What will happens if i short sell call or put option and hold it till expiry? Can i profit If i sell now and buy back on expiry day ? Because premium falls to 0 that day!
option selling is a good idea, but it takes a large analysis to hold that for long,
because if trend reverses, the more it reverses the more you loose
in short your risk will be unlimited, but reward maximum till the your entering premium
Thanks sir for explaining… one more thing i want to know. What will happen if i sell 1 lot call option and 1 lot put option and buy back on expiry day? I think in this way may be i will not loss if trend reverses
Depends on which strike prices you chose to Sell. Let’s say you chose to sell Nifty call and put option with strike prices that are 300 points away from current Nifty value and if Nifty moves up/down but stays within this +/-300 points range till expiry, then you will not loose rather make full profit (whatever premium you had received). On the other hand, if Nifty moves beyond the strike prices on either Call side or Put side then a loss can occur (infact, large loss can occur if there is significant movement beyond the strike prices.
Do a thorough analysis before selling Options. Always better to limit your risk by properly hedging sold options, as all trades are at best- probabilistic in nature.
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Selling naked call & put is not a good strategy.
Even if you are selling both , still it takes one trigger for nifty to rally in either direction , causing one of your position a severe damage. What if nifty rallys 200 - 500 points in a monthly cycle. Leave monthly period, at times nifty has given very big moves in a single day on account of triggers.
Risk to reward ratio will be average in this case.
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Ok… then what about intraday? I think it is less risky because i can use stoploss. But in holding there is a fear of gap up gap down opening and i can’t use stoploss.
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Fact is that intraday is more riskier than swing.
Swing offers better profitability & responds better to technicals.
It would be a good choice. You can earn some handsome profit in intraday.
@raheel265 can you tell me how much (%) premium can be earn in a day and what is the entry and exit time?
Usually I trade Nifty CE option. Which would around 30-50 Rs range 150 or 300 Qty. Will sell on achieving my target price. Have a look on my today’s trading…
Bought at 37 and sold at 40.65 (4 lots)
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now you have made profit after selling that call to someone.
now suppose the person who has buy from you hold that till expiry and reach beyond target price suppose 500 points more.
do you have to provide that profit(500 multiplied by lot size) to that person because you have sold it??
Exchange will provide that. Why do we? If you short call option then you have to do that?
brother, i have told him that you are liable only to exchange, you cannot consider the second person in contract, that can change 1000’s times in a day, think only that you have bought from exchange and your profit will come from the exchange and exchange will debit your account if you make loss. it’s not a rocket science
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By the way i am doing some experiment. today i sell 1 lot nifty PE and CE and holding it. I want to see what happens.
You are semma GENIUS boss
I think even Warren Buffet is not aware of this idea, Please do not share such valuable posts in common, others will also use, Get copy rights for this idea asap
Please share screenshot of current date of this experiment.
If You still holding position.
I already squared off next day with little profit
Okay