I bought HDFC 1520 PE @ 2.50 (lot size 500) inadvertently.
There is no buyer as of today or the buyer r at very less price.
HDFC Stock price is falling.
So in this case wht is possible loss have to bear if the is no buyer. How will my position will get squared off.
Pls let me know.
HDFC 1520 PE is a deep OTM option where the strike is about 10% away from the current trading price. HDFC has to close below 1520 on expiry for your option to be ITM.
This is the current snap:
Looks like your trade shows as the ltp. This looks more like an experimental trade. If you are certain HDFC will fall below 1520 before expiry, then you should hold it. Else, you should give it away hopefully if you get a price anywhere near your buy price or even lower.
NO need to worry. You dont have to wait till expiry. HDFC is in down trend & any further decline in price will result decent gain for your contract. But Yes there’s a liquidity problem in many stocks options. Since the option price has not appreciated inresponse to the underlying, this is because of no trade might have happened as you have confirmed that no buyer is there or the buyers are quoting low price.
Well , worst case would be equal to your maximum loss which is 500x2.5 = 1250 rs.
Now thats the max loss if you hold this option till expiry & it expires worthless.
If you are not able to square off then there’s no further liability on you. You have a right to exercise your option if its in profit but you are not OBLIGATED to exercise it.
If HDFC moves downwards then whenever liquidity increases in your strike price, the price of your contract will get updated with respect to underlying.
Downward movement will increase the price of your contract & you can come out in profit but dont hold it till expiry because otherwise your contract will expire with ZERO value as chances are less that hdfc will close below 1520.
The Deep OTM put currently has only time value. Even if HDFC falls and the implied volatility(vega) of the option does not go up, then the option price will still not go up. But yeah if HDFC does fall and vega goes up, then the currently OTM put option could reap profits.
Its associate recently came out with the IPO which is expected to commence trading of the Equity Shares on the Stock Exchanges: On or about November 17, 2017. This could be the trigger event for the HDFC stock to fall further if the HDFC Life listing is not good.
What a badluck brother! You did bought it inadvertently out of mistake. And the seller earned a free lottery.
If u look at the strike prices which are nearer to the underlying, there’s .80 rs increase in premium for strike price 1560 & its now at 2.3 rs. Means even after increase in price, the latest price is still cheaper than your BUY price of OTM put!!
Yes, near to ATM put is still cheaper than your contract which is far OTM .
You would have bought this at cheaper price & already could make a handsome profit of roughly 35% by today in it.!
For strike price 1580, its trading at 3.4 with increase of 1.25 so if u had bought it for around 3.4 - 1.25 = 2.15. Or even higher at 2.5 rs then would have made .90 rs on 2.5 rs, a profit of 36% . And have also closed this position. U would have made around 400 rs on your investment of 1250 rs.
Here your only hope is that HDFC moves downwards and comes closer to your strike price of 1520 so that it become somewhat more liquid and appreciates in price as well. Although breaking 1600 could be very difficult, but then anything can happen in the market!