What happens to option in a black swan event?

[waverider]

If you are short nifty puts and the market dropped a 1000 points in 5 minutes and then recovered then what happens to your position assuming you are over the margin? Is the position squared off by the broker? Has anyone been short nifty option witnessed a event like 'flash crash'? Assuming that rs. 74000 was blocked as margin but because nifty dropped 1000 points the position was at loss of rs.75000 momentorily.

 

[sanju005ind]

Black swan events occur two to three times in a year.Dont need to prepare for them.Nobody is.The on;y black swan event i was in was in was before the budget.I had bought a Put option as an insurance.The other one was Gujarat elections. Since Nifty opened way below the Daily ATR. I went long blindly in Fututres and options and made a killing.So dont bother about Black swan they are few and far.

 

[waverider]

But what happens if you are short options?

 

[travi]

But what happens if you are short options?

What did your broker tell you ?

 

[waverider]

I don't know i haven't asked. But i want to know what happens generally?

 

[OneThatGotAway]

In case of gap ......
what happens is your account will go in Negative balance and your position will be squared off at highest rate lol
and then broker be knocking at your door to collect money . it don;t matter if it recovers as your loss is aleady booked.

in case of black swan
you position will be auto squared off and all left in account is
Zero
and yes transaction charge broker charge so it will go in negative next day lol

 

[waverider]

That sounds scary