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
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.
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:
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
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
4)TAKE YOU TIME AND LEARN OPTIONS
5)what i told above was from delivery stand point only and not intraday
Yes profit raise as the price of the underlying increases but at the same time there are many factors which affects options price
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
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
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