This question is confusing me a lot, please help.

[samcha]

Dear Trader,
Being a newbie in trading I have lot to learn, but a particular question is bothering me a lot. I shall try to put my question with a hypothetical situation.

suppose I buy a nifty put option 29-oct 8100 strike @ 125
after a week I square off my position @ 200 thus making a profit Rs 75.

I made this profit because simply I both low and sold high.

Now, suppose the person who bought it from me holds his position till the expiry with a settlement price of 250. thus giving him a profit of Rs 50.

So, the question is from whose account is the profit deducted from.

If I was a writer of the option, off course it would have deducted from my account.

But in this case I just squared off my position which I already owned.
So if not me then who ?

this question may seems silly to the pros, but believe me its really confusing me.

Regards
Samrat.

 

[DSM]

Samcha,

For every buyer, there there is a seller. Consider this scenarios :

Scenario 1

X wrote options (sold) to A.
A sold it back before expiry (at profit or loss) which X b ought back
On expiry both A and X have no positions.

***

Scenario 2

X wrote options (sold) to A.
A sold it back before expiry (at profit or loss) which C bought
On expiry, both X and C have an open positions, where as A has squared off and has no position.

Trust this helps.

Dear Trader,
Being a newbie in trading I have lot to learn, but a particular question is bothering me a lot. I shall try to put my question with a hypothetical situation.

suppose I buy a nifty put option 29-oct 8100 strike @ 125
after a week I square off my position @ 200 thus making a profit Rs 75.

I made this profit because simply I both low and sold high.

Now, suppose the person who bought it from me holds his position till the expiry with a settlement price of 250. thus giving him a profit of Rs 50.

So, the question is from whose account is the profit deducted from.

If I was a writer of the option, off course it would have deducted from my account.

But in this case I just squared off my position which I already owned.
So if not me then who ?

this question may seems silly to the pros, but believe me its really confusing me.

Regards
Samrat.

 

[samcha]

Samcha,

For every buyer, there there is a seller. Consider this scenarios :

Scenario 1

X wrote options (sold) to A.
A sold it back before expiry (at profit or loss) which X b ought back
On expiry both A and X have no positions.

***

Scenario 2

X wrote options (sold) to A.
A sold it back before expiry (at profit or loss) which C bought
On expiry, both X and C have an open positions, where as A has squared off and has no position.

Trust this helps.

thanks a lot DSM. its really helped.