Comment on Basics on Options Shorting/Writing

Siddhant commented on 22 May 2016, 11:36 AM

Hi Nitin,

One specific question when it comes to Option writing.
Here is an example:
ICICIBANK Put Option shorted on 21/05/2016 at 3.28 PM.
Strike Price: 220, Premium: 3.35
I want to know what will happen on Monday (23/05/2016) in the following situation.
– ICICIBANK stock moves up with a gap up.
– 220 strike price premium opens gaps down by 1 Re to 2.35
– At the end of the day (23/05/2016), ICICIBANK recovers a bit and the premium closes at 3.00.
In this case which of the following will happen?
A) A premium of Rs 0.35 (3.35 Cl on 21/05 Less 3.00 Cl on 23/05) will be credited to my account OR
B) I will have to pay a premium of Rs 0.65 (Op Premium 2.23 Less Cl premium 3.00)
Your guidance will be much appreciated

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