Table of Contents
How much should I sell put options?
The average size of a recommended trade is about $6,000, and they range from $4,000 to $10,000. Because you have to buy at least 100 shares, or have cash set aside with your broker to buy it in the case of selling puts, you’re looking at committing at least $5,000 to any stock that trades for $50 per share and above.
How much money can you lose selling a put option?
Potential losses could exceed any initial investment and could amount to as much as the entire value of the stock, if the underlying stock price went to $0. In this example, the put seller could lose as much as $5,000 ($50 strike price paid x 100 shares) if the underlying stock went to $0 (as seen in the graph).
Is it better to sell puts or calls?
When you buy a put option, your total liability is limited to the option premium paid. That is your maximum loss. However, when you sell a call option, the potential loss can be unlimited. If you are playing for a rise in volatility, then buying a put option is the better choice.
Why are Nifty options worthless now?
The futures and options traders sold Nifty options across 7300 to 8000 strikes, whose premiums or prices have since fallen, making these options worthless. MUMBAI: In a lacklustre market, savvy derivatives traders have pocketed tidy profits by selling Nifty options a fortnight ago as premiums have since then fallen sharply.
What is a nifty put option?
Similarly, a Nifty put gives its buyer the right to sell the index. A seller of the options is obliged to give or take delivery of Nifty from the buyers. In practice index futures are cash settled, like their European counterparts. 2.
Moreover, we also maximized the premium by timing the trade perfectly. Another thing that can be done is that as the Nifty nears a resistance, we can also sell Calls before expiry and get even more profits.
What happens if Nifty Futures fall to 10600?
If the Nifty futures fall to 10600, B sells the futures to A for 10700 even though Nifty trades at 10600, which means the buyer faces a Rs 100 a share loss. As opposed to buying a futures contract, A can buy a 10700 call option on Nifty by paying a premium of Rs 200 (closing price on Friday) per share.