I have read for sufficiently long time but still did not get clarity. Please clarify my doubt in the following live situation.
SBIN Spot :297.45
SBIN dec 230 PE : 0.10 and there is a buyer at 0.05.
Assumed SBI price on 27th Dec 2018 (Expiry day) : 280
Now if I short it at 5 paisa, and don’t square off, what will be my profit or loss? I checked on the zerodha calculator giving buy price as 0 and sell price 5 paisa and it shows a profit of Rs.126/-. Will I get this profit or is there a catch? Someone please let me know what exactly does it mean when we say that the option expired worthless if the spot price is way above the strike price at which the put option has been sold. Thanks in advance. It is not worth the effort because the return is just over 5% assuming that there is no calamity occurring before expiry.
what if there is some black swan event and price drops to 200 rupees … u will lose like 20k INR , your wish to take risk , it wont happen but still , if there is SL market option u can try , still not worth it… and there is buyer because , u can see price went to 0.15 paise yesterday … so buyer makes double profit rarely
i am not that expert. My intention in writing the option is to get the premium in most cases. And buy the underlying in case the spot price falls. That is the reason I quoted SBIN and not a small or little known company. I mean if I was prepared to buy SBI at 250/-, it does not matter to me even if it fell to 150 because my assumption is that it will come back to 300 again.