My friend sold nifty call option at strike price of 11100 for July 26 2018 expiry date and wondering if he can square off before expiry date? He sold for 48 Rs. and current price is 40 Rs. but he is worried that price may go up…
Also we want to know what is the maximum amount he can loose…total he got is 48X75 minus brokerage and taxes… about 3550 Rs. He was told that the maximum he can loose is this 3550 Rs…is it true ?
if so …why there is about 50000 Rs. margin + spread?
Its called Nifty 11000 CE for a reason
CE means Call European
European option means you can square off any time, on or before expiry
Maximum loss is unlimited, it can be in thousands, lacs, crores, it can be more than GDP of India or Warren Buffet’s net worth
Thats why dont do selling of options unless you are expert. Or put a strict stop loss.
Better square off if you are in profit.
Check this thread for examples:
Now I understand that loss can be unlimited if we sell call but my understanding is in nifty you can not have huge loss because nifty will not go drastically up …11100 CE yes but nifty wont go pass 11500 in a month …can you tell me in this situation what will be loss if nifty goes to 11500? lot is 75 and premium was 48 Rs.
You end up in a loss of (500-48)*75
Just making sure its (500-48)x75 or it would be (400-48)x75 please note trade was 11100 sell CE …it was not 11000 sell CE
Yes you are correct… I just overlooked