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what is meant by squaring off an option? |
makarandsathe
White Belt
Joined: 25 Jul 2011
Posts: 6
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Post: #1  Posted: Wed Sep 28, 2011 9:03 pm Post subject: what is meant by squaring off an option? |
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I sold a call option for say 10 Rs (premium). Now if the stock price goes up (i fear it will cross the strike price) but the premium has gone down (to 5 rs.) now, then what should be done -
1. square off the option? (would it be profit or loss?)
2. cover the price rise by buying futures?
3. Buy the stock in cash so as to sell later in case price crosses the strike price?
Please let me know.
Thanks
Makarand Sathe |
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rk_a2003
Black Belt
Joined: 21 Jan 2010
Posts: 2734
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| Post: #2 Posted: Wed Sep 28, 2011 9:33 pm Post subject: Re: what is meant by squaring off an option? |
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You sold it at 10 and now you can buy it at 5 . Then buy it .
You are in 5 profit.
It's a simple math. why do you ask so many questions?!
It appears that you are not aware of basics of options.
It's equivalent to playing with fire- operating some thing without proper knowledge, especially in stock market.
I am sorry to say this.
makarands
athe wrote: | I sold a call option for say 10 Rs (premium). Now if the stock price goes up (i fear it will cross the strike price) but the premium has gone down (to 5 rs.) now, then what should be done -
1. square off the option? (would it be profit or loss?)
2. cover the price rise by buying futures?
3. Buy the stock in cash so as to sell later in case price crosses the strike price?
Please let me know.
Thanks
Makarand Sathe |
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makarandsathe
White Belt
Joined: 25 Jul 2011
Posts: 6
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| Post: #3 Posted: Wed Sep 28, 2011 9:43 pm Post subject: Re: what is meant by squaring off an option? |
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Sorry unknown friend, but it was an hypothetical example. I surely wouldn't risk burning my fingers unless i have the knowledge.
Thanks for the reply.
| rk_a2003 wrote: | You sold it at 10 and now you can buy it at 5 . Then buy it .
You are in 5 profit.
It's a simple math. why do you ask so many questions?!
It appears that you are not aware of basics of options.
It's equivalent to playing with fire- operating some thing without proper knowledge, especially in stock market.
I am sorry to say this.
makarands
athe wrote: | I sold a call option for say 10 Rs (premium). Now if the stock price goes up (i fear it will cross the strike price) but the premium has gone down (to 5 rs.) now, then what should be done -
1. square off the option? (would it be profit or loss?)
2. cover the price rise by buying futures?
3. Buy the stock in cash so as to sell later in case price crosses the strike price?
Please let me know.
Thanks
Makarand Sathe |
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pkholla
Black Belt
Joined: 04 Nov 2010
Posts: 2890
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| Post: #4 Posted: Thu Sep 29, 2011 3:21 pm Post subject: |
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Makarand seth:If u r serious then go to Infibeam/ Flipkart and buy Bill Johnson: Options 101 (Pub by Options Univ USA) & costs around Rs 1000. It is written by a trader on NYSE and covers EVERYTHING from basics to advanced fundas like straddle, strangle etc. Then you need not ask so many q's: Prakash Holla
Last edited by pkholla on Fri Sep 30, 2011 1:51 pm; edited 1 time in total |
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vinay28
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Joined: 24 Dec 2010
Posts: 11748
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| Post: #5 Posted: Thu Sep 29, 2011 9:30 pm Post subject: |
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| A suggestion pkholla. Please don't refer to any community even if you know makarand personally. Remember this is a public forum |
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pkholla
Black Belt
Joined: 04 Nov 2010
Posts: 2890
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| Post: #6 Posted: Fri Sep 30, 2011 12:42 pm Post subject: |
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vinay28:
U are right. I meant no DISRESPECT. Still I am sorry and would like to apologise for the error
Sorry, Makarand!
Thanks Vinay for giving the tip
Prakash Holla
Last edited by pkholla on Fri Sep 30, 2011 1:53 pm; edited 1 time in total |
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vinay28
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Joined: 24 Dec 2010
Posts: 11748
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| Post: #7 Posted: Fri Sep 30, 2011 12:55 pm Post subject: |
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| Thanks Prakash. I am sure Makarand takes this apology with grace. |
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makarandsathe
White Belt
Joined: 25 Jul 2011
Posts: 6
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| Post: #8 Posted: Sat Oct 01, 2011 10:46 pm Post subject: |
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Hi Prakash
I really didn't take it seriously as I don't know you or at least am not remembering if we have met.
Thanks for your references of the book. I shall surely look for it.
regards
makarand
| pkholla wrote: |
vinay28:
U are right. I meant no DISRESPECT. Still I am sorry and would like to apologise for the error
Sorry, Makarand!
Thanks Vinay for giving the tip
Prakash Holla |
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pkholla
Black Belt
Joined: 04 Nov 2010
Posts: 2890
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| Post: #9 Posted: Sun Oct 02, 2011 10:44 am Post subject: |
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Hi Makarand,
Thanks for taking it most sportingly. I shall certainly avoid such comments in future! I want to clarify that I havent met you. Sorry once again. Prakash |
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