Can I Short Sell a "PUT" Option ?

[SawViper]

Silly newbie question: Can I Short Sell a "PUT" Option and "BUY" it again to cover?
I know I can buy a CALL of the same strike price but still... just very curious.
Thanks in advance.

 

[trader.trends]

Silly newbie question: Can I Short Sell a "PUT" Option and "BUY" it again to cover?
I know I can buy a CALL of the same strike price but still... just very curious.
Thanks in advance.

Yes you can. All options can be shorted and covered.

 

[SawViper]

Yes you can. All options can be shorted and covered.

Thanks for the quick response !

 

[mprakash1972]

@sawviper,
if you are bullish on market view,you can buy a call or sell a put,the difference is when you buy a call your risk is limited to your premium and profit is depends how much market moves upwards,when you sell a put your profit is limited to the premium received.
regards,
m prakash

 

[dashr]

How does one calculate the investment required for shorting an option(intraday and delivery)?

 

[trader.trends]

How does one calculate the investment required for shorting an option(intraday and delivery)?

Approx equal to 10% of the value of the contract. If 5000 Call is at 80/- value of contract is 50*(5000+80). 10% of this is the margin required for holding overnight position. For intraday some brokers charge only 40% of the overnight position.

 

[SawViper]

Approx equal to 10% of the value of the contract. If 5000 Call is at 80/- value of contract is 50*(5000+80). 10% of this is the margin required for holding overnight position. For intraday some brokers charge only 40% of the overnight position.

Woah! @trader.trends, you mean 'selling' a Put is not as simple as buying a Put? If the Put is going for 80, I presumed I could just 'short sell' the Put by ponying up 80*50 and I'd be in the game - just like I would be if I were buying a Call or a Put. *scratches head vigorously*

 

[trader.trends]

Woah! @trader.trends, you mean 'selling' a Put is not as simple as buying a Put? If the Put is going for 80, I presumed I could just 'short sell' the Put by ponying up 80*50 and I'd be in the game - just like I would be if I were buying a Call or a Put. *scratches head vigorously*

You need to understand the risk involved before putting on the trade. Shorting a put/call means you are taking unlimited liability. To cover that you have to put up a margin approx equal to 25K for one lot. Try to understand the actuality of the trade involved then everything becomes simple.

When you are willing to (short)sell a 4900put to me for 80 what you are saying is you will buy Nifty from me on expiry day at 4900 no matter where it is and you want 80/- for that today. So on expiry day if Nifty is at 4600 you have to buy it from me at 4900 incurring a loss of 300/-. To cover these losses you have to put up a margin as required by the broker/exchange.

 

[SawViper]

You need to understand the risk involved before putting on the trade. Shorting a put/call means you are taking unlimited liability. To cover that you have to put up a margin approx equal to 25K for one lot. Try to understand the actuality of the trade involved then everything becomes simple.

When you are willing to (short)sell a 4900put to me for 80 what you are saying is you will buy Nifty from me on expiry day at 4900 no matter where it is and you want 80/- for that today. So on expiry day if Nifty is at 4600 you have to buy it from me at 4900 incurring a loss of 300/-. To cover these losses you have to put up a margin as required by the broker/exchange.

Got it ! Gee, you are quite the teacher. When you put it that way (no pun intended) it becomes crystal clear. Thanks buddy !

 

[harishkn]

yes very risky for new newbie. People loose shirts writing puts if not carefull. Falls can be deeper than raise except may 2009 where call writers lost