All stock trading depends on 2 terms. Either you could be bullish or bearish. Depending on whether you are bullish or bearish on the underlying stock, you could purchase either a call option or a put option. When you buy a call option, you hold the right to buy a specified quantity of the underlying stock at the strike price on or before the expiration date. Your loss in such a case would be premium you have paid.
However in India equity options and futures are currently cash settled and are not settled by delivery. If the spot prices rises to Rs per share before the contract expires you could exercise your option to buy the shares at Rs and then sell them in the market for Rs Your profit in this transaction would be Rs Sale price of Rs x 50 — purchase of x 50 — premium of 10 x If, on the other hand if the price does not go beyond Rs until the expiry date, you could just let the contract lapse.
In this case, your loss would be equal the premium that you have paid. When you buy a put option, you hold the right to sell a specified quantity of the underlying stock at the strike price on or before the expiration date.
If you are bearish on a stock you could purchase a put option at a pre-determine strike price that is higher than the fall you expect in the price of the stock,. Going with the above example if the spot prices depreciate to Rs 80 per share before the contract expires you could exercise your option to sell the shares at Rs and then buy them in the market for Rs Your profit in this transaction would be Rs Sale price of Rs x 50 — purchase of 80 x 50 — premium of 10 x If, on the other hand if the price does not fall below Rs until the expiry date, you could just let the contract lapse.
You buy options from the seller called Option Writer who is obliged to comply with your decision for which he receive a fee. The premium you pay to but an option. If you exercise your option the option writer bears a loss which is the price differential between the spot price and the strike price less the premium income he has earned. A trader, investor, consultant and blogger.
I mentor Indian retail investors to invest in the right stock at the right price and for the right time. Hi Shabir , Thanks for the tips you shared. I was going through many other blogs and i was very much confused over this Option trading. Now I have a clearer picture. Shabbir, what a amazing tips you shared. The 7 Basic Principles of Trading in Market. Follow the process that I follow. Details here — http: You can always square off your your buy or sell with a counter trade and trading in spot is not squaring off.
Now my question is if i exercise option to buy i have to sell it in the spot or i can square off in the option market itself without selling in the spot?
You buy a call option on XYZ stock at the strike price of Rs. If the market price of XYZ on the day of expiry is more than Rs. You will make profits if the the share price of XYZ crosses Rs. If the price of the stock is Rs.
In another scenario, if at the time of expiry stock price falls below Rs. In this case you lose the premium of Rs paid which shall be the profit of the seller of the call option. I understood the concept but suppose i exercise the call option then what to do? I have explained that Sameer, you buy the stock from the seller and then sell them at the current market price.
I understood about buying of call and put but what is the profit to the call and put seller as we call them as writer of option? Any clue on when does an option stock expire? Futures are contract that has an expiry date and time and normally expiry time is end of day and it should be 3: On the expiry date, can you setoff your option with physical stock?
How, how do I book my profit? Are all these european options? That is, do we have to wait until the due date to exercise the option? I believed only american options can be exercised before due date… However, the SK sales person says that PE NIfty can be exercised before due date as well: Himanshu, have you seen — http: If you expect the price of the stock to move upward, buy a call option If you expect the price of the stock to move downward buy a put option If you expect no upward movement, sell a call option.
If you expect no downward movement, sell a put option. If you expect the price of the stock to move upward, buy a call option 2. If you expect the price of the stock to move downward buy a put option 3. If you expect no upward movement, sell a call option.
I found these are some confusing. As you wrote, it is looking like similar. Like, buy a call option and sell a put option or buy a put option and sell a call option. Please explain me about that. I have explained every possible thing in the complete post and the last one is just the summary of what you should be doing. You know any reliable website where I can see beta values of stocks that are traded in indian stock markets? I would like to know beta values of each stocks.
It would be better If there is any consolidated list available. I think TTTK prestige is still a good bet at the current price. It has moved considerably yesterday. I would like understand about MKT. Dinesh, See my technical analysis book. Please reply on mail id. I can open my demat account with any brokerage co.. I have made profit of and loss of 1, respectively.
For both the transactions the amount has been credited as profit and debited as loss from my demat linked AXIS Bank account. I have made profit on 3rd Dec for the amount Rs. Now my query is why its still showing debit balance in my trade note while they already debited the last loss amount from my bank account… i was expecting Rs.
Suraj, I think you need to ask your bank about the details of the transaction and I only know what you say. If you made profit it should reflect and also the loss. Dear Shabbir, Thanks for the info here. Are there people who have made good return at this date? I am not an astrologer who can predict the return for 20 years but yes I myself have made good returns for myself.
Ponneshwar, have you seen — http: Trading Options On Futures. Current results season has produced a spectacular picture about growth in industrial activities and services. Results of the banking sector Glad you liked it Rajat. As You have written this: Sameer, let me explain you with an example You buy a call option on XYZ stock at the strike price of Rs.
I hope it helps. I explained that as well. In which pricing scenario it is profitable to whom. In other case the profit is by the other party. Also, when does this expire? Not sure if you can do anything with Physical stock. It has to be in Demat format. Aditya, thanks and surely will do. The pleasure is all mine Sajid. Shabir, You know any reliable website where I can see beta values of stocks that are traded in indian stock markets? A good scrip for trading as well.
If you know how to trade on the right side and is ready to cut your losses. If you expect no downward movement, sell a put option what is meaning of these in laymen term.. Thanks for guiding me. Can you pls explain this to me??? It will be helpful for all the new traders… If you want i can send you my credit notes for my doubts… Suraj.
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