Today by mistake I made a BUY or TATASTEEL 540 CE at 192.75.
There are no sellers or buyers and still my order got executed.
I am very much afraid of how do I now sell it as there are no human being there in this price. I am also afraid that nobody might show up in this 540 CE of TATASTEEL.
My Rs.1,92,750 rupees are stuck there.
I am in a shock and do not know what to do.
Could you please help me with your guidance?
It will be very kind of you if you can please help me here.
You have bought a deep In The Money option of Tatasteel 540CE at 192.75 when Tatasteel stock is trading at 720. Let’s consider the different scenarios:
You don’t find a buyer till expiry but Tatasteel closes at 734 on expiry(30 Nov 2017). Your option will have an intrinsic value of 194 and you end up breaking even(included additional STT of approx Rs.900) and you get back your entire invested amount.
You don’t find a buyer till expiry and Tatasteel closes below 734 on expiry, then this is the loss you have to take depending on where Tatasteel closes.
You don’t find a buyer till expiry and Tatasteel closes above 734, then you actually end up in a profit.
Place a sell order everyday at your buy price or upto 5% lower than your buy price hoping someone would come and buy it, but ensure to place a sell order everyday when the market opens.
Hope Tatasteel closes at or above 734 this expiry or hope that you find a buyer at a favourable price at the earliest.
Thanks so much. You came to my rescue as a savior!
Queries:
Tatasteel is 718.25. You said 720. I guess you gave a round figure as an example?
Why 734 specifically? How can I calculate this? I bought at 192.75. How do you calculate 194 based on 734?
If it closes at 733 instead of 734 do I lose the entire 1,92,750? how can I can calculate the money I can receive at the end of the expiry based on the price of the equity?
Does that mean that if no buyer comes, Zerodha will return the money based on the calculation of yours of above/below 734?
I assume that to be on a safer side, I should put AMO of about 182, so I can take 10000 loss than to risk all. Please confirm.
I assume that I need to keep an eye on the snapquote and sell my stock at any price even if I lose 10 to 20k than to take such a risk. Please confirm.
Do I place AMO as NRML LIMIT of say 182?
In your experience, do some buyer comes at this kind of scenario at 540CE? or most of the time for the entire month buyers might not come at all?
One more question.
I bought at 192.75. Won’t this price be declining everyday till Rs.0 till the end of expiry?
will I lose all money due to this if no buyer comes?
You bought the option at 192.75 so tatasteel has to close 540+192.75 = 732.75 for you to be At The Money, plus I took 1.25 for charges/taxes. So 734.
No sir, you will lose your entire premium only if Tatasteel closes below 540 which looks highly unlikely. Whatever is the price at expiry, subtract strike price of 540 from it. That’s the premium you receive at expiry. Ex. If Tatasteel closes at 720, then you get back 720-540 = Rs.180.
Not Zerodha but yes the exchange will settle the premium amount back to you after expiry
Yes, you can certainly do that.
Yes, keep an eye on the snapquote and if someone is quoting to buy slightly under your selling rate, you can use discretion and give away your option.
Yes, you have to place AMO as an NRML sell order. Ensure you are placing it for the correct option!
There have been no buyers who have come so far. You are the only one. And the chances of buyers coming are slim. But you can still keep placing a sell order.
Maybe not the right time to advise, but please learn options before you trade it. Here are the links. Link 1.Link 2.
Amazing! Thanks. I am relieved that I will not lose the entire money if it closes above my strike price.
So, if TATASTEEL closes at 720, I get back 720-540 = Rs.180.
I have 1000 shares (1 lot), so I get: 1,80,000 back in this case after the expiry?
Wow. You just saved me. I will be able to sleep peacefully now. I send you many blessings and wish you great success in trading world. Thanks again for your help. Goodnight my friend. I am very grateful to you.
Currently, tatasteel is at 720 and 540 call is at 192.75. So intrinsic value of option (720 - 540) = 180 and time value of option = 192.75 - 180 = 12.75.
If Tatasteel remains at 720 at expiry, then only the time value of the option becomes 0 but the intrinsic value of 180 will still be there. Because your strike is at 540 and the stock is at 720.
Suppose you bought 730 Call and Tatasteel closes at 720 on expiry, then this option will lose its time value as well as the intrinsic value and will expire at 0. It will be Out Of The Money.
I got it fully now.
I studied the options chain for tatasteel and see strong resistances at 720 and 800. Support at 700 and 680.
The news is also good of Tatasteel.
So, it seems it will stay within 800 and 680 range in Nov 2017.
Now, does it make sense that I try to sell my OPTIONS at 182 (with Rs.12,000 loss), or better to revise my loss till Rs.4000 or keep SELL LIMIT of 1 to 2 rupees above my BUY PRICE and keep on watching Market depth.
If market depth brings a buyer, I can decide to sell if it feels good.
Am I too scared to choose 182 and willing to lose 12000, or it is better to exit at whatever price even in a loss?
The whole month is there and 800 to 680 is the range. it it comes near 700, there will be more OI in 540 CE, so I can see to anyone as there will be volume. If it goes farther, volume is less in 540 CE but I still benefit?
The reason I am saying this is that is 182 LIMIT purely out of fear? Please share your views if I should cancel AMO and simple watch the market depth during the day and then decide?
Please share your views of what would you do if you were in my place?
My suggestion is do not panic. Patience is the key for you at the moment. Just like @Srinivas said, you have the intrinsic value which you will get on expiry. But keep putting AMO sell order at the price which you are comfortable at in taking a loss/profit.
@Angel_Rishi…you might have made a lucky mistake. first of all Tata steel is in Bullish mode. so Today its self because of good results you can see Tata steel may go up by 3-4%, if it does so then there is a good chance tatasteel may close this month closer to 780 levels. if that is so I am sure you can calculate the profits. Only downside you may have here is you may not be able to sell it till expiry because you re too deep in the money. But I am pretty sure you will end up profitable by the end of month on this trade.
Yesterday i bought LUPIN 980 CE @ 59 rupees. when stock trading @ Lupin 1000,
still i’m holding LUPIN 980CE ,
my doubt is. if the seller have only 1lac with his trading account.
DOUBT ::
like above TATASTEEL case.
if there is no buyer or sellers came in LUPIN 980CE,
if stock moves 1260 above in this month. what happen to the seller position. he have only 1lac with his trading account.
if stock closed @ 1300 on expiry what was my profit and who is going to pay it to me.
