Selling put options - a few questions

F&O
1

Let us assume the following. I sell a put option for adanient oct 25 2018 with a strike price of 110. The zerodha calculator says I need a margin of around 81k and will receive a premium of around 11k. Now with this in mind, I have a few questions.

  1. Is the premium divided into the number of days of the contract? i.e, to acquire the 11k, I need to hold the contract from the beginning up until expiry?

  2. Is the premium monthly? because that’s an amazingly high % of returns. Though, no doubt people would consider it risky as well.

  3. if the price of adanient stock keeps dropping and reaches close to the strike price, can I just exit the contract and keep whatever premium I have accrued?

  4. Is this a good strategy to follow? why so?

  5. Am I missing something here?

2

If ADANIENT falls and reaches 120 also, the put premium can go up lets say currently 2 rs to 5 rs

So your sell is at 2 rs, then your position will show (2-5) * 4000 = 12000 LOSS

Because you have to square off your position later, if you dont square off they take settlement price at expiry

If ADANIENT goes to 100, put premium goes to 20 rs (Example)

Now your loss is (2-20)*4000 = 72000

So now you decide its good strategy or not

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