Is writing/selling call or put of stocks (not index) and holding it till the expiry a good idea?
on the last day (expiry day) will we be able to buy back the sold option?
what will happen if we can’t buy back the sold option?
Not a good idea.
DONT DO THIS. THIS IS VERY VERY DANGEROUS AS RISK IS UNLIMITED.
you can surely buy back the sold option anytime before or on expiry provided there is liquidity.
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Blindly selling options is a terrible idea unless you have done your study, research, chart reading etc. It’s as good/bad as trading any other script (example - shorting nifty). In fact, Options can give you much bigger loss. So please don’t do blind selling.
On ‘what happens if you didn’t buy back’ - here is an article published by zerodha
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Please tell me:
If i sell a option of strike price say 100 at a premium of around Rs. 10/- on the first day of the contract trading.
and the price remains below Rs. 100 (remains out of the money) on the expiry day but i am not able to buy back the sold option. and the option settles at Rs. 0.05/- as it is out of the money option but the last traded price is say around Rs.6/-.
what will be my profits? Rs. 4/- or Rs.9.95/-?
If the contract settles below 100 , your entitled to receive entire premium value irrespective of last LTP.
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you still dont get it , do you?
tell me something, WHY ARE YOU SELLING OPTIONS, WHEN THE RISK/REWARD IS NOT IN YOUR FAVOR?
you can collect premium 9 times of 10 successfully , but that 1 time you will lose lot more than the premium, because risk is unlimited and only take ONE 3 SD day to ruin your account.
OPTION SELLING IS FOR MARKET MAKERS AND INSTITUTIONS, NOT FOR RETAIL TRADERS.
if you still want to sell , go ahead its your money.
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Thank you very much for your guidance.
I am just learning about the options before i take any hilarious trading decision.
Thanks again for your reply.