Variou index PE’s viz, 6800, 7000 etc, boughts of current month expiry have fallen drastically after the budget rally, If suddenly market reverses and entered into bearish before the expiry , will they come back with good premiums again, or they are going to evaporate even though market falls as the time is running out. If, on expiry day market closes at 6800 , whether the premium paid to bought the puts will be secured and can make money ??
No if you bought 6800 pe and market closes exactly at 6800 at expiry your money will be zero… And as expiry approach premium will erode rapidly…
it’s of no use. rolling is simply selling the one which is in hand and buying for next month/far month. but options are very fragile type of trading instruments and looses its value very fast. always trade with the strict stop loss.
last month i had bought 7300CE at the start of the month when market was just 30/50 points away. but a sudden gapped down opening of 100 points and further fall of 150 points (around 250 points down on the next day) erode my premium just on next day. even though market went back to that level afterwards, my call option could not recovered and had to suffer a huge loss.
The options are totally depends on the intrinsic value and time value. Options contracts are time bound. Many options expires useless i.e. at the time of expiry,if there no Intrinsic value for an option then it is called as useless.However, intrinsic value is the relation between price and the strike price.
Intrinsic Value = ( CMP - Strike Price )
Time value = ( Premium - Intrinsic value)
Note : Trade in Options but don’t Invest in Options.
it depends when nifty future price reach near to that strike… if somebody buy nifty 6800 PE… and if nifty comes near to 7000 or below that before 1 week of expiry… that he can expect some amount recover from that put option… because of time value… but if it comes near to 6800 or close at 6800 on expiry day, than better to close put option…
let assume on expiry day nifty open at 6900… and you expect a fall in nifty upto 6830-6850… so, when nifty comes near to 6850 or 6830… close your put option… because at that time you will recover some losses because of time value of put options… if you don’t close position at that time… and market stay there… than as long as nifty is trading above 6800, the premium will decrease…and final price will zero…
ok… Can I roll over ( i am not sure , what exactly is this) to next month( is such facility there for options ??), to escape huge loss , or what best should I do to minimise my losses in this particular scenario