Options (New Order in Sharekhan)

#1
Hi Guys

After reading many threads here on options I think understand how the option works. So I move on to see how this works in my online trading portal from sharekhan. I have the below info to fill in the form. Please guide me here:

1. Select underlying: Easy, just the stock or index you want to trade.
2. Instrument: Easy, options or futures. Options for now.
3. Option type[CE / PE]: CE for 'call' and PE for 'put' I guess.
4. Contract[date]: I see many dates under the drop down menu. Jan-27-2011; Feb-24-2011; Mar-31-2011 upto Dec-31-2015]. Need help on this.
5. Strike price: Price of stock I am buying the option for. I have selected Nifty as the underlying. Strike price is a drop down from 4400 to 7800 in increments of 100. Can I not select any number for my strike price?
6. Qty: Easy. Quantity I want to buy.
7. Order type: Buy / Sell. Sell is when I want to exercise the option. right?
8. Trigger price: Guess its the premium I am willing to pay. correct?
 

Alchemist

Administrator
Staff member
#2
4. What help do you need with the contract date?

Those are the expiry dates.

If you want to trade an option of current series (expiring 27th January), select 27th January.

If you want to trade an option of the next series (expiring 24th February), select 24th February.

5. Are you sure you know what "Strike Price" means?

If you have bought a 1100 call of Reliance, the call option will give you the right to buy Reliance at Rs 1100 per share. For this option, 1100 is the "Strike Price".

If you want to buy options of different strike prices, you will have to place separate orders for each strike price.

7. "Sell an option" means to write a new option or sell an option that you have already bought.

"Exercising" an option is totally different concept.

Presently all index/stock options in India are European-style and thus there is no question of exercising an option.

8. Trigger price is for stop-loss orders. You know how to place a stop-loss order?

------------------------------------------------

I think you still don't fully understand the working of options market.

I suggest you spend some more time on understanding the basic terms and concepts.
 
#3
4. What help do you need with the contract date?

Those are the expiry dates.

If you want to trade an option of current series (expiring 27th January), select 27th January.

If you want to trade an option of the next series (expiring 24th February), select 24th February.
I see dates up to 2015. Can we trade options of shares so far into the future?
5. Are you sure you know what "Strike Price" means?

If you have bought a 1100 call of Reliance, the call option will give you the right to buy Reliance at Rs 1100 per share. For this option, 1100 is the "Strike Price".

If you want to buy options of different strike prices, you will have to place separate orders for each strike price.
Yes. I think I understand strike price.
So here, say I want to buy Nifty call option at 5750. I cannot do that because strike prices are in 100 increments. So I have to buy option for 5700 or 5800 only. Is that sharekhan rule? Is this rule for all stocks?
7. "Sell an option" means to write a new option or sell an option that you have already bought.

"Exercising" an option is totally different concept.

Presently all index/stock options in India are European-style and thus there is no question of exercising an option.
Ok. thanks.
8. Trigger price is for stop-loss orders. You know how to place a stop-loss order?
Yes. I am quite familiar with stop loss.
I think you still don't fully understand the working of options market.

I suggest you spend some more time on understanding the basic terms and concepts.
Sure. I am just starting to look into the derivatives. This was just for my learning. Still some way to go before I actually start trading.

Its not as bad as I thought it was :D.

Next up is futures :).

Thank you Alchemist.
 

Alchemist

Administrator
Staff member
#4
I see dates up to 2015. Can we trade options of shares so far into the future?

So here, say I want to buy Nifty call option at 5750. I cannot do that because strike prices are in 100 increments. So I have to buy option for 5700 or 5800 only. Is that sharekhan rule? Is this rule for all stocks?
Besides options for the 3 closest expiries, the following long-term options are available for Nifty:

Next 3 quarterly expiries.

e.g.

Besides January, February, March series, currently, you can trade options with expiry in June 2011, September 2011 and December 2011.

Next 8 half-yearly expiries.

Currently, you can trade June 2012, December 2012, June 2013, December 2013, June 2014, December 2014, June 2015, December 2015 series.

Thus total available series for Nifty = 3 + 3 + 8 = 14.

http://nseindia.com/marketinfo/fo/optionKeys.jsp?symbol=NIFTY&instrument=OPTIDX&date=27JAN2011

For stocks, only nearest 3 series are available.

For indices whose value is above 2000, strike prices in multiples of 100 are only available.

NSE - F&O - S&P CNX Nifty Options
 
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