Federal Bank Options

[silentbull]

Hi

I am pretty new to Options buying and started with simple one today.

Bought a Federal Bank Stock with the following details

CE 55
Lot size 8500 (Bought 1 lot)
Price bought - 2.70
Expiry - Jul

Based on the above, Please clarify the below

1. Am i correct that since I have taken it for delivery, they have deducted 8500*2.70.
2. The CMP is 56 and hence mine is In the money. If i sell it tomorrow,am i correct that the profit will be 8500*current premium price - price bought premium.
3. Can i sell it immediately even though the expiry is end of this month?
4. What is the maximum loss that I will get if the premium price is reduced from 2.70 ?

Is there anything else I need to be calculating for profit like intrinsic value etc.,

[ShubhS9]

@silentbull

Am i correct that since I have taken it for delivery, they have deducted 8500*2.70

Yes. You would have to pay 22,950.

@silentbull

The CMP is 56 and hence mine is In the money. If i sell it tomorrow,am i correct that the profit will be 8500*current premium price - price bought premium.

Yes.

@silentbull

Can i sell it immediately even though the expiry is end of this month?

Yes, you can sell any time.

@silentbull

What is the maximum loss that I will get if the premium price is reduced from 2.70 ?

Max loss will be the amount you have paid ie. 22,950 (Buy Price * Lot Size)

@silentbull

Is there anything else I need to be calculating for profit like intrinsic value etc.

You don’t need to calculate anything else, calculation is straightforward. If Option Premium increases above you Buy Price you will be in profit. If it decreases, you will be in loss.

On side note, keep in mind Options trading is risky and doing it without proper knowledge will blow up your capital. You can get better understanding about Options here

Options Theory for Professional Trading - Varsity by Zerodha

[silentbull]

Thanks, That is why I wanted to try with 1 lot and bought federal bank based on recommendations.

[ShubhS9]

@silentbull

based on recommendations.

Don’t trade on recommendations, do your own analysis and trade accordingly not based on others view.

If you want to try your hand in Options, do so by trading Nifty or Bank Nifty Options. Stock Options are illiquid and also carry risk of Physical Delivery.

But first learn how Options work. Markets will be here forever, Your capital won’t be here if you blow it up.

[silentbull]

Hi

Thanks, I have been doing bit of Bank Nifty and Nifty and understood basic concepts.

Now thought would start with Options based out of stock.
Are you saying there is a risk that I can’t sell and would need to take deliver of 8500*Spot price of federal bank shares. Isn’t the idea of options are that we are not obligated to take physical delivery?

[ShubhS9]

@silentbull

Are you saying there is a risk that I can’t sell and would need to take deliver of 8500*Spot price of federal bank shares

SEBI has made Physical Delivery compulsory in Stock F&O, all positions that expire ITM are physically settled.

I was talking generally, to give you an idea of risks associated with trading in Stock Options. Federal Bank Call you are holding has good liquidity so you won’t have to worry.

You can learn more on Physical Settlement here.

[silentbull]

Thanks