I have a doubt. I am using random numbers for the sake of example.
Today I buy a Deep ITM option of a stock ‘A’ whose spot price is 2300. Expiry is tomorrow.
The option I select is 2000 CE and premium = Rs 500. Tomorrow the spot becomes 2200
and the premium becomes 400. But still i am ITM. Here how much will be my profit or loss?
Stock options are compulsorily physically delivered. So you must have around ₹7L-10L cash margin to take delivery at ₹2000 per share for which you had already paid ₹500 premium. So net per share costing would be ₹2500, @blazesprings
@Nidal : 1. Please let me know taking only delta into consideration (ignoring all other greeks),
and that the lot contains only 1 share, what would be my profit or loss?
2. What do you mean by phisically delivered that you said in your post?
Yes, if you sq off before 3:30 p.m. you will not be required to take delivery. But you will lose ₹300.
And generally stock options are bit illiquid, especially deep in the money and near to expiry. So it will be risky, in terms you will not find buyer at your desired pricing (or worst no buyers at all) and maybe you will lose more than ₹300 considering the ask-bid spread.
If you are a beginner, trade in index FnO, that too nifty only. Once you get hold of it, then you can start stock options. Since getting desired entry/exit for stock options is a challenge due to liquidity issue.