Comment on Option buying: The riskiest trade out there

Damodaran commented on 02 Jul 2021, 12:43 PM


Let me explain what happened today!

I had shorted position and as an option seller, I prefer to hedge my position by buying OTM options.

I executed my trades, but later understood they were MIS order.
I able to convert my shorted position from MIS to NRML
But options that I bought, I have to exit and recreate as NRML. Since MIS to NRML is not allowed.

So as an end customer it is always better to have the flexibility in the system, instead of enforced restrictions.
Since the Mr.Market allow for buy/sell why should you impose such restrictions? And at the end of the day people like me would like to move to systems which provide more flexibility and freedom of choice.


System should have the intelligence to understand they are naked positions or hedged positions and work accordingly.

Definitely I appreciate the effort you are taking to educate the retailers, but same time I feel these restrictions imposed are unnecessary.

Thanks for the detailed blog, which is very informative.

Restricting the MIS to NRML is not a good idea, I want to hedge my shorted positions by OTM.

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