Building Know-how in Options

[soft_trader]

Thank you for the info.
I was confused as Index options in India can be exercised only on the day of expiry (European Style) and stock options can be exercised at any day ( American style).
However, as far I understood, this has changed with NSE new circular and now it is only CE (Call European style) or PE (Put European style )...Correct me if I am wrong.
Regards

Ashwani Gujral's book.

Earlier Index options were CE/PE and Stock options were CA/PA.

But After Jan 27, 2011. Exchange Switched all options contracts as EUROPEAN Options.

I also have that book. It was written before 2005. So that book contains old info.

 

[monasona]

Could you provide names of some books specially for option selling?
Regards

 

[DanPickUp]

Alexander Elder: "Sell and Sell Short"

 

[monasona]

Can anyone explain how to sell a contract (PUT or CALL)?
So far whatever I read : I am afraid to sell an option.

Just to elaborate my query : Lets say I sell a PUT 380 TATA Steel at Rs. 1 premium.

The broaker has blocked some amount for this sell as I didn't own the underlying share ( meaning its a naked PUT).

Now as per the theory I am exposed to unlimited risks..
My query is :

1. If TATA STEEL doesnot go below 380 (moves higher than the current price), I will be in profit.

2. If it goes below 380, lets say the premium became Rs 1.40..then I can squareoff my position to get rid of the unlimited risk.

3. Is there any chance that someone (when TATA Steel goes below 380) can book my contract before the exercise date ( ex. from today to July 26, 2012) and will exercise the same on 26-07-2012? Then I will be in real problem.

Please help me to understand the option sell concept.

Thanking you in advance.

Regards
Monasona

 

[seetharamank]

I am new to options.

While reading one of the books in options I thought about creating this thread. Can we help each other by sharing/recommending study materials, Q & A etc?


My first query about selling options :

Can the buyer exercise his/her contract before the expiry date?

no since now all options are european type the seller can only close his open position and cannot exercise before the expiry date

 

[sachin928111]

sir
after selling put of 380 if he buys it will it be square off means will it be no pending positon for him?

 

[dineshN]

I don't know why so fuss about exercising an option. Once you are in profit or unbearable loss, just do the opposite of your first leg and square off your position. And that can be done, the next moment, a moment later, same day, next day or on the expiry day. Am I missing something?

If you deploy an option strategy where the timeframe is expiry, then its a different matter.

 

[monasona]

It is crystal clear.

My query is :

Imagine I didn't square off the position even it is in loss and want to wait for few days.

During this period somebody buy this option ( which is not known to me) and will later exercise on the expiry date [ which I will know later, while closing/sq. off my position]...

Regards

 

[dineshN]

If you do not square off your trade, exchange will square off this position with EOD Closing of expiry day. Accordingly your account will be adjusted with credits or debits on the next day.