Option Buy Recomendations

[msunny31]

Hi,

I am new to options.
I bought NIFTY 5100 Call @ 45(10 lots) and NIFTY 5200 Call @ 13(9 lots) expiring this month end (Oct 29th, 2009).
I bought both the calls on 21st Oct, 2009

Do you think its advisable to hold until expiry or sell it off with current loss?

Really appreciate your suggestion

-Sunny

 

[sprintravi75]

dear

it is not advisable to have any position after 20th espicially when clear trend is not there.i advise u to quare off your position once u get cost.

regards

 

[chaitanyagoa]

Hi,

I am new to options.
I bought NIFTY 5100 Call @ 45(10 lots) and NIFTY 5200 Call @ 13(9 lots) expiring this month end (Oct 29th, 2009).
I bought both the calls on 21st Oct, 2009

Do you think its advisable to hold until expiry or sell it off with current loss?

Really appreciate your suggestion

-Sunny

Hello Sunny,

19 Lots????????????????????:annoyed:..... For a newbie.......

U must either be Super Smart or A Stupehead to go with such a gargauntuam number of lots that to at the End of expiry......

Apologies for the harsh words....... But................:annoyed:

Anyways what is the buy price on the lots and what is the current Price????

Monday should be an Up-day, So u could keep a watch on the market before u take some decision...... To make matters worse, Dow is down by 130 points as i pen these words.....:annoyed:

Thanks

 

[msunny31]

Hello Sunny,

19 Lots????????????????????:annoyed:..... For a newbie.......

U must either be Super Smart or A Stupehead to go with such a gargauntuam number of lots that to at the End of expiry......

Apologies for the harsh words....... But................:annoyed:

Anyways what is the buy price on the lots and what is the current Price????

Monday should be an Up-day, So u could keep a watch on the market before u take some decision...... To make matters worse, Dow is down by 130 points as i pen these words.....:annoyed:

Thanks

Hi,

Thanks for your reply.
I am a totally over-excited "foolish" guy. While buying CALLS I was very sure that market would go up but did not realize other factors such as time decay and expiry. I have burnt my hands and need to be careful now on.

I have been buying lots at different prices (such as 75,56,42,30....) so as to average down to a nearest level, only to realize that value had been falling.

Current price of 5100 CALL is 20 whereas 5200 CALL is 5.7

My loss stands at more than 50% at current levels. My question is, would any wait till expiry will atleast help me reduce my loss or is it best to quit with the current loss on Monday?

 

[sprintravi75]

dear friend,

my suggestion would be to you is, avoid average loss in option. if u are very sure of bull market hold else minimise your loss.

al the best

 

[msunny31]

dear friend,

my suggestion would be to you is, avoid average loss in option. if u are very sure of bull market hold else minimise your loss.

al the best

Hi sprintravi75,

Thanks for ur reply.

Is there any possibility for the 5100 Call current value to go from 20 to 30 even if market goes up by 50 or more points?
Observation: On Friday 23rd Oct, even though the market was up by 40 points in the morning, the 5100 call value was struggling to go beyond 30.

Is there any post/topic in these forums which explain about time decay of value?

Ghosh Sir, waiting for ur reply too on this!

Appreciate all ur help.
Thanks,
Sunny

 

[ppmatkari]

Hi,

Thanks for your reply.
I am a totally over-excited "foolish" guy. While buying CALLS I was very sure that market would go up but did not realize other factors such as time decay and expiry. I have burnt my hands and need to be careful now on.

I have been buying lots at different prices (such as 75,56,42,30....) so as to average down to a nearest level, only to realize that value had been falling.

Current price of 5100 CALL is 20 whereas 5200 CALL is 5.7

My loss stands at more than 50% at current levels. My question is, would any wait till expiry will atleast help me reduce my loss or is it best to quit with the current loss on Monday?

I would suggest you to take advise from any of the senior options traders at the forum like Ghosh_ak34, AW10 , Linkon, stocks.murtaza , Smart trader.... on how to minimize your losses now. And do not play with options unless you fully understand what you are exactly doing.

 

[ghosh_ak34]

Hi sprintravi75,

Thanks for ur reply.

Is there any possibility for the 5100 Call current value to go from 20 to 30 even if market goes up by 50 or more points?
Observation: On Friday 23rd Oct, even though the market was up by 40 points in the morning, the 5100 call value was struggling to go beyond 30.

Is there any post/topic in these forums which explain about time decay of value?

Ghosh Sir, waiting for ur reply too on this!

Appreciate all ur help.
Thanks,
Sunny

Dear Sunny,

Current months expiry is next week so Oct options will loose its premium and so 5100 calls as there is less chances of Nifty to cross 5100 level strongly by monthend.

Time decay is a crucial component traders consider when deciding when/where to buy or sell options. Time decay (Extrinsic Value ) is represented by Theta. Lets not go into these Greeks. An options time to maturity (or time to expiration) has a huge impact on the price of the option. That is, as the option moves closer to expiry (i.e. running out of time) its chances of becoming more profitable decrease with every passing day. As you can probably imagine, predicting an approximate stock price becomes easier every day. For example, you will have a much greater chance of predicting tomorrows closing price of Reliance Industries or Bharti or stock that you closely track than you will of predicting next Fridays closing price.

Because of this, the Time Value of an option decreases exponentially as the maturity date approaches - especially as the time to maturity passes near last Thrusday of current month. For OTM options this is key, as the entire option is made up of Extrinsic Value.

We buy an OTM only when we believe that there is very strong chance of OTM to become in-money.

A vechile runs faster when running on a platform having less friction coefficient and when friction increases ie. running on sand for example, its speed decreases. You can compare this friction with time decay for options.

This friction is max. near expiry so its reco. not to buy an option after 20th of the current month.

Will suggest you to use a option calculator to calculate your risks-reward ratio before taking a decision for trade and be a regular visitor to nseindia->option-chain segment to see whats happening in options space.

Download options data for Nifty or the stock of your choice for the last 3 month of 3-4 strike prices. (One AT money or near money,one OTM, one ITM)
to see and understand the movement. Also keep the corresponding chart for the month side by side to understand its movement vis `a vis corresponding options strike price movement. You can also add/modify some indicators to see its effectiveness etc.

Being a self learner I followed the above myself and have found it useful.

Hope above helps.

Regards

 

[msunny31]

Dear Sunny,

Current months expiry is next week so Oct options will loose its premium and so 5100 calls as there is less chances of Nifty to cross 5100 level strongly by monthend.

Time decay is a crucial component traders consider when deciding when/where to buy or sell options. Time decay (Extrinsic Value ) is represented by Theta. Lets not go into these Greeks. An options time to maturity (or time to expiration) has a huge impact on the price of the option. That is, as the option moves closer to expiry (i.e. running out of time) its chances of becoming more profitable decrease with every passing day. As you can probably imagine, predicting an approximate stock price becomes easier every day. For example, you will have a much greater chance of predicting tomorrows closing price of Reliance Industries or Bharti or stock that you closely track than you will of predicting next Fridays closing price.

Because of this, the Time Value of an option decreases exponentially as the maturity date approaches - especially as the time to maturity passes near last Thrusday of current month. For OTM options this is key, as the entire option is made up of Extrinsic Value.

We buy an OTM only when we believe that there is very strong chance of OTM to become in-money.

A vehicle runs faster when running on a platform having less friction coefficient and when friction increases ie. running on sand for example, its speed decreases. You can compare this friction with time decay for options.

This friction is max. near expiry so its reco. not to buy an option after 20th of the current month.

Will suggest you to use a option calculator to calculate your risks-reward ratio before taking a decision for trade and be a regular visitor to nseindia->option-chain segment to see whats happening in options space.

Download options data for Nifty or the stock of your choice for the last 3 month of 3-4 strike prices. (One AT money or near money,one OTM, one ITM)
to see and understand the movement. Also keep the corresponding chart for the month side by side to understand its movement vis `a vis corresponding options strike price movement. You can also add/modify some indicators to see its effectiveness etc.

Being a self learner I followed the above myself and have found it useful.

Hope above helps.

Regards

Thank u very much Ghosh Sir. Will follow the above said before making my next Call on options.

 

[sprintravi75]

Hi sprintravi75,

Thanks for ur reply.

Is there any possibility for the 5100 Call current value to go from 20 to 30 even if market goes up by 50 or more points?
Observation: On Friday 23rd Oct, even though the market was up by 40 points in the morning, the 5100 call value was struggling to go beyond 30.

Is there any post/topic in these forums which explain about time decay of value?

Ghosh Sir, waiting for ur reply too on this!

Appreciate all ur help.
Thanks,

unny

dear sunny,

no, it will not go to that level, and option value is based on many factor. try to cut your loss. you can search for the topic.