iCharts Discussions

[asarkar04]

Please let me know which is the actual process of calculating profit in Option excluding brokerage. If I am wrong in both, pls let me know the correct one.

1. Profit = (Price of Underlying - Strike Price of Long Call - Premium Paid) x lot size

or

2.Profit = (Revised premium value at a particular strike price - Premium Paid at that strike price ) x lot size


For example:

Bought 4800 call @ 155
sold 4800 call @ 250

1: Profit= (5013-4800-155) x 50
or
2: Profit=(250-155) x 50



Thanks
Amit

[ConMan]

Bought 4800 call @ 155
sold 4800 call @ 250

1: Profit= (5013-4800-155) x 50
or
2: Profit=(250-155) x 50


Dear Amit

Because you have bought & sold the 4800 CE.... you have to use the profit calculation as per calculation 2...so your net profit is =95*50

regards

QGM

[asarkar04]

Thanks Murugun. I will appreciate if you kindly tell me following 2 things.

1. When to apply calculation 1 for profit .

2. In many documents I am reading 1 idea: like- CMP 40. Buy 1 lot call @ 2 at strike rate 40. Suppose lot size 100. So invested 200. Price moves upward. Go to 50. so profit (50-40)*100 - 200=800. Is it true? or am i doing any mistake?

Thanks

Amit

[ConMan]

Sarkar Sir

1. You can apply calculation 1 when you allow your option to expire on the settlement day.

2. Whenever you buy In The Money call or At the Money call, the price of the option tends to move exactly like the price of the underlying.

So if the CMP is 40 & you buy a call of 40@2, if the CMP after 3 days is 50, your call will be worth Rs.10.

[asarkar04]

Thanks a lot Murugun Sir.

Amit