Comment on Basics on Options Shorting/Writing

Nithin Kamath commented on 29 Mar 2015, 12:58 PM

Firstly you can get out of your option trade anytime you want. There is no rule that option shorts have to be kept till expiry.
If you have shorted at Rs 5 and you buy back at Rs 4, you make Rs 1 x 1000 = Rs 1000 profit.
If you have short 520 call, and stock is at 530, the premium will be minimum Rs 10, and it can’t be at 0.5. But assuming it is at 0.5, you will make a profit of Rs 4500.
When you short options, the premium is credited to you the next day itself. On expiry, if you do nothing and stock remains below the strike, you get to keep the entire money you received when you shorted the option.
What if stock goes 620? You have shorted 520 strike so you loose 100 x 1000 = rs 1lk loss.
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