We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- Buy a call option or sell a put option only when you expect the market to go up.
- Buy a put option or sell a call option only when you expect the market to go down
- The buyer of an option has unlimited profit potential and limited risk (to the extent of the premium paid)
- The seller of an option has an unlimited risk potential and limited reward (to the extent of the premium received)
- Majority of options traders prefer to trade options only to capture the variation in premiums
- Option premiums tend to gyrate drastically – as an options trader, and you can expect this to happen quite frequently.
- Premiums vary as a function of 4 forces called the Option Greeks
- Black & Sholes option pricing formula employs four forces as inputs to give out a price for the premium
- Markets control the Option Greeks and the Greek’s variation itself
next viedo kb aayegi option ki
Waiting sir for another option video.. No total option series sir
Next week 🙂
sir how can we minimize our risk in selling the option please provide a video on that topic
Coming soon 🙂
Hello Karthik Sir, Its a great tutorial. Everything is very smooth and clear the way you taught. While watching this video I got a question.
Let say a buyer and seller get into a contract, where buyer pays margin. I understood buyer can square off this deal anytime and leave position. If the seller of that particular contact square off before expiry, and Buyer holds the contract and wants settlement on expiry day. Who will settle money to buyer in this case?
Thanks, Mrinal. The buyer pays a premium, not a margin 🙂
So for a contract, there will always be a buyer and seller. So assume the seller wants to square off, to square off the seller has to buy, and there will be someone else who will sell. So that keeps going till expiry.
Hi Sir if the market keeps on going down, is it possible to exit while in the F & OP trading, if I will be going to exit what will happen?
last week i was did same as i mention above, now my doubt is there possible to loss my whole money or no.
because i had invested 50000 and when i was exit my demand account credited nearly 48000 but I got a message like Margine shortfall happened so need to keep more than the premium which is i have paid. i just scared of my money..
Ah, not sure what could have happened here. But you can exit the position whenever you want. I’d suggest you speak to the support executive to figure what exactly has happened in your case.
Strike price 42700
1.My question is if I bought CALL Buy premium at 42500 will my price increases immediately as I bought at ITM .
2.if 100 points rise above the strike then how much premium will increase n how we calculate this ?
1) If the spot price increases, so will the option price. If the spot price declines, so will the option price. By option price, I mean the option premium.
2) The option price will increase by a minimum of 100 points, that’s the easiest way to figure 🙂
As usual, great video and content. Just one quick question. When you click ‘exit’, what really happens in the background?
Thank you.
So, the exit will trigger a square-off order which will close the existing position.
Option selling directly is not coming
Sorry, not sure what you mean. Can you kindly elaborate?