I am bearish on a stock. Can i write call options instead of buying put options and carry forward the next day. Assuming the fact that option premium will always decrease with each passing day as time to expiry nears.
Yes you can write call options, you have the advantage of time decay. Only thing you gotta remember is you are writing, that means someone is buying the option contract by you. The profit to you is limited to a maximum of the premium you get from the buyer. But the maximum loss is unlimited. Recommended you go through sensibull.com. a platform for options trading from Zerodha. You can also go through their YouTube channel for more
Thanks for your reply.
One more doubt, Can i square off the margin before the expiry and exit the positions when i am profitable. I know that profit is minimum but i am actually ok with it.
yes you can
You can always square off your position any time till expiry irrespective of your profit/loss.
Option premium need not always decrease. If the stock price goes down, put option premium will decrease. Probably, what you want to say is that there is a time decay in option value with each passing day. Time decay will be there and that is why it is said that buy any option only if you are sure of a ‘timely’ movement in your favour. They say that 90% option sellers make money. So if you want to write option, you go ahead but I would advise against writing naked options. It is always better to buy a far off strike when you are writing options to avoid a huge loss in case stock/index moves fast against you.
Are you sure about this?
Thanks for pointing out. Not always. If the time decay is high compared to decrease due to stock price that option price can still decrease. Time decay will be high close to the expiry. But still if the price drop is quite significant like 3-4%, then put option price can increase even near expiry.