Sh
can you elaborate how much money to be spent if one buy a put and short a put, hope u understand question.
thanks
anil
The margin requirement for selling options is similar to what is required for futures (around 30 thousand per lot). It also depends on which strike price you are selling and which broker you are using.
For example to sell 1 lots 6600 PE at 187 required around 30 thousand margin. Nifty spot went up by around 80 points after I sold puts, so I bought it back at 132 yesterday so made 55 points profit (Rs 2750). So profit of Rs 2750 on 30 thousand margin is arounf 9% returns on investment within one week.
However imagine if mkts would have fallen 80 points after I had sold, I would have lost only 25-30 points (and not 55 points) ..so losses are smaller.
Live example is mkts have fallen in last 2 days and are back to almost the same level at which they were when I had sold the puts, however now the put is trading at 146 (40 points profit even when mkts are still at the same level).
You need to be abnormally bad trader to lose money while selling options in the long term.
Cheers
SH