Writing Call Option

#1
Hi,

I want to know about suaring OFF " write Call" position before expiry.

To square off a position in “ write Call”, I need to buy call of same expiry and same strike price.

Please let me know if I can sell this call , which I had to purchase to square off my “write call” position?

For Example – I sell below Call Option i.e. “ Write Call ” as on today i.e. 18/09/13.

Underlying – Nifty
Contract details -
Expiry - 28-Nov; Strike Price - 5900; LTP - 261; Qty- 50.

So, Premium received to me for "Writing Call" = 50x261 =13050

Case -1)

Say on 05th Oct 13, LTP of above call goes to 100.
I want to square of my position.
I will have to buy call of same expiry and same strike price i.e. I will buy Call of 5900 strike and expiry 28th Nov at premium of 100. Buy price will be = 50x100 = 5000.
Hence, my profit = 13050-5000= 8050.

Now, please let me know that if I can close off this call say after 5 days.

Say, on 10th Oct 13, call premium is 90.

Then, I close the call with 90 as premium.

Hence, sell amount = 50 x 90 = 4500.


My final profit = 8050 + 4500 = 12550.

Case -2)
Say on 05th Oct 13, LTP of above call goes to 400.
I want to square of my position.
I will have to buy call of same expiry and same strike price i.e. I will buy Call of 5900 strike and expiry 28th Nov at premium of 400. Buy price will be = 50x400 = 20000.
Hence, my loss = 20000-13050= 6950.

Now, please let me know if I can close off this call say after 5 days.

Say, on 10th Oct 13, call premium is 200.

Then, I close the call with 200 as premium.

Hence, sell amount = 50 x 200 = 10000.


My final profit = 10000-6950 = 3050.


Please confirm if above two scenerios are completely true or there are any errors in my understanding.
 

comm4300

Well-Known Member
#2
case 1)

how many times are you buying the same write?

you can square off what you sold just once....be it intraday or in a few days or at expiry.
 
#3
Thnaks for quick reply !

I will not buy same write. I am talking about squaring off "write call" position which I have already taken.

Can you please explain how "write call" position can be squared off before expiry
 

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