Is selling calls of higher strikes prices a profitable strategy
hey prem, it might look tempting to sell the options and book the premium however it might not be the safest thing to do so… the maximum profit one can enjoy is the premium on the option while the losses are huge (in case of sellin a put) and unlimited (in case of calls)…one should also remember that index options are of European type, settled at expiry…. the markets have also been at their volatile best and noone can guarantee the direction and degree of their movement perfectly…. i feel that one may sell an option but also take a corresponding position to hedge the risk, eg - sell the call and buy futures vice versa… its also better to do a thorough homework to predict the movement of the markets before selling an option… Seniors pls share your views too..
Regards,
On 9/12/07, Prem K Agarwal wrote: > > > For example: > > the nifty 4750 call was traded at 25-30 rupees. sep 07 > expiry… > > as nifty gather strengths to say about 4650-4700 range > this call can become 50-60 rupees > > at that time we can sell it and get the option > premium.. > > our breakeven will be at 4800-4810 … which is very > unlikeky levels for nifty closing on the expiry day > > this i am telling becaue one of the renowned teachers > of Management & Financial Accounting subject of CA > final level , told while explaining Derivatives > Chapter that most of the time it is option seller who > makes the money… > > Senoirs Please Analyse…. and suggest > > Regards, > Prem K Jasrapuriya > > > > > > > ____________________________________________________________________________________ > Building a website is a piece of cake. Yahoo! Small Business gives you all > the tools to get online. > http://smallbusiness.yahoo.com/webhosting > > > >
