swagat86 said:
example
NOW I SELL TWO OPTIONS
1) OPT-TISCO-27-Jul-2006-520-CA Premium Value : 19,237.50
ONCE DONE WITH I EVEN SQUARE OFF THE OPTIONS
NOW LETS FIND THE p/L
STOCK PRICE GOES DOWN TO 510
BEING A SELLER OF THE PUT
I WILL HAVE TO PAY 675*10=6750
THIS WILL BE MITIGATED WITH THE SELL ORDER THAT I HAV PLACED IN THE CASH MARKET
AND THE CALL OPTION WONT BE AFFECTED
Swagat
(See Vince's clarifications in preceding posts .. implying that u need to square off each option EOD instead of hoping it to be assigned)
Since u will need to square off each option, 'best offer' rates at EOD will be applicable
See attachment to get an idea of the bid/offer spread
So the cheapest rate u can buy back the call is Rs 125 !! despite market having gone in yr favour. And u sold the call at 46 ?
But lets be fair ... lets assume that all calls are highly liquid and the Bid/offer spread is negligible (maybe 10 yrs from now we would have reached that mature state for market leaders like TISCO) , if u work out yr bottom line, I doubt if it will be positive.
Like I suggested earlier, try work out the exercise in Excel ... and check yr brokerage assumptions pl (also do not forget the margin requirements for sale of the options ... though this does not impact yr bottom line but only yr liquidity)
Cheers
AGILENT
PS Vince ... trust u will corroborate ... thanks