Options Premium

I am observing that at the starting of the month, the premium is very high for writing options. And at or near to expiry, the premium will be very low.

If I take short at the starting of the month and I cover at middle or end of the month, when the premium will be very low (in comparison), I would get profits.

Can I know what is the risk associated with above strategy?

(If there is no risk, every one would have adopted. I thought about it but I couldn’t get the answer for the risk associated with it)

If you have taken the position in right direction, then you will be in profits else you need to maintain strict SL. As playing with options is like using the two sided knife. Also you need more amount for shorting options which can be more than 10 times the value of option. If you use cover orders it will be less risky but these are good for intraday trading :slight_smile:

1 Like

Yes Direction is very important and if you not in the right direction you will loose a lot of money, In Option writing you would know profits are limited and loss's are unlimited, Margins will be more to sell firstly after that maintaining them throughout till the expiry would be a tough task.



Hi Athvik,

Your observation is very much right. Options trade at a high premium at the start of the expiry and as time passes by, the premium decreases. 

As an option seller, it is very essential to analyze the right levels technically as it is an unlimited risk trade. Also,to initiate an option short trade you will require margin equivalent to Futures. For example, If ITC futures requires, 40,000/- margin same is the case with shorting ITC CE/PE. Now, if you short ITC 320 PE at 5.00 and the stock moves in opposite direction, and expires at lets say, 380.

Your total loss will be =(380-320)*1000=60,000 /-  and it be any amount if the stocks keeps on increasing.

On the other hand, options buying are low risk trade as only the premium you pay is the total MAXIMUM loss. You may check out this article to know the details of options shorting versus options buying:


Drop in a comment for more details on options shorting.

Dear Sir?Madam i had a query please help me.

When infratel was 168.70 Premium was 9.40 for INFRATEL MAY 180CE.

Now Infratel is at 173.50 but Premium is showing 9.20. How is this?

If it reach strike price within expire .Is it increase premium

if it reach strike price within expiry how much would be my profit. i though premium will raise till 12.45 if it reach premium initially paid amount will deduct or with initial premium also count as profit?


madam pls learn option you will only profit when
infratel goes above -180+9.40=189.40 ,other wise you will lose money as time passes,you are buyer of the option so you have negative theta.
seller of the option earns money if infratel goes above the said price until then he earns profit

Thank you sir answer the query?

Sir im not trade its for intraday. I hold it till expiry. if infratel reach 179 what happens? if premium raise 9.40 to 10.50, how much profit can i book?

sir lot size was 2000*9.25=18500 if it not reach strike price within expiry what is the my loss 18500 or more than this?

1 ) loss will be 18500 ONLY
2)Once the price of infratel goes to above 189.40 you will start to earn profit -say if price goes to 194 your profit will be 4.6*2000=9200
3)if you are new to option i would suggest hedging the bought option by selling the option,you will limit max profit but at the same time will limit the loss
5)what i told above was from delivery stand point only and not intraday

OK Sir

I saw in many youtube videos, They are showing profit once premium raise. premuim wiil raise from 9.50 to 10.50 like below example
9.502000= 19000
2000= 21000
profit 2000 in position

You should check out Zerodha ‘Varsity’ app.

i need answer from experts in option i know lot of website like versity. please you quite here. IRA sir will anwer. For put link here for question not required adviser like you

Yes profit raise as the price of the underlying increases but at the same time there are many factors which affects options price

  1. dte-as time reduces price also decreases eg say you need to travel 1000 km in 10 days so avg you need to travel 100km per day if you don’t travel that much your probability also decreases to reach the destination
    2)as you said many YouTube video says option price increase but these price increases only according to delta of the option say the option you bought was having delta of 30 if the price of Infratel increases by 10 rs your option price will only increase by 3 rs and theta will reduce profit also day by day
    3)for delivery of option buying these are main cons these youtubers will lure you and notice mostly they will entice you to go for intraday in option that is why 90 % option buyers loose money
  2. if you are confident price of the underlying will go in your direction buy itm but again mostly the cost of the option you buy will be same as buying future
  3. if you are lucky enough you can make money I am not denying it,esp stocks are operator driven and they are the people who have sold the option in 1 price and have huge money to make sure it does not go itm and even if it goes they hedge the option they have sold or they have the stock the portfolio

IRA Sir, we have to trade base on premium price or Strike Price

Sir If premium hikes 9.20 to 10.20 Can we book profit?

or we have to wait stock cross strike price + Premium price initially paid?

You can always book profit y not
You have got approx 10% return on capital