Reliance Put What to do

#1
I am very new in trading and a new member in traderji dot com. Please help me. I have bought Reliance Put 960 (31 Mar) at the rate of Rs. 9.80 on 18 Mar 2011. The last price of Reliance was then Rs.990.

Now today i.e on 25 Mar 2011 Reliance last price is 1026.60 and the put value is only 55 paise.

What should I do now? Should I wait till expiry? Suppose if the price of Reliance goes down next week say may be up to Rs. 990, but the put price does not go up, then what should I do? I don't know the procedure of "exercise". How can I sell my put with the procedure of "exercise"? I have an account with ICICIDirect. Or should I simply suqare off / sell this put? What is the benefit of "exercise" please let me know. Thanks in advance and best wishes for beneficial trading.
 

AW10

Well-Known Member
#2
This trade is more or less over,dear. If you go to squareoff this trade, You will get 55*250/100 = 137.50 rs, and ICICI will easily charge you brokerage of 100+ for this (chk out how much u paid when u bought the put). i.e. you might get 37rs or so (provided you still see 55 paise on monday).

Even if reliance falls to 990 or 960, the price of this put will not increase much cause in order to make money on this put, reliance needs to go below the breakeven point.. which will be =960-premium paid. For you to see any profit on this, reliance has to fall below 960 - 9.80 = 950 rs. else this is just a loosing trade.
Reliance has support at 1000/990/960 levels so it is difficult to reach that level in remaining 4 days.

So best course for you would be to let it go, and if you are lucky and u see higher premium for it which will put some money in pocket after paying brokerage, then get rid of it.

hope you have learnt the lessons from it. Let me give you few tips here
- buy calls at the strike which is support and buy puts at strike which is resistance.
- look at chart (free chart available at yahoo and so many sites) and identifty the places where price has taken a turn. Those are the levels which will act as support or resistance.
- level below the current price is support and above the current price is resistance. (no rocket science but just common sense)
- calculate your breakeven point and make sure you have room to make money from it.
- if trading close to expiry date, and trying to bypass rule 1 above, than don't go for strike (ie support/resistnace) more than 1 level away for current price. And monitor it closely so cut the position, if price goes against you.

Hope these simple no-nonsense rules will help you in next option trade.

happy trading.
 
#4
This trade is more or less over,dear. If you go to squareoff this trade, You will get 55*250/100 = 137.50 rs, and ICICI will easily charge you brokerage of 100+ for this (chk out how much u paid when u bought the put). i.e. you might get 37rs or so (provided you still see 55 paise on monday).

Even if reliance falls to 990 or 960, the price of this put will not increase much cause in order to make money on this put, reliance needs to go below the breakeven point.. which will be =960-premium paid. For you to see any profit on this, reliance has to fall below 960 - 9.80 = 950 rs. else this is just a loosing trade.
Reliance has support at 1000/990/960 levels so it is difficult to reach that level in remaining 4 days.

So best course for you would be to let it go, and if you are lucky and u see higher premium for it which will put some money in pocket after paying brokerage, then get rid of it.

hope you have learnt the lessons from it. Let me give you few tips here
- buy calls at the strike which is support and buy puts at strike which is resistance.
- look at chart (free chart available at yahoo and so many sites) and identifty the places where price has taken a turn. Those are the levels which will act as support or resistance.
- level below the current price is support and above the current price is resistance. (no rocket science but just common sense)
- calculate your breakeven point and make sure you have room to make money from it.
- if trading close to expiry date, and trying to bypass rule 1 above, than don't go for strike (ie support/resistnace) more than 1 level away for current price. And monitor it closely so cut the position, if price goes against you.

Hope these simple no-nonsense rules will help you in next option trade.

happy trading.

Thank you very much AW10 for giving me these good tips. You advised me that I should do nothing and let it go as it is, this means I should not sell it. In this way will I save my brokerage? So this action "not to do anything" is also called "exercising"? I want to know what is exercising? Pls let me know.

Thank you very much again. I feel that I have done a good thing to join this forum !

Regards
 

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