Need help on understanding Nifty option

F&O
1

Hi all,
I have 2 questions about Nifty. Can anyone please help me to understand this?

  1. if I buy Apr Nifty 10050ce, is there any guarantee that at expiry if Nifty is at 10300, there will be always payment (no one can back out and I loose premium)

  2. in screenshot attached I could see a decrease in 1000 points. Is this really possible? 10100 decreased by only 70. I was wondering why this was having premium in 1000s.

Screenshot_Kite_20180323-105728-picsay
Screenshot_Kite_20180323-105728-picsay720×1280 161 KB

2

Yes, payment is guaranteed as exchange acts as counter party in any transaction.

As that option is illiquid till yesterday it might have closed at theoretical price or at last transaction price which might have happened few days or weeks ago. If someone is new to markets it is recommended to transact in liquid contracts only.

1 Like
3

Thanks for reply. :slight_smile:

In case of liquidity, I thought Nifty 50 is having high liquidity for all strike price.

If we consider liquidity, how could I know apr 10050ce is liquid contract?

4

Normally, the strike prices close to the underlying would be active. You can check from NSE website -

https://www.nseindia.com/live_market/dynaContent/live_watch/option_chain/optionKeys.jsp?symbolCode=-10006&symbol=NIFTY&symbol=NIFTY&instrument=-&date=-&segmentLink=17&symbolCount=2&segmentLink=17

This page gives information about both CE & PE Nifty options. End of the day, you could check the total volumes traded in each of the options! Hope this is helpful.

5

Okay. Thanks for reply. Now I understand about liquidity.

But now I am confused about my first query. If am able to buy a contract at a specific strike price (nifty50 option), should I be worrying about liquidity

6

Follow few basic rules like selecting current month contract only during first couple of weeks of the month, select within 5 to 6 above and below strikes only, check if any activity(volume) is happening or not, said that all mentioned points are just basic but decent to start with and as time goes markets will teach you everything.

7

Thanks Siva. I have been trading option for last 4 weeks using strategy you mentioned, but mostly intraday. Few overnight positions cost me loss of 15k. But it’s been interesting journey so far with options. Just wanted to experiment with next month contract.