Picking up nickels in front of steamroller!!

[jvblogger]

As it was year ending ,I could not sum up the outcome of Option Selling for April'10 series.

I am getting around 4% monthly return on the collateral used as margin, which I believe is decent return. I have found that one NIFTY option needs to fetch premium of anywhere between Rs. 16 to 20 to have 4% return on the margin used for one NIFTY lot depending upon the exposure allowed by the broker.

I have found the May series the most volatile since I have started option selling. It requires constant shuffling of positions. But gives good opportunities to sell put options as far as 4100-4200 for June series.

 

[spiritunit]

I like to know, is it require more margin money to take a position selling/writing option or the same price as buying call/put?

 

[jvblogger]

Yes, it does!! Check the attached sheet to view the amount utilized towards margin by Sharekhan! Margin percentage may vary from broker to broker!

 

[spiritunit]

But I found only stocks and indices in the excel sheet, I really like to know the margin money for selling/writing in OPTIONS

for eg. since you're doing selling/writing in options, for a 4900 PE (current market price @ Rs.62) If I like to take a position as selling/writing at this strike price, what is the margin I required? (I have sharekhan and RKGlobal a/c's)

 

[jvblogger]

Thanks for your interest!

The margins shown in the sheet are of Options for stocks/indices.

For one lot of NIFTY 4900 PE around margin of Rs.17-18000 would be required/blocked by your broker.

However, I would strongly advice not to sell 4900 PE , unless you have been foretold by any mystic man that NIFTY would close about 4900 at the expiry. You might find it tempting to pocket Rs.3000/Rs.60 in three days but , DONT DO THAT, or you will end up in cursing Option Selling unnecessarily.

Ordinarily I place trade for far OTM put/call before a month or more. In option selling it is all about encashing the time value of an option.

You might want to try your hands on 4100 PE for June series with premium of around Rs. 17. With bit more risk you might want to sell June 4200 PE at Rs. 23-00.

Option selling is not about hitting jackpot, but a game of patience, where you wait for time to expire for the option you have sold without going it into ITM.

Enter into option selling with careful research and an risk management in place.

 

[spiritunit]

Thanks for the advice, I just tried with sharekhan about writing/selling an option, but it shows error as "Customer is not allowed to place an sell Option. He can place only for Squareoff" (I don't hold any positions in options now) I am confused how can I squareoff without having any positions!!

For one lot of NIFTY 4900 PE around margin of Rs.17-18000 would be required/blocked by your broker.

How this calculation is made? what are the charges for other strike prices? would be the same amount (Rs.17-18000) or depends upon the price movements?

 

[jvblogger]

Thanks for the advice, I just tried with sharekhan about writing/selling an option, but it shows error as "Customer is not allowed to place an sell Option. He can place only for Squareoff" (I don't hold any positions in options now) I am confused how can I squareoff without having any positions!!

How this calculation is made? what are the charges for other strike prices? would be the same amount (Rs.17-18000) or depends upon the price movements?

Possibly your broker is not allowing you to sell naked option. You might have to talk with the broker to do that. Often it is brokers who discourage the customer from option selling as option selling also involve risk for brokers as well. What the error says that your allowed to sell the option you possibly have bought by the way of squaring off.

The calculation is made on the strike price of NIFTY option and % of exposure allowed by the broker; you select 4900 PE then :

4900 x 50 (nifty unit) = Rs. 2,45,000-00 x (7%/100) = Rs. 17,150 is required margin.

Margin is calculated on the strike price.

 

[paisapaisa]

Hi All,

Please suggest me on the performace of RK Global trading site.... I have observed that this site is very slow, if any one has account with RKGLOBAl, please suggest me if this worthy to open account ?

 

[jvblogger]

Hi All,

Please suggest me on the performace of RK Global trading site.... I have observed that this site is very slow, if any one has account with RKGLOBAl, please suggest me if this worthy to open account ?

Sorry I have no experience with RK Global. But I would advise to avoid it, as it is small player in the broking business. Rather you should opt for bigger and established player.

 

[MaxX]

I follow a very similar strategy to yours jv. I have a question for you, do you continue to sell options even when VIX is low as one has to sells closer options as premiums are lower?

I faced this issue at the end of last month with VIX's at super low levels.. still managed to scrape through this month though due to today's rise... too close for comfort though!