Option Exercise

muralisankars · #1 16th February 2009, 05:11 PM

HI,

If I am a Option Seller. And some of the Option buyer with the same strike price & Same Expiry date is Exercising the option, then How can I intimated that the My Option is Exercised?

And how this Option Seller is Getting identified?

Thanks in Advance.

Alchemist · #2 16th February 2009, 05:38 PM

Quote:

Originally Posted by muralisankars

HI,

If I am a Option Seller. And some of the Option buyer with the same strike price & Same Expiry date is Exercising the option, then How can I intimated that the My Option is Exercised?

And how this Option Seller is Getting identified?

Thanks in Advance.

Your broker will let you know if an option that you sold is exercised.

The exchanges select option sellers on random basis.

Quote:

The assignment of the option on stocks exercised by the buyer is random. This means, if the option holder decides to exercise his option before the call option expires, the stock exchange would randomly assign the option to one of the sellers

Source.

muralisankars · #3 17th February 2009, 08:42 AM

Quote:

Originally Posted by Alchemist

Your broker will let you know if an option that you sold is exercised.

Whether the broker will let me know in Online or offline (say next day or something like that) ?

Because If I want to do this option trading for my hedging purpose, then I may need to know it online. So, that I can take that appropriate step after that.

Thanks in Advance.

Alchemist · #4 17th February 2009, 08:44 AM

Quote:

Originally Posted by muralisankars

Whether the broker will let me know in Online or offline (say next day or something like that) ?

Because If I want to do this option trading for my hedging purpose, then I may need to know it online. So, that I can take that appropriate step after that.

Thanks in Advance.

that depends on your broker.

who is your broker?

only deep-in-the-money are exercised.

otherwise option buyers prefer to sell the options in the open market, so that they can get the "time value' too.

muralisankars · #5 17th February 2009, 08:49 AM

Quote:

Originally Posted by Alchemist

that depends on your broker.

who is your broker?

only deep-in-the-money are exercised.

otherwise option buyers prefer to sell the options in the open market, so that they can get the "time value' too.

I am having HDFC Securities....

Where Can I see whether HDFC Securities, When will they Inform as?

And what does below quotes means?

Quote:

The options writer has to pay initial and market-to-market margins on the value of options (including strike price) sold.

Alchemist · #6 17th February 2009, 04:50 PM

Quote:

Originally Posted by muralisankars

I am having HDFC Securities....

Where Can I see whether HDFC Securities, When will they Inform as?

And what does below quotes means?

I am not sure, but I think you will get an email.

Large brokerage houses don't call retail clients in such matters.

===============================

As far as margins are concerned, writing an option is similar to a futures position.

the initial margin has to be maintained - even when you have a profit in the position.

mtm margin covers any loss that your option position may be having.

the broker will add initial and mtm margins and then ask for the net figure.

muralisankars · #7 17th February 2009, 05:14 PM

Quote:

Originally Posted by Alchemist

I am not sure, but I think you will get an email.

Large brokerage houses don't call retail clients in such matters.

===============================

As far as margins are concerned, writing an option is similar to a futures position.

the initial margin has to be maintained - even when you have a profit in the position.

mtm margin covers any loss that your option position may be having.

the broker will add initial and mtm margins and then ask for the net figure.

Thanks Alchemist...

Is there min/max percentage for intial Margin?

Alchemist · #8 17th February 2009, 05:45 PM

Quote:

Originally Posted by muralisankars

Thanks Alchemist...

Is there min/max percentage for initial Margin?

margins keep changing.

The margins can exceed 100% in periods of extremely volatility.

I think the minimum margin for selling stock options is 7.5%.

see this link.

http://nseindia.com/content/nsccl/ns...parameters.htm

rajivka · #9 20th January 2010, 06:34 PM

Is it necessary to exercise option, if the option is in money.

Suppose I buy 1 lot (lot size 200 shares) of Infosys PA-2600. If the closing price is 2599. I will get Rs 1 per share on exercise. So I will get Rs 200.

But the expenses of exercising the option will be:
STT : 650(2600 * 200 * .125/100)
Brokerage: Around Rs 260(2600 * 200 * .05/100).

So I need to pay around 910 to get 200. Nobody will want to exercise this option.

Alchemist · #10 20th January 2010, 06:40 PM

Quote:

Originally Posted by rajivka

Is it necessary to exercise option, if the option is in money.

No.

The exchanges will settle the open position.

All in-the-money options are cash-settled on expiry.

muralisankars · #11 30th January 2010, 08:09 AM

Quote:

Originally Posted by Alchemist

All in-the-money options are cash-settled on expiry.

so, In the previous example he will get 100 rupees without any deductions????

rajivka · #12 30th January 2010, 01:45 PM

No, I will get Rs 200 if my option is in money. But I need to pay STT of Rs 650 and brokerage of Rs 260. So I need to pay Rs 710 for my in-money option.

So I conclude maximum loss is not limited to the premium paid + brokerage at the time of purchase. There can be more losses, if the option is slightly in the money.