PLease help with F&O

[narayana.g]

hi,

what if we bought a call option contract and sold when the market price was less than the strike price what will happen.

Answering you qs one by one:
Futures and options are for trading and nothing more than that. If you believe that future price of, say, company XYZ will rise in the comming 2-3 months, you buy 2M or 3M call option in XYZ and if you believe that price will fall, you sell put option. Futures are also same. From the practical point of view, you can exercise an option any time within the expiry date, whereas futures are to be exercised only on the expiry date.

There is no such factor like one is better for making money while the other is not.

The time horizon you'll choose will depend on the time span you're studing the underlying asset upon. If all your analysis pertain to one month rise/fall in the value of the underlying asset you'll buy/sell 1M options and so on. But as a beginner, it's always good to focus on the short term. If afterwards, before the expiry date, you feel that you can afford to hold on to your investment with the hope of greater returns. you can always rollover your contract.

Strike price is simply the price at which you, being the buyer of the call option,wish to buy the asset. Say, Infosys which is trading today at Rs 1810 has 3 call options, @ 1760, 1810, 1860 for 1M, 2M and 3M. And you buy 50 contracts of Infy at 1810 strike price @ 150 premium for 2M. If now, after 15 days, Infy rises to Rs 2000, and you want to ecercise the call, you'll gain Rs (2000-1810-150)*100*50 = Rs 2,00,000. And suppose you want to wait till the expiry of the option in the hope that the price will burgeon further. But it plummets down. Then you definitely will let the contract lapsein which case you'll loose the premium paid on the contract.

When u r placing contracts, your call option will always be matched with a put option. So you have to give it some maximum waiting time or queing time before getting lapsed. If you choose the GFD option, it means Good for the Day which implies that your passive contract will be in the queue for the whole day and as soon as it gets a match it'll transform itself into an active contract. On the other hand, IOC means if the match is not found then and there, it'll get lapsed immediately.

Market price: You choose to buy the contract outright at the price prevalent in the market.
Limit price: Suppose you keep Rs X as the limit price, the contract will be bought/sold if the trading price is below/above Rs X.
Trigger: Say you put a trigger of Rs Y on a security. It means, your order will get triggered to the exchange once the security trades at the price Y.
Hope this clears your doubts.

 

[rkkarnani]

Hello,
As a investor in the stock market I would really like to know exactly how to trade in the F&O segment. Can any of the senior members please provide a series of tutorials on the F&O rules regulations etc. ? My broker cheated me recently when I tried to trade in the F&O segment , making me pay for mark to market losses though I had more than enough margin. It was only after the experience that I learned brokers cant do that unless I square off my position. So please someone help this novice with a detailed explanation of all the rules ( what is the margin req, when I need to pay the broker if I have suffered a loss in my trade etc etc). Any links also wld be appreciated. I just want to know. I am being ripped off by my broker . With a 3 mn Rupees portfolio I am not allowed to trade in F&O

You may try out this :
Step by step learning ... the link if from 4 shared dot com... click the link and then in address bar change the asterix to 4 shared dot com to get the link ....
Feel it to be good for starters!!!

http://www.************/account/file/44137389/8397b5a5/Step_By_Step_Learning.html

or remove the space from the following lonk :

www. 4 shared. com/account/file/44137389/8397b5a5/Step_By_Step_Learning.html

 

[rkkarnani]

hi,

what if we bought a call option contract and sold when the market price was less than the strike price what will happen.

All depends on the mkt price at which u are able to sell it!!! You gain / loose the price difference between your buy and sell rates!!!

In case you hold on to the contract till expiry and the underlying closes at lower than the strike price, all you loose is the premium u paid to acquire the CALL option!!! You do not have to pay anything more!!!

The CMP of Reliance is 2100.00. You buy a Reliance Call of strike price 2200 at Rs.10.00 The current rates are 2100.00 and on derivative close Reliance closes at 1900/- You simply loose the Rs.10/- you paid as the premium to get the Call option.

The CMP of Relaince is 2000.00 You Buy a Call of strike price Rs.2000.00 at Rs.100/- The price of reliance falls to Rs.1900.00 , the price of Call shall also fall. This fall shall depend on Market volatility and the time of the month, i.e. days remaining to expiry. If you sell it at say Rs. 60.00 u loose Rs.40/- (100 minus 60) The current mkt price of Reliance has no bearing on your profit or loss directly, the CMP affects the price of the Call and hence your P/L.

 

[rkkarnani]

Hello Amrita,
If you have problem with your broker, better change.
Trading in futures is easy and profitable. For example IFCI (lot size 7875) was trading at Rs56 on 2nd august and rose to 60 plus the next day. So a profit of Rs4 multiply 7875 equals Rs 31500 is the gross profit. Still need more explanation ? I can help

Can you please elaborate the highlighted portion!!!
FnO is easy and profitable!!! May agree to this statement but is it also :

EASILY PROFITABLE!!!!

Regards
R K Karnani

 

[swati23]

From the practical point of view, you can exercise an option any time within the expiry date, whereas futures are to be exercised only on the expiry date.

What does the above statement mean? We can square off a futures lot only on expiry day?

Answering you qs one by one:
Futures and options are for trading and nothing more than that. If you believe that future price of, say, company XYZ will rise in the comming 2-3 months, you buy 2M or 3M call option in XYZ and if you believe that price will fall, you sell put option. Futures are also same. From the practical point of view, you can exercise an option any time within the expiry date, whereas futures are to be exercised only on the expiry date.

There is no such factor like one is better for making money while the other is not.

The time horizon you'll choose will depend on the time span you're studing the underlying asset upon. If all your analysis pertain to one month rise/fall in the value of the underlying asset you'll buy/sell 1M options and so on. But as a beginner, it's always good to focus on the short term. If afterwards, before the expiry date, you feel that you can afford to hold on to your investment with the hope of greater returns. you can always rollover your contract.

Strike price is simply the price at which you, being the buyer of the call option,wish to buy the asset. Say, Infosys which is trading today at Rs 1810 has 3 call options, @ 1760, 1810, 1860 for 1M, 2M and 3M. And you buy 50 contracts of Infy at 1810 strike price @ 150 premium for 2M. If now, after 15 days, Infy rises to Rs 2000, and you want to ecercise the call, you'll gain Rs (2000-1810-150)*100*50 = Rs 2,00,000. And suppose you want to wait till the expiry of the option in the hope that the price will burgeon further. But it plummets down. Then you definitely will let the contract lapsein which case you'll loose the premium paid on the contract.

When u r placing contracts, your call option will always be matched with a put option. So you have to give it some maximum waiting time or queing time before getting lapsed. If you choose the GFD option, it means Good for the Day which implies that your passive contract will be in the queue for the whole day and as soon as it gets a match it'll transform itself into an active contract. On the other hand, IOC means if the match is not found then and there, it'll get lapsed immediately.

Market price: You choose to buy the contract outright at the price prevalent in the market.
Limit price: Suppose you keep Rs X as the limit price, the contract will be bought/sold if the trading price is below/above Rs X.
Trigger: Say you put a trigger of Rs Y on a security. It means, your order will get triggered to the exchange once the security trades at the price Y.
Hope this clears your doubts.

 

[desikid123]

this thread has definitely cleared lot of questions i had..... but all this talk sounds like one side of coin....

my question is; why would one will be so generous to traders, where you get 1M, 2M or 3M price garranty plus you pay just a small premium till price becomes favorable.

i mean how does this work... wats the whole picture look like

many thank for all the inputs guys

keep educating:clap::clapping::thumb:

 

[mangoinvestor]

I also have issues with "SHAREKHAN". It is of very serious nature. They closed my DP account with them. There after did scrupulous trading in my account. My account with them since 2003. Issues since 2009. At no time shares transferred to BODP.

Gross failure of compliance on the part of broking member. Matter being pursued through SEBI.

 

[tradedatrend]

:clapping: :clapping: :clapping:
Sir you will make people billionaire (not just millionaire)

and if you believe that price will fall, you sell put option

 

[tradedatrend]

You can square off future also at any day/time before expiry!

From the practical point of view, you can exercise an option any time within the expiry date, whereas futures are to be exercised only on the expiry date.

What does the above statement mean? We can square off a futures lot only on expiry day?