how does it work in this situation?

F&O
1

Let’s say I have bought 27000 BN call. BN is currently at 26900.

BN moves to 27500.

Hypothetically consider there are no other buyers left in this system and everybody wants to sell.

I want to carry my position to next day but the person(Let’s say A) who had sold me wants to exit.

Will A never be able to exit and has to stay in the trade as long as I wants to keep the position open ?

Or is there any way for A to exit?

let’s say A can’t exit and he only has X amount in his account. if I don’t want to cover my profits and my profits exceed X, how is the amount exceeding X is recovered from A ?

2

Hi there,

In this case A is called the option writer, the option writer has a potential to make limited profit(premium received from you) or end up making unlimited loss,if the position movies again him. To cover for this, the option writer is needed to keep margins with the exchange while option writing, whereas the buyer of the option needs to pay only the premium. BankNifty has enough liquidity at any point of time for him to be able to exit. But the odds of the option writer making money is more likely than the option buyer. To know more on options I would suggest you check out

Regards

3

Thanks for the reply.

I understand A is called option writer and he need to maintain margin.

My query is think about a hypothetical scenario wherein there are no buyers left in system after i enter trade.

OR

For some reason option writer doesn’t want to exit as he think trend will reverse.

In such case if my profits exceeds the margin, then what happens?

the trade/position is forcibly closed ?