When i check in zerodha margin calculator the premium receivable shows is around 200 rupees but in temeinal the option trading is 20 means when i sell i will get 200x75 or 20x75 ?
When you short an option you get " Price you sold * quantity " as a credit.
If that option is expired out of money you can keep complete premium.
If option expired In the money you have to pay back the difference.
Options are dangerous instruments with out knowing how to use. First study about the risks involved.
Yeah sure i will learn first,so as per what you said the terminal price is the price correct? And option selling/ shortig means option writing?
Yes. You are correct
One final question is that why margin requirement is 51k ???While option buying margin is very less
Option buying has limited risk. Which you have paid.
Option writing will have unlimited risk. If underlying price shoot out of your option strike and continue the rally. To bear the unlimited risk more margin will be blocked.
Simple thing, when you buy something, your max risk is the price.
Lets say I bought Nifty 9000 PE for 2 Rs premium (2*75) in April since I thought market will fall more.
Max risk for me is if premium falls to zero (as Nifty went up to 10500), so 2 rs is my risk. So when i buy the PE option that 2*75 deducted from my account.
FOR SELLER - He sold at 2 Rs premium. But his risk is unlimited. Lets say Nifty fell to 5000 in April due to some war. Then Nifty 9000 PE would trade around 4000 Rs. So sellers have undefined amount of risk.
So they usually pay margin which is higher and calculated based on Zerodha calculator.
I can understand but think what are there chances of wars?and does such situations happend ever before where the option sellers have suffered just curious know before hand
@Speculator when options expire in the money but is not exercised by the buyer due to higher STT, what happens should the option seller still pay back the difference? To whom do these monies go to?
I can remember of May 2009, where Nifty showed two upper circuits on Congress getting elected. Lot of people must have bought and sold options just before elections.
21% rise in Nifty in one day, think what would happen to the call writers
I am not much knowledgeble person in options. Those are very big subject.
I feel very afraid even to trade them. I saw premium get eroded.
Even option writing also very dangerous in my view . Even if we wrong for 1 time out of 10 we may loose entire profit.
@nithin, could you clarify my query please.
Call writers were not aware that the election results are around the corner???
Yes option writing can be done by only those who have the leaked exam papers LOL. Option buying is done by people who put less at the table and expect to become millionaires overnight.
So basically option writing by operators who mint money, and option buying by retailers who give donation to FIIs and operators.
I think there were both sets of people those who believed markets could crash more or rise.
Since 2008 was big crash, and until the elections, there was no clear government being formed, lot of retailers (newbies) were still in “bear” mindset. Even April 2018 you see how operators fooled retailers. All retailers were short on futures thinking markets will fall more.
Finally in election, govt was formed, and since stability at the Centre is seen positively, markets went twice upper circuits.
Problem is once market crash badly, lot of people go in depression mindset and feel it will never recover, that is the reason why people sold their stocks at loss in 2008. Even now if markets crash to Nifty 5000 now, half retailers will run to Fixed deposits and never come to stock markets until Nifty reaches 8000 minimum.
So they will miss out the 3000 point run, this is all psychology.
It seems there is not way earn money i tried all and as a last resort before leaving the trading i wanted to try in option selling.that too seems not good,do you know how to earn well without studying a CA,Top MBA and having Huge capital business and Top engineering degrees??
Check this thread
Nithin ji what are the ways to earn atleast 50lakhs per month ?if im wrong im sorry to ask this ,u keep inspiring us always,zerodha is my 1st broker and i have only one broker and i will stick with them always,money gives good control in life i struggled a lot pls help