option trade techniques stock futures option trading options trading software

3. Short selling “Deep in the money calls and puts” (low risk high profits)

The example of “deep in the money call” is like suppose if Nifty Index is trading at 2500 then “deep in the money call” would be 2800, 2900, 3000 etc.
The example of “deep in the money put” is like suppose if Nifty Index is trading at 3000 then “deep in the money put” would be 2700, 2800, 2500 etc.

Generally “deep in the money calls and puts” carry very high price.

If Nifty Index or particular stock is expected to move down sharply in coming weeks or in coming days then short selling these high premium calls and puts provide good returns.

For example - Suppose if Nifty is trading at 3200 and “deep in the money call at strike price 3600, costs at Rs.350 and if you have short sell it, the profit would be good.
As the Nifty moves in downward direction away from your strike price, which is at 3600, your profits will keep on increasing.
The maximum profit would be Rs.350 x 50 (one lot of Nifty) = 17,500 when your call expires.

You have done short sell taking into consideration that Nifty Index would move down sharply in next couple of weeks or in coming days and if the Nifty moves as you predicted, they you would reap good profits . The maximum profit (17,500) you can get when Nifty moves very sharply down and your call expires.

Please note - For short selling options future derivatives margin is required.

Short selling “deep in the money put”
Suppose if Nifty is trading at 2800 and the deep in the money put at strike price 2500 is at 300.
If you are expecting Nifty to go up in next couple of weeks or days then you can short sell above “deep in the money put” and you would get good returns if Nifty turns as you expected.

As Nifty moves in upper direction, away from your strike price (which is at 2500), you will start getting profits into your account.
So the maximum profit you can gain is Rs.300 x 50 (quantities) = Rs.15,000, if your put expires if Nifty moves sharply in upper direction.

Please note - It’s very rare case of where Nifty “deep in the money calls and puts” get expired unless Nifty moved very sharply in expected direction, so instead of waiting to expire your deep in the money calls and puts book your profits whenever applicable.

Disclaimer: Information presented on this site is a guide only. It may not necessarily be correct and is not intended to be taken as financial advice nor has it been prepared with regard to the individual investment needs and objectives or financial situation of any particular person. Stock quotes are believed to be accurate and correctly dated, but www.daytradingshares.com does not warrant or guarantee their accuracy or date.
www.daytradingshares.com takes no responsibility for any investment decisions based on recommendations provided on website.
Financial contents like Technical charts, historical charts and quotes are taken from NSE and Yahoo sites.
Note - All quotes are delayed by 15 minutes and unless specified.
Please read at www.daytradingshares.com/disclaimer.php before using any material or advice given at www.daytradingshares.com
Copyright © 2009 DayTradingShares.com. All Rights Reserved.

option trading
options trading
options trade
option trading stock
online option trading
option trade
stock options trading
futures options trading
how to trade options
online options trading
option trading software
options trading software

options trading strategies
currency options trading
day trading options
forex options trading
option trading strategies
option trading system
futures and options trading
options trading software
options trading system
commodity option trading
options paper trading
options trading strategy

commodity options trading
learn options trading
options trading course
nifty option trading
options trading education
option trading education
options trading systems
options trading training
call option trading
day trade options
future and option trading
options trading strategies

options and futures
options information
options market
options on futures
options pricing
options quotes
options strategies
options strategy
options trade
options trader
options trading
put options