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apka
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Joined: 13 Dec 2011
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Post: #4801  Posted: Tue Aug 28, 2012 9:52 pm Post subject: |
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| saumya12 wrote: |
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 |
The question is for Vinay, but I love options and I guess Vinay wouldn't mind me replying.
1. In the money means if spot is above the strike price call you have bought, or spot is below the strike price put you have bought. incase of 5400, it will be 0 for both 5400pe and 5400ce because it is at breakeven. At 5403 and 5405 you will get value 3 or 5 respectively. (Brokerage, stt, etc. will be additional cost to the price u get at expiry).
2. I have done the same. I had once bought 5100ce and 5200pe (nifty was near 5180 or so), so both were the in the money. My qty was 1000 for each call and put (so 20 lots each side). I saw the opportunity that both call + put value was coming @ 91 whereas 5200-5100 difference is 100. So, I was getting the total value @ Rs.91000/-. And I thought if it expires in between I will get Rs.100000/- in return if it expires in between or more even if it expires above 5200.
However, I came to know that if you let in the money calls/puts expire then you get charged STT what is charged on value of equities you buy. So, 5180*0.125%*2000qty... Now this STT charge has been revised to 0.100 for delivery of equities or in the money options that you let expire.
My STT cost came at between Rs.12000-13000... while I was excited to get call and put in total 9 points discount, I understood why they were in discount, nobody wishes to buy and carry them over because of the high STT charges.
It roughly comes to about Rs.360-400 per lot option which expires in the money. Otherwise before expiry if you sell buy the cost of STT is 10 times lower.
3. Didnt get your 3rd question... |
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saumya12
Brown Belt
Joined: 21 Dec 2011
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| Post: #4802 Posted: Tue Aug 28, 2012 11:00 pm Post subject: |
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| apka wrote: | | saumya12 wrote: |
3. What is the procedure to exercise option. Is it to sell (cover) the option in this case or something else.
Thanks |
3. Didnt get your 3rd question... |
Thanks apka for the detailed reply as I want. You just make my concept clear about options.
Regarding 3rd question I change it as,
3. When we do not let the option to expire because being 'in the money' then how to deal with it.
I think it is simply to sell for a buy position as and when it become 'in the money' before expiry and for this we have to look/wait till end on the expiry day, if we have an open position till end. Am I right in my opinion.
Thanks |
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apka
Black Belt
Joined: 13 Dec 2011
Posts: 6137
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| Post: #4803 Posted: Tue Aug 28, 2012 11:16 pm Post subject: |
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| saumya12 wrote: | | apka wrote: | | saumya12 wrote: |
3. What is the procedure to exercise option. Is it to sell (cover) the option in this case or something else.
Thanks |
3. Didnt get your 3rd question... |
Thanks apka for the detailed reply as I want. You just make my concept clear about options.
Regarding 3rd question I change it as,
3. When we do not let the option to expire because being 'in the money' then how to deal with it.
I think it is simply to sell for a buy position as and when it become 'in the money' before expiry and for this we have to look/wait till end on the expiry day, if we have an open position till end. Am I right in my opinion.
Thanks |
good question, u mean how r options useful for earning as a strategy. Options run on premium based on 2 factors a) VIX - how much up down volity is going on b) no. Of days remaining for expiry.
Today LT 1350pe when LT opened near 1390 had a low price of about 2.7, citing 2 days remaining for expiry this is nrml. Had it been 1st aug, it may have been near 30. Why this much premium cuz LT can give that much movement in 20 trading sessions, its for u to chose call or put. Sometimes writers are smart, for both call n put total they not allow u to earm beyond that total.
Today 1350pe went from 2.7 to 9+, fall was near 40 points in LT. So options is about timing a rise or fall or hedging ur position. Or simply for gamvling id u invested 25k in 1350pe @ 3.. Then @ 9 it woud become 75k and accordimgly if LT rose it could goto 0.5 or expire worthless, i.e. Our of the money. |
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apka
Black Belt
Joined: 13 Dec 2011
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| Post: #4804 Posted: Tue Aug 28, 2012 11:22 pm Post subject: |
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there are more than 200 scrips in fno, but very few have liquidility in optios - means ver few with 0.05 - 0.20 paisa difference between buyers n sellers.
Keep a scrip like jpassociat, sbin, lt, tatamorors most liquid scrips or any of ur fav stock option on ur screen along with its fut n spot price and see the movement for the entire month. U will see how premium rises and falls as day pass. |
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saumya12
Brown Belt
Joined: 21 Dec 2011
Posts: 1509
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| Post: #4805 Posted: Wed Aug 29, 2012 12:01 am Post subject: |
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Thanks apka for the knowledge you provide.
Will ask you, if I have any query about Options.
Thanks |
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vinay28
Black Belt
Joined: 24 Dec 2010
Posts: 11748
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| Post: #4806 Posted: Wed Aug 29, 2012 8:26 am Post subject: |
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thank you apka. Saumya, 5405 was just an example. When underlying price is above the exercise price your call is "in the money" or if it is lower, your put is "in the money".
Forget about expiry for the moment. The option price comprises intrinsic value and time value e.g. when NF is 5405 at the beginning of a month 5400CE may be 100 or much more depending upon sentiment while on the day of expiry it will be probably 5 or may be slightly less. 5405-5400=5 is the intrinsic value and that doesn't die with time. A lot of good traders therefore only buy "in the money" options to avoid this time decay in value. |
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doctorshah
White Belt
Joined: 24 Jul 2011
Posts: 95
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| Post: #4807 Posted: Wed Aug 29, 2012 8:45 am Post subject: |
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Vinay
The problem of buying In the money options is that they require large investment esp at the start of the month and second problem is if the trade goes against you the decrease in value of options is large |
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saumya12
Brown Belt
Joined: 21 Dec 2011
Posts: 1509
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| Post: #4808 Posted: Wed Aug 29, 2012 9:19 am Post subject: |
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| vinay28 wrote: | thank you apka. Saumya, 5405 was just an example. When underlying price is above the exercise price your call is "in the money" or if it is lower, your put is "in the money".
Forget about expiry for the moment. The option price comprises intrinsic value and time value e.g. when NF is 5405 at the beginning of a month 5400CE may be 100 or much more depending upon sentiment while on the day of expiry it will be probably 5 or may be slightly less. 5405-5400=5 is the intrinsic value and that doesn't die with time. A lot of good traders therefore only buy "in the money" options to avoid this time decay in value. |
Thank Vinay, for the clarification.
Yes, I understand that 5405 is just an example.
The underlying price is Nifty Spot or Nifty Future.
I have yet to learn a lot with your help, friends.
Thanks |
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psalm
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Joined: 12 Nov 2011
Posts: 5368
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| Post: #4809 Posted: Wed Aug 29, 2012 9:59 am Post subject: |
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Market is trading around 5320 levels after making a high around 5345. As I have mentioned yesterday, the low made around 5312 (yesterday's low) is crucial now. A break below 5312-5310 levels COULD push the market to 5280-5270 range or even 5240 levels. On the upside, levels around 5363 will be the first resistance above that 5386 could be tested. Current rate is around 5321. Watch out.
NOTE: I may not be online most of the time during the day, as we Keralites are celebrating ONAM, our harvest festival.... ...Hope you'll understand. |
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kishjk7551
White Belt
Joined: 26 Jan 2008
Posts: 293
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| Post: #4810 Posted: Wed Aug 29, 2012 10:03 am Post subject: |
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Wish You a very Happy Onam Sam .
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vinay28
Black Belt
Joined: 24 Dec 2010
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| Post: #4811 Posted: Wed Aug 29, 2012 10:13 am Post subject: |
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sam, very happy happy onam. As long as you are on right side of trade, you can enjoy onam.
Saumya, it's NF |
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saumya12
Brown Belt
Joined: 21 Dec 2011
Posts: 1509
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| Post: #4812 Posted: Wed Aug 29, 2012 10:16 am Post subject: |
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| Wish you a very happy Onam SAM |
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vishyvaranasi
Green Belt
Joined: 11 Jul 2011
Posts: 1159
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| Post: #4813 Posted: Wed Aug 29, 2012 12:12 pm Post subject: hi sam |
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Hi sam,
Wish u a very happy happy onam
| psalm wrote: | Market is trading around 5320 levels after making a high around 5345. As I have mentioned yesterday, the low made around 5312 (yesterday's low) is crucial now. A break below 5312-5310 levels COULD push the market to 5280-5270 range or even 5240 levels. On the upside, levels around 5363 will be the first resistance above that 5386 could be tested. Current rate is around 5321. Watch out.
NOTE: I may not be online most of the time during the day, as we Keralites are celebrating ONAM, our harvest festival.... ...Hope you'll understand. |
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SP50
Brown Belt
Joined: 26 Nov 2010
Posts: 1615
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| Post: #4814 Posted: Wed Aug 29, 2012 12:16 pm Post subject: |
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Happy Onam to everyone!!!
Wish everyone makes handsome profits today,
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apka
Black Belt
Joined: 13 Dec 2011
Posts: 6137
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| Post: #4815 Posted: Wed Aug 29, 2012 1:43 pm Post subject: |
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| SAM, I think nifty has fallen 100 points from the point u bought 5400pe sept.. how much value addition (points) has 5400pe sept given in return to the fall? |
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