Basic of options


#1

Suppose trading date :: 1/11/2018. Bank Nifty is trading at 25000.
(1) As per my analysis I assume that Bank Nifty will be bullish for next 10 days. Than I decided to buy 25500 CE at 300. After 3 days. Bank Nifty rises upto 25200 and 25500 CE at 450. At this stage can I square off my position before expiry???
(2) Can I get profit of 450-300=150*20=3000/- ??? Even if Bank Nifty did not cross 25500?? Is it necessary to cross strike price??


#2

You can squareoff 25500 CE when ever you desire before expiry. if your buying option

If 25500CE premium reaches 450 you will get end up with profits (as per your example) minus brokerage charges and STT

I do recommend to go through the below chapters from varsity if you want to trade in Options.

  1. https://zerodha.com/varsity/module/option-theory/
  2. https://zerodha.com/varsity/module/option-strategies/
  3. https://zerodha.com/varsity/module/markets-and-taxation/
  4. https://zerodha.com/varsity/module/risk-management/

#3

Respected sir,
I have read ZERODHA VARSITY…bur as per my understandings…profit can be accumulated only and only when underlying crosses strike price. In my example BANK NIFTY is trading at 25200 i.e. not crossed strike price 25500.
You are sincerely requested to clear my doubts.


#4

Where u read this? Post that link first


#5

You might have read saying “exercise the option only on the expiry day” which is in the initial stage. Please complete all those topics to get a clear idea.

There is no mandatory the it should cross 25500 strike, suppose if the premium of the lot increase and want to book profits you can squareoff or else if suppose if the premium goes down and u are in loss don’t want to hold the lot anymore even then you can book your losses.

During every chapter please do read comments in the end section, similar doubts u will have the answers


#6

Many thanks for your humble and prompt responce.
Can we book losses also if our premium goes against our analysis???


#7

Yes, absolutely. Trading in options is a lot like trading in stocks- you can get in and get out as you see fit.

-Neha (vrdnation.com)


#8

Thanks a lot.:pray::pray::pray:


#9

How to Learn Completely Option strategy?


#10