in case of call options , how do we place stop-loss or limit orders ?
1) are they based on premium value ?
2) are they based on strike price ?
attached is a query :-
suppose i wish to sell USDINR NOVEMBER 15 CALL OPTION AT strike price = 66
premium i am to recieve is 740 .
how should i place stoploss or limit square-off order so that i get to keep 700 premium amount even after square-off ?
The SL/Limit order that you will place will be on the premium not on the Strike.
When you write an option, you collect premium and the position is still open. This premium isn’t profit till you realise it. By Realise I mean, buying back the short option and closing your position.
In order to receive a premium of Rs.700 on one contract of USDINR, you’d have to buy back the option at Rs.0.7 lower than what you sold it at. 70 paisa on 1 lot = Rs.700
The main difference between the stop-loss order used by shareholder who holds a short position and one used by a depositor with a long position is the position in which it is positioned. The individual with the long position desires to see the price of the asset increase, whereas the trader with the short position wants the value of the asset to decrease and would be unenthusiastically affected by a sharp increase. To protect against a large price increase, the short seller can use a buy-stop order, which is an order that will turn into a market order once the upper price has been reached. MMF solutions provide free comex tips for stock trading.
thank you mr.venu ,
can you guide me step by step with respect to above mentioned example itself ?
0.04 is where u buy back
