the transaction be closed ?

Sitution 2. On the 20th of the same month I sell a 5400 ce @ 80 while nifty is at 5350, assuming expiry is on the 26th. Now on the 26th the Nifty stands at 5100 and i forget to buy back my option how much would IT BE AUTOMATICALLY closed for - or at what rate would the transaction be closed ?

Thanks,
Austin

Hi Austin,

Situation 1. Lets suppose on 20th of a month I buy a 5300 PE @ 80 when NIfty is at 5350 , assuming expiry is on 26th. Now on the 26th the Nifty stands at 5100 and i forget to sell my option how much would IT BE AUTOMATICALLY closed for - or at what rate would the transaction be closed ?

In this situation you guessed the trend correctly.You bought 5300PE @80.
On expiry Nifty ended at 5100.For example sake,the premium stands at
@110.That means (110-80)*50=1500 is added to your account automatically.
It will be squared off AUTOMATICALLY.

Sitution 2. On the 20th of the same month I sell a 5400 ce @ 80 while nifty is at 5350, assuming expiry is on the 26th. Now on the 26th the Nifty stands at 5100 and i forget to buy back my option how much would IT BE AUTOMATICALLY closed for - or at what rate would the transaction be closed ?

In Situation.2, you were wrong in guessing the trend.Say ,the expiry premium
was 40, for example.An amount (40-80)*50=-2000.That means 2000 is deducted
from the account.In both the cases the amounts are adjusted
automatically.Please bear in mind the expiry premium are taken for example
sake.

 

[baludalal]

I am sorry to interfere. in seoncd also, trend was predicted correctly.
5400CE sell was as good as shorting the market at 5350 and market fell to 5100, meaning the trend was in line
Assumed reduction in premium has to be bought back and you have preempted the sale at 80 and buying back at 40 means Rs.40 Plus
pl. correct me Mr.Columbus if i am incorrect
Thanks

 

[vikrit]

Hey guys,
quick question - I am a newbie and trying to get my self acquanited to options. here is a hypothetical situation of what im trying to figure out
...............................

Hi Austin,......................

columbus, i think some confusion is there. as i know this will work out as follows-

Situation 1. Lets suppose on 20th of a month I buy a 5300 PE @ 80 when NIfty is at 5350 , assuming expiry is on 26th. Now on the 26th the Nifty stands at 5100 and i forget to sell my option how much would IT BE AUTOMATICALLY closed for - or at what rate would the transaction be closed ?

5300 PE will become IN THE MONEY when spot at 5100, so on expiry day it will be "EXERCISE" as you didn't square off before. so, if nifty at 5100 on expiry, (this calculation doesn't include taxes, nse charges etc)

Net = [(Strike Price–Current Price)–premium] x lot size = (5300–5100–80)x50 = 6000 Rs. PROFIT




Sitution 2. On the 20th of the same month I sell a 5400 ce @ 80 while nifty is at 5350, assuming expiry is on the 26th. Now on the 26th the Nifty stands at 5100 and i forget to buy back my option how much would IT BE AUTOMATICALLY closed for - or at what rate would the transaction be closed ?

selling options has unlimited loss and limited profit potential, so be careful. These trades require full margin, even some broker don't activate till you have cash 5-10 times of margin money in your account. as you sold 5300 call, and nifty at 5100 on expiry, so in this also you are in profit. (this calculation doesn't include brokerage,taxes etc)

Net = (Premium credited to your account when the trade was executed) = option price x lot size = 80x50 = 4000 Rs. PROFIT


these formulas work only for these types of situations.

.

 

[vikrit]

@AUSTIN11

if you asked this to compare buying & selling then you should consider many more situations & also about risk level in those situations.

for ex -

if nifty will close at 5450 then -

Situation 1. Net = Premium paid x lot size = 80x50 = 4000 Rs. LOSS

Situation 2. Net = (STRIKENifty price+PREMIUM)x lot = (5400-5450+80)x50 = 1500 Rs. PROFIT



if nifty will close at 5600 then -

Situation 1. Net = Premium paid x lot size = 80x50 = 4000 Rs. LOSS

Situation 2. Net = (STRIKENifty price+PREMIUM)x lot = (5400-5600+80)x50 = 6000 Rs. LOSS


(these calculation doesn't include brokerage,taxes etc, and these formulas work only for these types of situations.)


many more situations & strategies possible to calculate, i am also learning as a student of market. if you or any friend of yours having an account with sharekhan, then ask for online (live + recorded) trainings. 10-12 topics available like - options basics, how to trade options successfully, day trading, swing trading etc etc. I have attended them, many are basics in nature, but found very useful & informative for a start and best part they are LIVE & FREE!.

.

 

[Donmuthu]

Hi Columbus Sir....... Had created this Spreadsheet for tracking Nifty Options with graphs for Total OI, Change in OI and Option Pain.... Hope this helps......

And you had earlier mentioned that you are unable to put dates on X-axis in your Graphs.... If you could share that Sheet with us, I might try my hand to resolve this issue....


[PS: The link to the file shared is temporary and might change in future..... In case it changes, this is the Link to the Folder..... From here, you may download the file called "Nifty Options Analysis.xlsx"...]

Aditya,

Thanks for this file. I would like to know more on creating/modifying this file. My objective is to create similar files for stock options I want to track. Will appreciate any pointers or inputs in this regard.

Thanks,

 

[adityasaraf007]

Aditya,

Thanks for this file. I would like to know more on creating/modifying this file. My objective is to create similar files for stock options I want to track. Will appreciate any pointers or inputs in this regard.

Thanks,

Hi Muthuji,
Please have a look over here.... and the posts following that..... I have explained all the stuff which you need to know.....

And, if there's something more, do let me know.....

 

[columbus]

Feb series-Day9 ,NiftySpot:5368 (33)

The EFFECTIVE ZONE moved to 5000~5500.There is huge build-up in PUT
side.The addition of OI ,today alone in 5500CE is more than ONE MILLION.
More than 50% in PUT window has LTP less than Rs.10.