Hey guys, Happy Dussehra! If you’ve got some time, I’d very much appreciate it if you could answer these queries about shorting/selling CALL/PUT INDEX options.
While taking an options selling position, whether it’s MIS/NRML, Span & exposure margin is taken. Is this amount returned in full once a position is either squared off before expiry or the option expires OTM?
Are there any additional charges for either taking MIS/NRML positions or squaring them off? I just want to make sure there aren’t any additional charges that I need to keep in mind when I’m calculating my profit target.
Suppose I shorted a call/put at a particular premium price… On the day of expiry, the premium price of the option is higher than the premium price at which I shorted the option, but the option is still OTM.
I don’t have to worry about the increased premium price do I, I’ll still get to keep the premium because the option will still expire due to being OTM, right?
Whatever happens to ATM options on expiry? Do they not get exercised just like OTM options?
I remember reading somewhere that when you sell an option, any loss is deducted from the premium you receive first. This has me confused the most.
Suppose I sold an option and received 30,000 in premium, the market went against me and the premium for that option is now 50,000.
If I squared off the position before expiry, my profit would be 0 and my total loss would be 20,000 since I had to purchase the option at a higher premium, right?
- MIS margins are lower than NRML margins, but since all online calculators only show NRML margins, how to calculate MIS margins for options selling positions?
Sorry for such a long post, but I’m hoping the answer to these would help not only me but many others who are curious about how options selling works…