Call Option Profit n Loss

F&O
1

I would like to know where i am missing the concept, when compared to Zerodha varsity "Call Option Basics – Varsity by Zerodha Option " explanation
and real time traded Postion values.

I bought HDFCBANK JUL 1380 CE for premium of 19.4 on Thursday (15/07).i dont remember the spot price exactly, but sure it was around 1356 to 1362.
Yesterday spot proce closing was 1362.05 and premium was 19.5.
In positions screen , it shows profit of 55 ruppes.(1 lot 550).

Now as per the varsity chapter below is the formula for gain on a call option.
P&L = Max [0, (Spot Price – Strike Price)] – Premium Paid

Do i really dont make any profit even if it hit 1400??
By above formula, gain would be :
(1400-1380)- 19.4 = 0.2.

which one is correct?

2

We have two scenarios

  1. On expiry - for you to make money on expiry, the spot price should be greater than strike price plus premium paid

I.e Spot price should be above 1380 + 19.4 = 1399.4

  1. Before expiry - Based on the number of days left to expiry, volatility and spot price your option premium will increase or decrease.
3

Thanks for the explanation.Got it.

4

Adding to what Vivek88 said

Your payoff graph & greeks would be

Screenshot 2022-07-17 at 11.51.14 AM
Screenshot 2022-07-17 at 11.51.14 AM1528×1008 80.9 KB

Screenshot 2022-07-17 at 11.51.27 AM

5

Thanks for that.Trying to understand the Premium decay concept.
Last two weeks invested in index options and understood the premium decay as the days pass on.
What i noticed is whether it is CE or PE, a gain of 30 to 35 points on nifty (towards our bet direction) on the next day also not giving any profit.
For ex: if i buy 16100 CE at spot price of 16070 with premium 50rs, next day even if it touches 16100, premium is at 50 only.
Looks we need in depth analysis to take a bet in options trading.

6

HDFCBANK JUL 1380 CE has become ITM today.
What i learnt is we need to maintain funds for ITM options during last week of expiry.
Based on zerodha article,In order to carry this position i need to maintain 4 lakhs funds for a 1 lot of HDFC Bank.
Please let me know if my understanding is correct as this is first time i made a call option on Stock.

7

Hello @Mounica37

Good to hear on this topic, as you have mentioned that we required 4lac on last week of expiry but here is fact that you don’t required fund of approx 4lac in your trading acc. on T-2,T-3,T-4 for HDFCBANK . As per NSE website but you should have 50% on per lot size x spot price of margin on T-1 , and 100% of margin on T day that is last date of expiry . If any of the player won’t maintain this margin on these two date they will short fall margin penalty. And interest will levied to the client if any on this incident happen. Margin should be calculate using simple calculation of lot size x spot price
here for example on HDFCBANK ticker its lot size is 550 and assuming that spot price at 1400 so required margin on T day will be 550 x 1400 = 770000 which would be 100% but on T-1 it would required half of 770000 which would be 385000 . And also don’t go with rough calculation that you would required 4lac of margin as 1818.20 spot would required 5lac margin on T-1.
More information regarding this available in NSE website.

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