If we sell a Put option & dont get a seller to buy what is the situation

[mahesh2007]

Thanks ARMHM for explanation.
I am 1000% in synch with you. RIL 2350 Put option is ITM when RIL spot price is 2000.
This ITM option is excercised by exchange on expiry and whatever is the value, the money is taken from Option seller.
This is not what was suggested by Chakravu. ("If it is in the money just let it expire. You retain the premium.").
As a option seller, we can't let the ITM option get expired. Option buyer has this privilage but not the seller. As a seller we got to manage / hedge it so that risk at expiry is managed.

Happy Trading.

The criterion of ITM is different for option seller(writer) and buyer.

for the writer of reliance 2350 put option 2400 is ITM while 2400 is OTM for the buyer.
brokerages and other costs not considered just to keep things simple.

 

[AW10]

Mahesh,
Options definition of ITM / ATM/ OTM depends does not depend change from Buyer or sellers perspective.
For CALL option
if Option Strike Price = Current mkt Price Then it is At The Money (ATM)
if Option Strike Price < Current mkt Price Then it is In The Money (ITM)
if Option Strike Price > Current mkt Price Then it is Out of The Money (OTM)
For PUT option
if Option Strike Price = Current mkt Price Then it is At The Money (ATM)
if Option Strike Price < Current mkt Price Then it is Out of The Money (OTM)
if Option Strike Price > Current mkt Price Then it is In The Money (ITM)

For Ex - RIL PUT 2350 when spot price is 2350 , is ATM
- RIL PUT 2350 when spot price is 2400 , is OTM (hence real worth is ZERO)
- RIL PUT 2350 when spot price is 2000 , is ITM (and real worth is 150).

Option Buyer controls the right on real worth and has choice to make. But for Seller, there is no choice but only the obligation equal to the real worth.

Happy Trading.

 

[mahesh2007]

Mahesh,
Options definition of ITM / ATM/ OTM depends does not depend change from Buyer or sellers perspective.
For CALL option
if Option Strike Price = Current mkt Price Then it is At The Money (ATM)
if Option Strike Price < Current mkt Price Then it is In The Money (ITM)
if Option Strike Price > Current mkt Price Then it is Out of The Money (OTM)
For PUT option
if Option Strike Price = Current mkt Price Then it is At The Money (ATM)
if Option Strike Price < Current mkt Price Then it is Out of The Money (OTM)
if Option Strike Price > Current mkt Price Then it is In The Money (ITM)

For Ex - RIL PUT 2350 when spot price is 2350 , is ATM
- RIL PUT 2350 when spot price is 2400 , is OTM (hence real worth is ZERO)
- RIL PUT 2350 when spot price is 2000 , is ITM (and real worth is 150).

Option Buyer controls the right on real worth and has choice to make. But for Seller, there is no choice but only the obligation equal to the real worth.

Happy Trading.

i am open to correction .

I deciphered that conclusion from chakravu's post.

 

[beginner_av]

Re: If we sell a Put option & dont get a seller to buy what is the situvation

..............Winning Options traders always write options
Happy trading

This is the greatest options myth. Dont blame you. Those armchair authors!

 

[citrus]

Mahesh,
Options definition of ITM / ATM/ OTM depends does not depend change from Buyer or sellers perspective.
For CALL option
if Option Strike Price = Current mkt Price Then it is At The Money (ATM)
if Option Strike Price < Current mkt Price Then it is In The Money (ITM)
if Option Strike Price > Current mkt Price Then it is Out of The Money (OTM)
For PUT option
if Option Strike Price = Current mkt Price Then it is At The Money (ATM)
if Option Strike Price < Current mkt Price Then it is Out of The Money (OTM)
if Option Strike Price > Current mkt Price Then it is In The Money (ITM)

For Ex - RIL PUT 2350 when spot price is 2350 , is ATM
- RIL PUT 2350 when spot price is 2400 , is OTM (hence real worth is ZERO)
- RIL PUT 2350 when spot price is 2000 , is ITM (and real worth is 150).

Option Buyer controls the right on real worth and has choice to make. But for Seller, there is no choice but only the obligation equal to the real worth.

Happy Trading.

If the real worth of reliance put will be Rs 350 or Rs 150. Please clarify.
Regards.

 

[ARMHM]

One thing always works in favour of option writer (seller) and that is time. If the scrip or index is moving sideways then automatically the value of option diminishes as the time passes. Whereas option buyer only gains when that particular stock or index is rapidly moving in his favour.

 

[ARMHM]

If the real worth of reliance put will be Rs 350 or Rs 150. Please clarify.
Regards.

That should be 350 (perhaps typing error)

 

[AW10]

Thanks ARMHM for correcting it.
I am sorry about that typo, Citrus. The real worth of PUT will be 350 (i.e strike price of 2350 minus mkt price of 2000).

Happy Trading

 

[beginner_av]

One thing always works in favour of option writer (seller) and that is time. If the scrip or index is moving sideways then automatically the value of option diminishes as the time passes. Whereas option buyer only gains when that particular stock or index is rapidly moving in his favour.

again, thats very simply put. but thanks a lot anyways for explaining.

 

[pokrate]

Hi !
Say, I bought an option but I am not finding any buyer to whome to sell.
Now what will happen ?
Assume its an out of money option.