Option buying profit and Loss

Trading
1

Currnt market price: 1000 on day 1

Buying call option for 1100 at Rs. 10

Currnt market price: 970 on day 10, but premium is Rs. 12.

If I close the trade now, will I get Rs. 2 (12-10) as profit or loss of Rs. 10 since the CNP is below the strike price.

2

You will get profit of 2

3

Thank you

4

Hi,

If the premium of a 1100 call after 10 days and a 30 point drop in CMP of underlying stock/instrument is still Rs.12 then yes you can book a profit of Rs.2.

But the likelihood of that happening is very slim.

  • Firstly you say there is a 10 day gap between you buy and today and there will be Time value decay(or Theta decay) that drive the premium down as it approaches its expiry.
  • Secondly, There is a drop of 30 points in the market price which drives the premiums lower (delta drop)

Options Premiums almost instantaneously get adjusted to reflect the changes in the market price and other factors that drive the premiums. So the premium in your example will be in all likelihood be lower than Rs.10

However, in spite of the above reasons the premium can still increase primarily because of the IV, so your scenario is also possible, but less likely.

And if you are not familiar with any of these concepts, please be aware that you are running a significant amount of risk trading options.

Best of luck!

5

Thank you

1 Like
6

U are very luck under profits even after 10 days
Don’t trade options with out proper knowledge of call & put options
Greeks - delta -gama- theta - Vega which has implications on your premium value
Pls take guidance with some trainer before trading options boss

7

Thank you