- What is: Call and Put Options - Shabbir Bhimani
- Option Trading | Basics, Strategies, Types, Tips, Risks
- Option Trading in India with examples
- Call and Put Options: What Are They? - The Balance
To maximize profits, you buy at lows and sell at highs. A call option helps you fix the buying price. This indicates you are expecting a possible rise in the price of the underlying assets. So, you would rather protect yourself by paying a small premium than make losses by shelling a greater amount in the future.
What is: Call and Put Options - Shabbir Bhimani
As long as the index does not cross 6,655 , he benefits from the option premium he received from you. index is between 6,655 and 6,685, he is losing some of the premium that you have paid him. Once the index is above 6,685 , his losses are equal in proportion to your gains and both depend upon how much the index rises.
Option Trading | Basics, Strategies, Types, Tips, Risks
If you are bullish on a stock you could purchase a call option at a predetermine (Called it as the strike price) that is lower than the appreciation you expect then, if all goes well and the stock price does rise beyond the strike price + the premium you have paid, on or before the expiration of the contract, you can exercise your option to buy the stock at the strike price and simultaneously sell it in the spot market. . the cash market to book your profit.
Option Trading in India with examples
Whether you are a buyer or a seller, you have to pay an initial margin as well as an exposure margin. In addition to these two, additional margins are collected. These differ for buyers and sellers, who are at the opposite ends of the spectrum.
Call and Put Options: What Are They? - The Balance
There are two ways to settle – squaring off and physical settlement. If you decide to square off your position before the expiry of the contract, you will have to sell the same number of call options that you have purchased, of the same underlying stock and maturity date and strike price.
Thus, the maximum loss an investor faces is the premium amount. The maximum profit is the share price minus the premium. This is because, shares, like indexes, cannot have negative values. They can be value at 5 at worst.
Call options are those contracts that give the buyer the right, but not the obligation to buy the underlying shares or index in the futures. They are exactly opposite of Put options, which give you the right to sell in the future. Let's take a look at these two options, one at a time. In this section, we will look at Call options.
So, if the index remains above your strike price of 5,955, you would not really benefit from selling at a lower level. For this reason, you would chose to not exercise your option. You just lose your premium of Rs 6,555.
Going with the above example if the spot prices depreciate to Rs 85 per share before the contract expires you could exercise your option to sell the shares at Rs 655 and then buy them in the market for Rs 85. Your profit in this transaction would be Rs 555 (Sale price of Rs 655 x 55 purchase of 85 x 55 premium of 65 x 55)