Hey guys, finally decided to learn options trading, but I feel like I’ve hit a wall that’s making me reconsider my decision; break even point. I’ve just begun learning, so there can be mistakes in the question itself, but I’ll try to frame it to the best of my ability:
Taking SBI as an example, the main stock closed at 363.20. I think the price of the stock will go up tomorrow, and as per the options chain on this site https://www.nseindia.com/live_market/dynaContent/live_watch/option_chain/optionKeys.jsp?symbolCode=238&symbol=SBIN&symbol=SBIN&instrument=OPTSTK&date=-&segmentLink=17&segmentLink=17 , the closest option to the 363.20 price is the 25th July 365 option, the “ask price" premium for which is 5.80. Assume I bought this call before market closing.
The next day, the main stock opens 60 paisa above the 363.20 price, wouldn’t the 5.80 call appreciate in value? Is there ANY way the call could be worth less than what I paid for it? Because if not, I’m unable to understand how “break even point" applies to me.
Since I’m only trading this call and not going to be the one who’ll exercise this contract on the 25th of July, if the call is worth, let’s say, 5.95 tomorrow, couldn’t I just sell it and make back the 5.80 premium and book the 15 paisa profit? Is there something I’m missing here?