I WANT TO TAKE CALL POSITION IN NIFTY.
Strike prices = 10000.
In screenshot This 112 is Premium Price?
Can anyone Explain this? HOW PROFIT & LOSS WILL BE CALCULATED?
First you should read this module https://zerodha.com/varsity/module/option-theory/
Already done. @Scalping_Trader If you can explain me this. It will be very helpful for me.
If you have already read that module I wonder why are you asking this question?
The answer to your question- (assuming that market is open) if you buy 10000 CE at LTP i.e 112 and Nifty is trading at 9974 and now I hope you know that when you buy CE’s you are bullish on the underlying in this case which is Nifty.
So if Nifty reaches 10000 this 10000 CE should be trading at 140-160(approximately). You can book your profits intraday by selling at this price and your profits for 1 lot will be 75*(150-112) = 2850.
Now if you plan to hold this till expiry then for you to be profitable Nifty should close on expiry at 10150(approx).
I hope this answers your query.
hey @harshendrasingh Just Learning…
So, what will happen if NIFTY Will not reach 10000?
So if Nifty reaches 9990 this 10000 CE should be trading at 125-130 (approximately). You can book your profits intraday by selling at this price and your profits for 1 lot will be 75*(130-112) = 1350.
It will work like this?
yes it will work like this
@harshendrasingh Thank you.
Lets Talk about Loss.
So if Nifty reaches 9550 this 10000 CE should be trading at 95-100(approximately). You can book your loss intraday by selling at this price and your Loss for 1 lot will be 75*(95-112) = -1257.
It will work like this?
yo man P/L for options is dependent on the movement of price just like trading in stocks but the prices of options follow underlying and there are some other factors too which are options geeks. But for intraday you can ignore them except for expiry week.
In Module I learned that Loss in Options are Limited? can you explain me how?
The loss in options is limited when you are buying options, this is because the maximum you lose is the option premium which you paid for.This will happen when the price of the underlying is less than the strike price of the option you bought by expiry.On the other hand, you can have unlimited losses(unless you have manual stop losses every day) when you are shorting the option, because the value of the premium can increase to any extent as and when the underlying increases.Hope this is clear.All of this is explained very clear with examples by @Karthik sir in the options module.
Okay, Thank you for your explanation and Valuable Time. @harshendrasingh & @sudheer_kumar.
Same goes with stocks whenever you buy something the maximum you can loose is the capital you have invested and you profits are unlimited one bagger two bgger ten bagger and so on…
But when you short something your risks are unlimited and your profits are limited.
Options trading is a double sided sword , it is better getting experience in buying/selling stocks and then one can consider Derivatives, at present Nifty is in a Danger zone
Is Intraday trading allowed in options? Isn’t you are supposed to exercise your right/trade on expiry day only?
(Somewhere i read American model of option trading is discontinued, now its all European model)
PS: I am new to options, with no practical experience
Yes intraday trading is allowed. For details visit Options module on varsity here.