thanks mr.gosh let me try this...btw..how to trade with shares using Option's...i meant how to write a strategy. coz, i tried buying RELIANCE call "at-the money" and buying nifty put "at-the-money"...(Reliance contributes 10% of the nifty)...ended up losing...kindly help me?....i think ricky's idea was good...selling the shares "out-of-the-money???
Dear Nandu,
RIL had a good run, and you should have exited with profits. About writting stock options, Going short out of the money call/put, after 20th of the month makes sense provided one is very sure that the underlying will never reach your strick price. regarding wrirring as said earlier:
I personally do not like writting a call because it eats money as margin. I think, if you are having loss then, you exit that and look for some other one. Maintain strick stop loss. I will never reco. writting a call because of above reason.
Writing a call and buying a call is done to hedge your postions. But below I will just talk about when I will write a call.
In my view, normally call is written when underlying volume is decreasing, underlying is not showing any significant movement up near your strike price and expiry is approaching i.e. after middle of the month. Example you took Chambal Fert. at 100 strike price @6 and the underlying is at 90. But all of a sudden volume goes down from 1000k to 700k for e.g. and Chamble Fert underlying remains around 90 or below 100 near middle of the month, underlying is trading below 50 days moving average or approaching it then one can think to write a call. but its always risky.
Hope above helps.
Regards
