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Jagoinvestor - Personal Finance Blog Manish Chauhan 51 Comments What is an Option? Option is a contract which gives buyer the rightbut not the obligation to buy or sell an underlying asset at a specific price on or before a certain date. An option has an Expiry datewhen its automatically exercised if it has metatrader trading platform download nero intrinsic value left.

When you buy an option you have to pay some premium at the time of buying it. You can buy or sell Options just like you buy or sell Shares. They are traded in real time. An option value depends on some underling, which can be a stock or an index or even interest rate, The scope of this article is restricted to Stock options or index options.

An example of index option is Nifty optionso its underlying is Nifty. You must know that its a kind of Derivative : Derivatives are any instrument whose value are derived from some other thing, there value depends on some other thinglike In case of options in stock marketthere value depend on either a stock or an index. Futures are also a kind of Derivatives, The minimum money required for trade in Futures are much more than Options. You can trade in options with as little as 2, or 3, depending on the option you are trading in.

CALL option gives you the right to BUY something anytime before expiry at a predetermined price. The value of the CALL option increases as the Price of the underlying thing increases. The reason for this is because you can still buy it at the fixed price and the difference is your profit. PUT option gives you the right to SELL something anytime before expiry at a predetermined price. The value of PUT option increases as the price of the underlying Decreases. The reason is that you still have the right to SELL it at fixed price and difference will be your profit.

SOME OPTION TERMS Exercising an Option : To exercise an Option means to Buy CALL or Sell PUT the stock on the expiry date if they are European style else Buy or sell anytime on or before Expiry if they are American Style. Expiry Date : The date on which an option will expire and then it will be exercised automatically if it has any intrinsic value left.

Option Style : Options are of two stylesAmerican style It can be exercised any time before or on expiry date and European Style exercised on expiry only. STRIKE Price : Strike rate is Stated Price for which the underlying stock can be purchased or sold on expiry date. SPOT Price : The current price of the underlying at a particular time. LOT : Options are traded in lot sizeyou can buy 1 lot2 lot or any number of lotsand a lot has a particular number of shares in a single lotLike Nifty options have lot size of Premium : Every option has some premium which users have to pay when they purchase an Option.

So for a CALL option, the premium increases when its underlying price increase and decreases when its underlying price decreased and just opposite of PUT option. How does an OPTION look like? Example : CHAFER 90 CE 1. The expiry date of this option is 26 th June current year. What are the Profit and Losses you can make? The Losses are always limited call put option data 2200 the extent of premium you pay in worst case you do not exercise the option and you let your premium goOn the other hand the profits are theoretically unlimitedbecause the option price can keeps increasing when underlying increases or decreases depending on the type of option.

What is time value and option value? The Premium you pay for the option has two components — Time Value — Intrinsic value Intrinsic value is the true worth of the option premium and Time value is the value which is there because of the time left for the expirybecause as the Expiry time comes near the risk of loosing the money is high. So time value keeps decreasing as the expiry comes closer.

There fore you will see that even if STRIKE price is closer to SPOT pricethe option price will be very high if the expiry is after many days. For CALL option price moves towards 0 if SPOT is less then STRIKE price and expiry comes closer. For PUT option price moves towards 0 id SPOT is higher than STRIKE and expiry comes closer.

How does it works You can either call put option data 2200 it at the profit or still hold it. If price increases to say 85then the option may increase to 4. Now option price will move the same way as the price of Infosys share. You think that Economy is not doing well and markets as whole will fall because of high inflation news and political issues or for any reasonSuppose Nifty is at and you believe that it will fall to in monthsSuppose current date is 1st June then you can buy NIFTY PE AUGassume premium is Rs Case 1: If markets fall badly and reaches in 1 month and the premium increase to You can either sell it at the profit or still hold it.

Options with more gap between between STRIKE and SPOT have less premiumbut very risky and can be very rewarding too. I sold Chambal Fertilizer CALL 90 option when it price went up to 6. I would be happy to read your comments or disagreement on any topic. Please leave a comment. April 5, at pm Very nice article sir. I read on various articles about options trading. Mostly explained about near expiry or action on expiry date. From thisarticles, my all doubts cleared easily. September 27, at pm This is very specific query which you should follow up with the concerned authority only.

We wont be able to comment on that. July 15, at pm. July 16, at pm. March 15, at pm i have rs. March 19, at pm 8k is a very less amount. You will be able to buy 1 lot of NIFTY options, but chances of your making a lot call put option data 2200 money in long term is almost ZERO. March 11, at am Say I have ICICI Call Options call put option data 2200 buy call sell put option strategy network the month End.

Strike Price is and lot size is So at the time of expiry, if ICICI is trading at Rsdo I need to actually call put option data 2200 shares of ICICI at and then sell at ? Or is it just a cash settlement of the difference? March 19, at pm. February 14, at pm. February 18, at am. December 18, at pm Hello. Truly a nice article. Got to know important forex com vps 60$ for options market.

I have a question what does it mean premium is greater than spot price or vice versa in call as well as put option. December 26, at pm Premiums has no relation to Spot Price. Premium can be any number higher than the spot price depending on the anticipationbut generally its a small amount! January 22, at pm. November 13, at pm Can we make the profit from difference in premium values ir-respective of strike price?

Suppose the below is the security Current value of NIFTY Buy put, thought that it will decrease. November 14, at pm. October 19, at am This is very good article on OPTIONS. You have clearly explained about it with examples. Though derivatives are complex but anybody with little market knowledge can understand OPTIONS from this article. October 19, at am. Download Our FREE Ebook! Share this Article with others Read more Articles from Jagoinvestor 51 Comments Add Comment.

April 5, at pm. Very nice article sir. September 20, at pm. September 27, at pm. This is very specific query which you should follow up with the concerned authority only. Can a person sell a call option or buy a put. Like in shares we short sell. Yes, you can do that. March 15, at pm. March 11, at am. Just a doubt about the point of Exercising the Option. Say I have ICICI Call Options expiring at the month End.

Its going to be just a settlement of difference. You dont need to do anything! When one should sell call option ideally before expiry? Whenever it makes sense to sell it as per market conditions. One cant give a number! December 18, at pm. December 26, at pm. Premiums has no relation to Spot Price. I need your email ID. November 13, at pm. Very good article, thank you…. I have a small question. Can we make the profit from difference in premium values ir-respective of strike price?

Suppose the below is the security. Current value of NIFTY NIFTY has decreased to say This is very good article on OPTIONS. Download FREE Book Kit worth Rs Sample chapters of our Books. DO YOU NEED FINANCIAL HELP? Financial Planning Buy Life Insurance Buy Health Insurance Invest in Mutual Funds. Unlimited Webinars Goal Based Planning How Insurance Companies Work — The Ultimate Guide to understand their Business Model Everything you wanted to know about Income Tax Notice and scrutiny cases?

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Puts and Calls - How to Make Money When Stocks are Going Up or Down (Part 1 of 2)


Put volume: 2, • Call volume: • Put: Call Ratio: May 05, (13 days until expiration) Quote and option data delayed at least 15 minutes;. Apr 22,  · OPTION CHAIN FOR S&P INDEX. In-the-money. CALLS: 2, quote: 3, Plus the latest data from fantastic-art.ru on 21 home markets. approach you purchase both a call and a put option in the same Review the US Charts option data for both put and call options The initial cost was $ 2.