dhanvarshagrp (7/31/2010 8:10:16 AM): how was the day
Sinoj (7/31/2010 8:10:37 AM): okay Sir
dhanvarshagrp (7/31/2010 8:11:10 AM): see u r holding 1 pe short at 69.90 na
Sinoj (7/31/2010 8:11:16 AM): yes sir
Sinoj (7/31/2010 8:11:17 AM): that is right
Sinoj (7/31/2010 8:11:31 AM): i wanted to ask you a question regarding that
dhanvarshagrp (7/31/2010 8:14:14 AM): see in options if u r gaining 8 points at any time and u r obsering that rg trade atarted maro exit .....
Sinoj (7/31/2010 8:15:44 AM): now ltp is 73.50
dhanvarshagrp (7/31/2010 8:16:11 AM): see made a low of 58.55
dhanvarshagrp (7/31/2010 8:16:43 AM): easy 10 points were available
Sinoj (7/31/2010 8:16:49 AM): ok
Sinoj (7/31/2010 8:16:55 AM): so when nifty price goes down
Sinoj (7/31/2010 8:16:59 AM): the ltp will decrease
dhanvarshagrp (7/31/2010 8:17:11 AM): it will increase
dhanvarshagrp (7/31/2010 8:17:26 AM): put price will increase
Sinoj (7/31/2010 8:17:48 AM): ok..got it
dhanvarshagrp (7/31/2010 8:18:07 AM): read here http://dgrpchat.blogspot.com/
dhanvarshagrp (7/31/2010 8:20:32 AM): have u noticed our yesterdays crucial level was 5371 and nifty futures last traded price was 5371.00
Sinoj (7/31/2010 8:20:55 AM): yes
Sinoj (7/31/2010 8:22:18 AM): Sir we brought nifty 5300 strike price right
dhanvarshagrp (7/31/2010 8:22:42 AM): no we sold it
Sinoj (7/31/2010 8:22:51 AM): yes
dhanvarshagrp (7/31/2010 8:22:59 AM): we are option writer
Sinoj (7/31/2010 8:23:23 AM): we sold it and when it reaches strike price we get profit
dhanvarshagrp (7/31/2010 8:24:16 AM): no if it will move towards strike price buyer get benefited
dhanvarshagrp (7/31/2010 8:24:53 AM): it must not reach towards strike price
dhanvarshagrp (7/31/2010 8:25:21 AM): if it will move towards 5400 5500 u will earn
Sinoj (7/31/2010 8:25:38 AM): ok got it ..so this is how put sell works
dhanvarshagrp (7/31/2010 8:25:55 AM): and reverse for call
Sinoj (7/31/2010 8:25:57 AM): so when the premium goes low ..we beniefit
dhanvarshagrp (7/31/2010 8:26:09 AM): obviously
Sinoj (7/31/2010 8:26:21 AM): so lets say we got teh premium as 50
dhanvarshagrp (7/31/2010 8:26:47 AM): how u can say ??
Sinoj (7/31/2010 8:26:59 AM): so is the profit 69.9 -50 muliplied by 50
dhanvarshagrp (7/31/2010 8:27:26 AM): i m not getting u ?
Sinoj (7/31/2010 8:27:34 AM): i am trying to calculate the profit
Sinoj (7/31/2010 8:27:46 AM): i dont know how profit is caluclated in options
dhanvarshagrp (7/31/2010 8:28:07 AM): see we sold at 69.90
dhanvarshagrp (7/31/2010 8:28:11 AM): ok
Sinoj (7/31/2010 8:28:13 AM): right
Sinoj (7/31/2010 8:28:33 AM): just to get a feel for comparison of futures and options
dhanvarshagrp (7/31/2010 8:28:47 AM): if till expiry mkt will stay above 5300
Sinoj (7/31/2010 8:29:09 AM): then i lose the premium
Sinoj (7/31/2010 8:29:26 AM): 69.9 multiplied by 50
dhanvarshagrp (7/31/2010 8:29:31 AM): you wont loose buyer will loose
dhanvarshagrp (7/31/2010 8:29:48 AM): you are seller
Sinoj (7/31/2010 8:29:53 AM): ok now i got it
dhanvarshagrp (7/31/2010 8:30:25 AM): you have sold a right to sell nifty at 5300
dhanvarshagrp (7/31/2010 8:31:20 AM): so any time buyer will take ur nifty @5300
dhanvarshagrp (7/31/2010 8:31:48 AM): correction
dhanvarshagrp (7/31/2010 8:32:12 AM): u will have to buy nifty @ 5300
Sinoj (7/31/2010 8:33:34 AM): so if buyer buys it at 5300 then we lose our premiumn
dhanvarshagrp (7/31/2010 8:33:55 AM): so if nifty is above 5300 no one will give u his nifty
Sinoj (7/31/2010 8:34:12 AM): ok
Sinoj (7/31/2010 8:34:26 AM): now lets say nifty is above 5300
Sinoj (7/31/2010 8:34:39 AM): and ltp is 72
Sinoj (7/31/2010 8:34:43 AM): in that case what happens
dhanvarshagrp (7/31/2010 8:35:05 AM): so premium price will be 0.05 paisa at expiry
Sinoj (7/31/2010 8:35:41 AM): how did we arrive at 0.05
dhanvarshagrp (7/31/2010 8:36:14 AM): see yesterday i told u all that it was at 66 at 5400
dhanvarshagrp (7/31/2010 8:36:43 AM): in any future date
dhanvarshagrp (7/31/2010 8:36:57 AM): if nifty will trade at 5400
dhanvarshagrp (7/31/2010 8:37:16 AM): pe 5300 will never toch 66
dhanvarshagrp (7/31/2010 8:38:17 AM): coz time decay interest rest and many more factors reducing option prces
Sinoj (7/31/2010 8:39:03 AM): so 0.05 is basically the brokerage
Sinoj (7/31/2010 8:39:05 AM): for the trade
dhanvarshagrp (7/31/2010 8:39:55 AM): no
dhanvarshagrp (7/31/2010 8:40:15 AM): it is min price which can be traded
Sinoj (7/31/2010 8:40:22 AM): oh ok
dhanvarshagrp (7/31/2010 8:40:26 AM): read this
dhanvarshagrp (7/31/2010 8:40:28 AM): http://dhanvarshagrp.blogspot.com/2010/06/optionsyou-must-know-about-time-decay.html
Sinoj (7/31/2010 8:51:54 AM): ok sir read the article
Sinoj (7/31/2010 8:52:00 AM): so in our case
Sinoj (7/31/2010 8:52:53 AM): if the price of nifty goes up and does not come below 5300 we have nothing to lose
dhanvarshagrp (7/31/2010 8:53:05 AM): yes
dhanvarshagrp (7/31/2010 8:53:40 AM): and 3.5 k is solid gain
Sinoj (7/31/2010 8:54:50 AM): so in options are we allowed to square off or we have to hold till end of of contract period
dhanvarshagrp (7/31/2010 8:55:58 AM): see at any time u can exit at suitable rate like other trades
Sinoj (7/31/2010 8:56:12 AM): ok
dhanvarshagrp (7/31/2010 8:56:27 AM): coz u dont know who is buyer
Sinoj (7/31/2010 8:56:38 AM): ok
dhanvarshagrp (7/31/2010 8:56:56 AM): just u can change the seat
Sinoj (7/31/2010 8:56:57 AM): so if nity goes 5400+ and premium goes down
Sinoj (7/31/2010 8:57:03 AM): to say
Sinoj (7/31/2010 8:57:09 AM): 50
dhanvarshagrp (7/31/2010 8:57:30 AM): you will be at 2k gain
Sinoj (7/31/2010 8:57:34 AM): we can exercise our option s
dhanvarshagrp (7/31/2010 9:01:45 AM): you have no right you sold right to exercise option to the buyer and keeping 69.90 with u that is called premium
Sinoj (7/31/2010 9:04:44 AM): so how 2k sir
Sinoj (7/31/2010 9:04:56 AM): if premium goes to 50
Sinoj (7/31/2010 9:05:23 AM): from 69.9
dhanvarshagrp (7/31/2010 9:08:12 AM): 20x50 = 1k
Sinoj (7/31/2010 9:08:21 AM): ok
Sinoj (7/31/2010 9:08:27 AM): now got it
dhanvarshagrp (7/31/2010 9:08:43 AM): my error
Sinoj (7/31/2010 9:09:09 AM): No sir ..
Sinoj (7/31/2010 9:09:19 AM): i was just trying to figure out calculations
Sinoj (7/31/2010 9:09:33 AM): so the risk in
Sinoj (7/31/2010 9:09:39 AM): options is less
Sinoj (7/31/2010 9:09:42 AM): compared to futures
Sinoj (7/31/2010 9:10:03 AM): because there is potential of earning huge sum
Sinoj (7/31/2010 9:10:22 AM): if we can predict before a month
Sinoj (7/31/2010 9:10:45 AM): and you only lose your premium
Sinoj (7/31/2010 9:10:50 AM): if it hits strike price
Sinoj (7/31/2010 9:16:18 AM): Sir i am going to go out ..friends are waiting ....i will chat with you later on today your afternoon or evening time
dhanvarshagrp (7/31/2010 9:16:45 AM): cua
Sinoj (7/31/2010 9:17:07 AM): Thank You for taking the time to explain
Sinoj (7/31/2010 9:17:18 AM): your article was very helpfull
Sinoj (7/31/2010 9:17:29 AM): and doing a trade helps me understand options better
dhanvarshagrp (7/31/2010 9:17:46 AM): k
No comments:
Post a Comment