understanding of selling option contract OTM

Hello friends,

I am new to trading, I would like to see if my understanding is correct or not with respect to selling of option contract
Please guide me

I am referring to Ashokley FEB 85 CE OTM with price of 1.80 RS(1 lot= 8000) when I sell this contract what will be the premium received??

Is it (8000×1.8=14400) RS credited to my account??

As time goes by if premium increase to 2 RS then my premium will be cutdown by (2-1.8)*8000=4000 RS
I that case my premium will be (14400-4000=9600) rupees

Is my understanding correct??

Please guide me…

If ur sold option price reaches Rs.2, then you r in loss of Rs.1,600. (16000 - 14400).

Suggest you to read varsity options before trading in options.

1 Like