Options Trading - Am i correct? how call options work?

F&O
1

I am new to options, in learning stage,please dont mind if i am wrong,

for example if i buy nifty apr 10700 ce @10.00 premium with expiry date 26 april and nift trading at 10450

A) as nifty trading at 10450 now, i will make profits once it crosess 10700 even premium changes?
B) since premium price changes , on expiry date, if not crosses 10700, i will be in a loss of 10.00 *lot size? or premium changes to 12.00 for example, what happens now? or premuim falls to 8.00 what happens?
C) am i correct , you make profits or losses when trading intraday of apr 10700 ce if premium go down or up when selling on the same day? and what if in intraday if nifty trades above 10700? how does your profit calculates , is it change of premium of up and downs? or since it crosess 10700 on the same day , difference of 10700-10450(spot price during buying call option) calculates?
D) what are exits for above call option buying?

please help

2

Options can be traded like any stock, i.e., you can buy and sell the premiums at any time until the expiry of the option happens. The target price and the underlying price comes into picture on the expiry day. If the underlying is above the target price at expiry, you will be paid by the exchange (difference of target price and underlying price) else the option goes waste i.e., the option premium in full is gone. Hope I have clarified you.

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3

you profit or loss is the difference between exit - break-even (break-even=entry+charges) in any segment.

you just have to study and be experienced in how prices moves up and down.

you can exit anything anytime you want, in derivatives till expiry anytime you can exit.

4

Thanks for reply sir, I guess i understood,i have an example,

as of now nifty is trending at 10500 , and i bought call option of 10700 at 10 premium price,

A) before expiry, if want to sell it, i will make profits/loss only based on premium price, even if it crosess 10700 or trading around 10600 on the same day ?
B) On expiry day, can i still sell based on scenario A, or if i wait till expiry, then target price and underlying price comes into picture irrespective premium ups and downs

am i correct??

5

Thank you replying, It means it only based on premium prices to make profits or losses?

6

Yes, on expiry day, you can do scenario A until 3.30pm and the underlying/target picture comes in after 3.30pm

7

okay sir, i have an another question, how premiums works and decided on normal days, is it just like individual stock prices? thank you in advance

8

Premium pricing is not straight-forward like stock prices, there a 2 unique factors which decide the prices along with the 3rd already known factor i.e., the supply and demand.

The 2 unique factors are volatility and time left for contract expiry. These are called the Option Greeks, To simplify the Option Greeks, there is a formula for Option Premium pricing called the Black & Scholes Formula.

For details you have to go through the Zerodha Varsity (Options section).

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9

actually, yes but you need to see what factors determine premium ( demand and supply in underlying and some in derivatives also )

10

Sir,is option price we see in the terminal and option premium as people say are same?

11

Yes, option price & option premium are synonyms. However, there is another price called strike price for every option.

12

Dear sir im very clear about strike price but my doubt is only the trading price of the option and the premium because when i see for margin requirement in zerodha calcukar for option selling the premium is showing as 200 rupees but in terminal it is trading at 20 rupees that is why confused…