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pkholla
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Joined: 04 Nov 2010
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Post: #4786  Posted: Tue Aug 28, 2012 2:41 pm Post subject: |
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saumya12 see 1234!:
1) If u buy 5200 call for say Rs 100 then that's all u invest, ever. Even if NF expires at 5190 and call is worthless, all u lose is max Rs 100 (loss always<= invst), OK? Profit may be high eg NF expiry 5900 means u earn 700-100=600 profit
2) But if u sell option then loss may be limitless. Eg if u sell 5500 put at NF 5490 for Rs 50 (incl. time value), market crashes to 5100 at expiry then your loss is Rs 400-50 = 350 per share. OK? Here profit always limited to <yr investment of Rs 50!!!
3) Try to buy excellent book (only 1st chapter avail as ebook!) Options Trading 101 by Bill Johnson. U will learn EVERYTHING from grass roots to clouds, believe me. Costs around Rs 1100 (avail on Infibeam/ Flipkart)
4) Always keep tight SL as market can run away from you. Better to square off < 1515 intraday instead of carry fwd while u learn
Best regards, Prakash Holla
Last edited by pkholla on Tue Aug 28, 2012 2:45 pm; edited 1 time in total |
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saumya12
Brown Belt
Joined: 21 Dec 2011
Posts: 1509
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| Post: #4787 Posted: Tue Aug 28, 2012 2:42 pm Post subject: |
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Thanks SAM
Confused between writing a call and selling a call.
I am trying to learn the basics of options as I found that options are a good hedge for futures at a small cost or even otherwise.
Thanks again. |
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psalm
Black Belt
Joined: 12 Nov 2011
Posts: 5368
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| Post: #4788 Posted: Tue Aug 28, 2012 2:48 pm Post subject: |
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So, 5312 has held.....now the question..will we be able to close above 5332???  |
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saumya12
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Joined: 21 Dec 2011
Posts: 1509
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| Post: #4789 Posted: Tue Aug 28, 2012 2:57 pm Post subject: |
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| pkholla wrote: | saumya12 see 1234!:
1) If u buy 5200 call for say Rs 100 then that's all u invest, ever. Even if NF expires at 5190 and call is worthless, all u lose is max Rs 100 (loss always<= invst), OK? Profit may be high eg NF expiry 5900 means u earn 700-100=600 profit
2) But if u sell option then loss may be limitless. Eg if u sell 5500 put at NF 5490 for Rs 50 (incl. time value), market crashes to 5100 at expiry then your loss is Rs 400-50 = 350 per share. OK? Here profit always limited to <yr investment of Rs 50!!!
3) Try to buy excellent book (only 1st chapter avail as ebook!) Options Trading 101 by Bill Johnson. U will learn EVERYTHING from grass roots to clouds, believe me. Costs around Rs 1100 (avail on Infibeam/ Flipkart)
4) Always keep tight SL as market can run away from you. Better to square off < 1515 intraday instead of carry fwd while u learn
Best regards, Prakash Holla |
Thanks for the explanation.
Actually, it is said that trading in options is like a sword because of limited gain and unlimited loss and one's trading account will be wiped out in minutes (I think that is in case of selling an option). So I never tried to learn options. But later on learned that it also gives limited loss and unlimited gains as in case of buying an option. Or can be used to hedge one's losses in future trading.
Am I right in my opinion.
Thanks |
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pkholla
Black Belt
Joined: 04 Nov 2010
Posts: 2890
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| Post: #4790 Posted: Tue Aug 28, 2012 3:04 pm Post subject: |
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| saumya12 wrote: | Thanks for the explanation. Actually, it is said that trading in options is like a sword because of limited gain and unlimited loss and one's trading account will be wiped out in minutes (I think that is in case of selling an option). So I never tried to learn options. But later on learned that it also gives limited loss and unlimited gains as in case of buying an option. Or can be used to hedge one's losses in future trading.
Am I right in my opinion. Thanks |
Correct. Even if u never buy/sell options many others are doing so. So at least, to understand what they r doing and how it affects u, u need to learn. OK? Buy the book, I have it. Best investment of Rs 1100 I ever made. Prakash Holla |
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psalm
Black Belt
Joined: 12 Nov 2011
Posts: 5368
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| Post: #4791 Posted: Tue Aug 28, 2012 3:10 pm Post subject: |
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| saumya12 wrote: | | pkholla wrote: | saumya12 see 1234!:
1) If u buy 5200 call for say Rs 100 then that's all u invest, ever. Even if NF expires at 5190 and call is worthless, all u lose is max Rs 100 (loss always<= invst), OK? Profit may be high eg NF expiry 5900 means u earn 700-100=600 profit
2) But if u sell option then loss may be limitless. Eg if u sell 5500 put at NF 5490 for Rs 50 (incl. time value), market crashes to 5100 at expiry then your loss is Rs 400-50 = 350 per share. OK? Here profit always limited to <yr investment of Rs 50!!!
3) Try to buy excellent book (only 1st chapter avail as ebook!) Options Trading 101 by Bill Johnson. U will learn EVERYTHING from grass roots to clouds, believe me. Costs around Rs 1100 (avail on Infibeam/ Flipkart)
4) Always keep tight SL as market can run away from you. Better to square off < 1515 intraday instead of carry fwd while u learn
Best regards, Prakash Holla |
Thanks for the explanation.
Actually, it is said that trading in options is like a sword because of limited gain and unlimited loss and one's trading account will be wiped out in minutes (I think that is in case of selling an option). So I never tried to learn options. But later on learned that it also gives limited loss and unlimited gains as in case of buying an option. Or can be used to hedge one's losses in future trading.
Am I right in my opinion.
Thanks |
Options might look pretty attractive...but there are a lot of pitfalls....so, learn them properly before trading with it....An interesting thing to remember is that "HISTORICALLY, OPTION WRITERS WINS 80% OF THE TIMES"....that means they're smarter than us, the retail traders.....By the way, Option are always handy for a trader.....there are traders who trade only using options......But trading only with option is pretty risky....unless you're an expert in that....When you buy one lot of Nifty futures, you may not lose more than 5% investment even when the market falls. However, it may not be the same with options...when you buy an option say around 50 rupees and suppose the market moved against your position...in that case it is pretty easy that the option might go to 30 or 20 or even to single digits (it happens on expiry days)...that means even though you're losing only a few rupees, in percentage terms its a huge loss....for example, when you lose 20 rupees out of an option which you bought for 50, you're losing almost 40% of your investment....thats HUGE.....thats the prob with options....
NOTE: Since the risk is pretty high, reward is also pretty high. That's why lot of traders are attracted to these instruments..... |
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psalm
Black Belt
Joined: 12 Nov 2011
Posts: 5368
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| Post: #4792 Posted: Tue Aug 28, 2012 3:11 pm Post subject: |
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| pkholla wrote: | | saumya12 wrote: | Thanks for the explanation. Actually, it is said that trading in options is like a sword because of limited gain and unlimited loss and one's trading account will be wiped out in minutes (I think that is in case of selling an option). So I never tried to learn options. But later on learned that it also gives limited loss and unlimited gains as in case of buying an option. Or can be used to hedge one's losses in future trading.
Am I right in my opinion. Thanks |
Correct. Even if u never buy/sell options many others are doing so. So at least, to understand what they r doing and how it affects u, u need to learn. OK? Buy the book, I have it. Best investment of Rs 1100 I ever made. Prakash Holla |
Good choice of words, Prakash.... |
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psalm
Black Belt
Joined: 12 Nov 2011
Posts: 5368
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| Post: #4793 Posted: Tue Aug 28, 2012 3:24 pm Post subject: |
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| 5310-5312 now assumes more significance......a break below that may force a few LONG unwinding....so, for LONGs, 5312-5310 will be a good stoploss, I believe.... |
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saumya12
Brown Belt
Joined: 21 Dec 2011
Posts: 1509
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| Post: #4794 Posted: Tue Aug 28, 2012 3:38 pm Post subject: |
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Thanks SAM
Thanks Prakash
Thanks friends for your clarification and advice.
Will first learn the basics of options and then only will trade, in buy position only, of call or put options.
You are right SAM, that it may be a small amount to lose money wise if a trade goes against you but percentage wise it is more. But you know before hand about your loss and only after that you take a position.
Thanks friends. |
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psalm
Black Belt
Joined: 12 Nov 2011
Posts: 5368
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| Post: #4795 Posted: Tue Aug 28, 2012 3:42 pm Post subject: |
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| saumya12 wrote: | Thanks SAM
Thanks Prakash
Thanks friends for your clarification and advice.
Will first learn the basics of options and then only will trade, in buy position only, of call or put options.
You are right SAM, that it may be a small amount to lose money wise if a trade goes against you but percentage wise it is more. But you know before hand about your loss and only after that you take a position.
Thanks friends. |
"IF YOU'RE BUYING OPTIONS", then yes.....risk is limited upto the price of the options....and the reward is unlimited.... at least theoretically... |
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vinay28
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Joined: 24 Dec 2010
Posts: 11748
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| Post: #4796 Posted: Tue Aug 28, 2012 4:14 pm Post subject: |
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| saumya, if you want to gamble before you learn option trading, buy 5400CE for august when it is about 3. Your total loss is then 3 (plus brokerage, etc.). Note that if NF closes at about 5405 on expiry the price may still be 3 but you MUST cover and not allow it to expire otherwise STT is very high. If NF closes below 5400, you may allow it to expire. Never allow "In the money" options to expire. |
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apka
Black Belt
Joined: 13 Dec 2011
Posts: 6137
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| Post: #4797 Posted: Tue Aug 28, 2012 7:31 pm Post subject: |
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aha a discussion about options
5500ce writers were winner this series. (2 days remain, but i doubt any1 still hoping for a expiry above 5500).
5400pe writers have given up mostly as from total OI which was standing 75 lakh few days back today stands at 40 Lkah shares with 12 lkah shares being shedded intraday.
5400ce have taken the advantage by adding 23 lakh shares intraday (ATP 7.35 today)
5300pe despite coming so close to 5300 spot, has only shedded 5 lakh shares and still OI stands at 1.05cr shares.
when we were near 5320 spot, aug series had added near 10 lakh shares and sept series had added near 32 lakh shares. EOD Aug series saw short covering (many scrips futures premium rose) and it settled with -32 lkah shares (total OI 2 cr).
Sept series added total 57 lakh shares eod and its total standing at 1.15cr shares. (Sept ATP today is 5,376.80). Yesterday also Sept series added near 20 lakh shares then ATP was near 5400)
SAM, your LT has gone down 120 points in 7 trading sessions... whats your view will it stay in control or lose more. Both LT, SBI and Bank nifty are dragging nifty down. |
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psalm
Black Belt
Joined: 12 Nov 2011
Posts: 5368
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| Post: #4798 Posted: Tue Aug 28, 2012 7:39 pm Post subject: |
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A huge miss.....US Aug consumer confidence dives to 60.6 Vs an estimate of 65.4, lowest since November 2011......it shows a bad economy....but how abt QE?...makes it inevitable???....no idea....the charts are telling me that global markets are about to dive down...but will it happen this time??...  |
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psalm
Black Belt
Joined: 12 Nov 2011
Posts: 5368
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| Post: #4799 Posted: Tue Aug 28, 2012 7:45 pm Post subject: |
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| apka wrote: | aha a discussion about options
5500ce writers were winner this series. (2 days remain, but i doubt any1 still hoping for a expiry above 5500).
5400pe writers have given up mostly as from total OI which was standing 75 lakh few days back today stands at 40 Lkah shares with 12 lkah shares being shedded intraday.
5400ce have taken the advantage by adding 23 lakh shares intraday (ATP 7.35 today)
5300pe despite coming so close to 5300 spot, has only shedded 5 lakh shares and still OI stands at 1.05cr shares.
when we were near 5320 spot, aug series had added near 10 lakh shares and sept series had added near 32 lakh shares. EOD Aug series saw short covering (many scrips futures premium rose) and it settled with -32 lkah shares (total OI 2 cr).
Sept series added total 57 lakh shares eod and its total standing at 1.15cr shares. (Sept ATP today is 5,376.80). Yesterday also Sept series added near 20 lakh shares then ATP was near 5400)
SAM, your LT has gone down 120 points in 7 trading sessions... whats your view will it stay in control or lose more. Both LT, SBI and Bank nifty are dragging nifty down. |
Apka, all that you have mentioned are looking pretty weak....LT still have a lot of downside left, I feel.....but since it is looking a bit oversold, a bounce back cannot be ruled out. BankNifty is looking really fragile.....tomorrow could be the day for SBI, if its a down day......so, expect BankNifty to go down as well....Anyway, if its an UP day tomorrow, then there is chance of some Profit booking by the SELLERs, as we're near some key support levels. However, if its a DOWN day, then it will be pretty difficult for the stocks....could see much deeper levels.... ....anyway, let's wait and see how we open tomorrow.... |
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saumya12
Brown Belt
Joined: 21 Dec 2011
Posts: 1509
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| Post: #4800 Posted: Tue Aug 28, 2012 9:32 pm Post subject: |
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| vinay28 wrote: | | saumya, if you want to gamble before you learn option trading, buy 5400CE for august when it is about 3. Your total loss is then 3 (plus brokerage, etc.). Note that if NF closes at about 5405 on expiry the price may still be 3 but you MUST cover and not allow it to expire otherwise STT is very high. If NF closes below 5400, you may allow it to expire. Never allow "In the money" options to expire. |
Thanks Vinay for the suggestion. Will certainly like to avail an opportunity to do a practical trade.
What I understand from your post is to buy Nifty 5400CE aug premium @ 3 (or 4 or 5). So the total cost for one lot will be say 4 x 50 = 200 plus expanses per lot and if NF closes less than 5400 then let the option to expire.
You said that if NF closes at about 5405 then I must cover and not allow it to expire otherwise the STT will be very high.
1. What will be the "in the money" value in this case 5400 or 5403 or 5405 or something else.
2. What is the STT value for "in the money" options eg in above case, if one let it expire, by mistake/ignorance.
3. What is the procedure to exercise option. Is it to sell (cover) the option in this case or something else.
Thanks |
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