Call and put option nifty

Theoretically, Buyers of Call Options can make unlimited profits as stocks can rise to any level, while call option writers make profit limited to the premium received by them. With SAMCO, your brokerage will be Rs. You can calculate your savings with the Brokerage Calculator. Theoretically the buyer of the Put option can make a profit limited to the spot price of the underlying less Premium paid, say for example, A Ltd is trading for Rs. Unlike Traditional brokers who charge brokerage per lot purchased or sold, with a Discount Broker like SAMCO, you pay brokerage on the number per transaction! The profit of the Seller of put options is limited to the premium received by them. Buyers of call options expect the price of the underlying to appreciate. With the SAMCO Option Fair Value Calculator calculate the fair value of call options and put options. Put option writing also requires margin to be paid by the option writer.

You buy a Put contract of A with strike price 100, paying Rs. SAMCO would in no way be held responsible for use of the same. To put it simply, say you buy 20 lots of call options on the NIFTY in one order. Buyers of put options expect the price of the underlying to depreciate. Why Trade Options with SAMCO? Stock price of A falls to zero, you make a profit of Rs. This can also be used to simulate the outcomes of prices of the options in case of change in factors impacting the prices of call options and put options such as changes in volatility or interest rates. The SAMCO Options Price Calculator is designed for understanding purposes only. The above charts really get to the core of why successfully trading options remains a challenge to many retail investors as myself. If possible, please post table of Position Initiation Target Expectation Best Strike To Trade for banknifty weekly options.

Is it possible that spot prices may go up but the the volatility will come down? If you go through the charts carefully you will realize that the conclusions for the Call options holds true for the Put options as well. And why are people exercising instead of squaring off? The only strikes that make money are ATM or slightly ITM option. Doesn this indirectly mean that a lot of people are ending up losing money because there is a greater STT that is levied on exercising options? You guys are rocking. In the next chapter I would like to discuss some of the simple trades that I initiated over the last few days and also share my trade rationale behind each trade.

Thanks a lot for that. As we can notice from the chart, maximum money is made by 5400 and 5500 strike. News driven option trade such as buying an option owing to a corporate announcement is a classic example. Of course the initial few chapters gave us an understanding on the call and put option basics, but the agenda now is to understand the basics of call and put options keeping both volatility and time in perspective. For example the blue line shows how the call option premium behaves when there are 30 days to expiry, green for 15 days to expiry, and red for 5 days to expiry. Your hard work is very much appreciated. One should certainly avoid buying ATM or OTM options. In fact I would suggest you buy 2 or 3 strikes away from ATM and not beyond that.

The safest bet under such a scenario is strikes which are slightly OTM. OTM options tend to lose money when the target is expected to be achieved close to expiry. Nifty Underlying is 8629. You want to buy a call option with an intention of squaring it off 5 days from now, which strike would you choose? So let us start from the first chart on the left top. Also, I see that some call option contracts rise tremendously in value even if the underlying has fallen in value. Varsity or I overlooked it. There is no point buying ITM or ATM options. Before we proceed we need to get a grip on the timelines first. When you are in the 2 nd half of the series, and you expect the target to be achieved around 5 days from the time of trade execution buy strikes that are slightly OTM.

Sell options when I expect volatality will decrease which in other words market will go up. While the discussions we have had so far are with respect to buying a call option, similar observations can be made for PUT options as well. What would you do if the time to expiry is more than 15 days away? Keep the good work going. Hence it just does not make sense risking with far OTM options. Traders should avoid buying ATM or OTM options. Nowhere I could find all the information so compiled, thorough and simplified. Have a look at the image below; it contains 4 bar charts representing the profitability of different strikes.

While trading options is it important to look just at the volume figures for liquidity purpose or should we look into the Open interest figures as well? Please do keep this in perspective while reading through below. PUT options and the decision making process regarding which strikes to buy based on the time frame. There is a certain degree of ground work required before you buy an option. Notice how the profitability changes, clearly buying far OTM option does not makes sense. Infact when you wish to buy an option it is important to analyze how far away we are with respect to market expiry. This is when far OTM options moves smartly.

Varsity and that ended my search. This is the angle I would like to discuss in this chapter. This is where the assessment of time to expiry comes into play. Feels good knowing these stuff. So since volume is the number of contracts traded and open interest is the number of positions that are still open, if say for example I see the NIFTY 8000 call of 25 jan 17 expiry, till the expiry date the volume was around 8403 and open interest was 95925. TV18BRDCST CE of 27th apr 17 expiry, and strike of 52. Selection of strike depends on the time to expiry. Here the target is expected to be achieved 25 days from the time of trade execution.

ITM options is less than that of ATM options, which I found quite confusing. The 4 charts below help us identify the right strike for different time frames during which the target is achieved. However the more important aspect is to identify the right strike to buy. The ground work mainly revolves around assessment of volatility, time to expiry, and of course the directional movement of the market itself. Please do let me your views. Awaiting eagerly for your advice in the matter. Will it come in the next chapter.

Hopefully the case studies that I will present in the next chapter will give you a perspective on the general thought process behind simple option trades. Question: when exactly does VIX go down? Instead what makes sense is buying ITM options. Say on end of expiry the underlying was 8650, then is it 10. Then what to do in options? Maybe at this point, it may also be worthwhile to revisit Open interest in context of options. Now that we have spent time learning Option Greeks, perhaps it is time to take a fresh look at the basics of the call and put options, keeping the option Greeks in perspective. This is especially true in cases where the market moves but not at the right speed.

When we are at the start of the expiry series, and you expect the target to be achieved over 25 days, it makes sense to buy ITM options. Note that this is an ITM option. In fact when the target is achieved closer to the expiry, the heavier the far OTM options bleed. With this, we are now at the verge of completion of this module. OTM, ATM, or ITM and why would you choose the same? Since you have not closed the position yourself, the exchange will do the settlement on your behalf. What would you do if the time to expiry is just 2 days away? Clearly as we can see OTM options are not worth buying.

Aug, The underlying should be above 8639. Let us just assume that the volatility is expected to increase along with increase in the underlying prices. But was very tedious and I left in between without any success. Clearly buying a call option makes sense. It is nice that you gave in a perfect form. Very important info or I will say it is extract of the full module in a very practical way.

OTM options made sense, but here the target is achieved in 5 days, and because the trade is kept open for 5 days especially during the 2 nd half of the series, the impact of theta is higher. When I see the open interest and volume data for equity options, most of the times the open interest is extremely high when compared to volume throughout the trading month. Actually about a year back I was trying to understand the same thing by looking at historical data on NSE site and copying them to excel and doing some calculation. The target is expected to be achieved within 5 days of trade execution. Do bear in mind the effect of time decay accelerates in this period; hence as we are moving closer to expiry the dynamic of options change. After research on different brokers, I joined Zerodha a month back.

In this case will you suggest that the trader buys only one or two contracts so that he can sell it not difficult before expiry and he can avoid the trap of any options not getting squared off due to insufficient buyers? When we in the 1 st half of the expiry series, and you expect the target to be achieved over 15 days, it makes sense to buy ATM or slightly OTM options. Waiting eagerly for next module. Thanking you very much. Put options, so why all over again? In most of the cases one ends up losing money with OTM options. Buying an index option based on the monetary policy decision by RBI is another example.

Of course we do this while keeping theta in perspective. Oct, Infosys results are on 12 th Oct, and you are bullish on the results. FA to option and showing option trade taking place. What is high or low for volatility based on which we can judge chances of volatility movement. SInce STT on exercised options is quite high and eat up profits made in ITM options, then how can traders square off contracts whose daily volume are also low? Thank you once again for this excellent material. The volatility is expected to go down while Nifty is expected to go up? While these charts help us understand which strikes to trade when is the trade is executed in the 2 nd half of the series and the target is achieved under different time frames.

Once you do this, with the help of the table above you will know which strikes to trade and more importantly you will know which strikes to avoid buying. If i were to take CE call buy at strike 8500, at a premium of 139. Therefore the ability to interpret OI and its changing dynamics in the context of options may be useful? Notice how the profitability of far OTM options diminishes. One should certainly avoid buying far OTM options. Greeks and after discovering the option Greeks. Would you buy an ATM option or ITM option?

These charts help us understand which strikes to trade when the trade is initiated in the first half of the series, and the target is achieved under different time frames. SBI till the day of expiry is quite low. After deducting the taxes your profit money will be credited to you account. Having established this, what would you do? That said, a chart of Theta vs Strike Price will also help in understanding the core concept, IMO. OTM options simply because the premiums are lower. Second question is, you can see in the data that the open interest figures are quite high even till the date of expiry. If I sell call and put options both when I expect volatality will decrease, both call and put option values will increase after decrease of volatality.

This seems to be the same case where most of the options are exercised for other underlyings as well. If you feel it is too much to give the detailing as above then please give us a few guidelines n how to proceed on the same which will help us make the calculations. Waiting eagerly for next chapter and next module. ATM options and not beyond that. Market must have already considered the volatility factor. Is there any formulae to predict the premium based on predicted index if I know all the geeks and implied volatility.