Buying call options

Kindly clarify my doubt in BUYING CALL OPTIONS.

Example:
NIFTY 50 trading at 18000 Premium Rs. 100 for strike price 18500 on day 1 for Buying a call option.

On day 15

Scenario 1:
NIFTY 50 trading at 18700 premium Rs. 150
If Closing the trade, what will be the profit or loss?
Spot price 18700 - 18500 = 200 (or)
Premium 150 - 100 = 50

Scenario 2:
NIFTY 50 trading at 18300 premium Rs. 80
If Closing the trade, what will be the profit or loss?
Spot price 18300 - 18500 = -200 (or)
Premium 80 - 100 = -20

Scenario 3:
NIFTY 50 trading at 18500 premium Rs. 90
If Closing the trade, what will be the profit or loss?
Spot price 18500 - 18500 = 0 (or)
Premium 90 - 100 = -10

Scenario 4 on expiry day:
NIFTY 50 trading at 18700 premium Rs. 10
If Closing the trade, what will be the profit or loss?
Spot price 18700 - 18500 = 200 (or)
Premium 10 - 100 = -90

What will happen if I am not closing the trade.

Whatever it is, if I am excercing the contract, should i buy the NIFTY 50 by paying the spot price or strike price?

If I bought NIFTY 50 by paying spot or strike price, how to sell?

GTT available for entry, SL, profit in BUYING CALL OPTION?

Thank you.

1 Like

If you are closing your position before the expiry, the difference between premium paid to buy the option and premium you will receive upon closing the position will be your P&L. Just like it is with stocks, where difference between buy and sell price is the P&L.

If you are not squaring-off the position and letting it expire. Then, if the option is ITM (Spot Price > Strike Price), it’ll be settled at intrinsic value (Spot Price - Strike Price) and the difference between buy price and settlement price will be your P&L.

If the position is OTM (Spot Price < Strike Price), the option will expire worthless and you will lose the entire premium paid.

Do check out this post for more information: What happens if I don't square off my positions in options? - #2 by ShubhS9

Would also suggest you go through this module on Varsity for deep dive into options:

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If I am excercing the contract, shoul I buy the instrument by paying strike price or the deal finished once closed the positions before expiry or expired.

Thank you

Got answer for all my questions from your previous post.

Thank you