Rules for Options

Buy (Call/Put)
Profit is Unlimited
Losses are limited to premium paid
Call Buy = Expect market to go up
Put Buy = Expect market to go down
Nifty = 18000
Buy = 17900 call
Premium = 150
Lot size = 50.
100 -150 = -50*50 = 2500 Loss
1. Malay has bought a Put option @ Rs 20. Spot price is trading at 700 & strike
price is 670. Lot size for the same is 1000. Calculate the Profit/Loss.
Expectation is not met. Hence loss will be limited to Rs 20(Premium)
Loss = 20*1000= 20,000/-
1. Aditya Raj bought a call option at a strike price of Rs 22000. He bought it at
Rs 120. Spot price is 22500 & the lot size is 25. Calculate the Profit & Loss.
500 -120 = 380*25 = 9500 Rs Profit.
Aditya Sawant bought a Put @ 45 when strike price is 3500 & Spot is 4000. Lot
Size is 100.

Loss limited to premium = 45*100 = 4500/-

1. Anish bought a call option @ Rs 40. Strike is 1000 & Spot price is 1140. Lot
size is 500.
1. 40= 100*500= 50,000/- Profit.
1. Ankita bought a call option. Spot Price is 700. Strike Price is 670. Premium is
Rs 30. Lot Size is 830.
30 - 30 = 0*830 = 0 (No profit no loss).
1. Apurv bought a Put. Strike Price is 9000, Premium is 100, Spot price is 9000.
Lot size is 75.
Loss limited to premium = 100*75 = 7500/-
Selling of an option
Profit is limited to premium received
Losses are unlimited.
Sell Call = Do not expect market to go up
Sell Put = Do not expect market to go down.

1. Devesh sold a call of strike price 1000 @ Rs 40. Spot price is 980. Lot size is
500.
Profit is limited to premium received = 40 *500= 20,000/- Profit.
1. Ganesh sold a Put @ Rs 100. Spot Price is 2000 & Strike price 1100. Lot size
is 600.
Profit is limited to premium received = 100*600 = 60,000/-
1. Geet sold a Put @ Rs 170. Spot Price is 12500 & . Strike price is 12850 & lot
size is 20.
-350+170= -180*20 = 3600 Loss.

1. Harshada sold a call at strike price of 4000. Spot price is 4200 & lot size is
150. Premium for the same is Rs 470.
-200+470 = 270*150 = 40500 Profit.
1. Harshal sold a put @ Rs 10. Strike price is 4000 & Lot size is 100. Spot price
is 3950.
-50+10= -40 *100 = 4000 Loss.

Combined buying & selling option

Jyoti sold a call @ Rs 70. Strike Price is 700, Spot Price is 730 & Lot size is 700.
-30+70 = 40*700 = 28000 Profit.
Khushal buys a put. Lot size is 600. Strike price is 800 & premium is 50. Spot price
is 870.
-50*600= 30000 Loss.
Khushbu buys a call. Spot price = 600. Lot size 600. Premium 70. Strike price = 800
Maximum loss is premium
= 70*600 = 42000/- Loss
Laxmi sells a put.
Spot= 4200
Strike = 4400
Lot size = 200
Premium = 200

-200+200 =0 No profit no loss

Madhika buys a call

Strike = 3000
Spot = 3070
Premium= 100
Lot size = 2000
70-100= -30*2000= 60000 Loss
Ahmad sells a call
Strike = 6200
Spot = 6400
Premium= 150
Lot size = 100
-200+150 =-50*100 = 5000 Loss
In the money/At the money/Out of the money.
In the money = Expectation is fulfilled
At the money = Strike price= Spot price
Out of the money = Expectation is not fulfilled

Strike price = 4000

Spot Price = 4200
Type = Call

A put is said to be out of the money if _______

Spot is greater than strike

Strike is equal to spot
Strike is greater than spot

Neelam buys a call with a strike price of 1000. Spot price is 1300 & the premium is
Rs 10. The call is In the Money

Neeraj buys a put with a spot price of 3700. Strike Price is 3600
This is Out of the money.

A call is said to be In the money if Spot is greater than strike/ Strike is smaller than
Spot.
18000 Spot Price
17900 Strike Price

A put is said to be In the money if Strike is greater than Spot/ Spot is lesser than
strike.
36000 Strike
35800 Spot
Intrinsic value/Time Value
Premium = Intrinsic Value + Time Value.
Intrinsic Value & Time Value can never be negative. They can be either zero or
Positive.
Intrinsic value is the amount by which my expectation has got fulfilled.
Strike Price = 3000
Spot Price = 3200
Type = Call
Premium = 270

Neetu buys a Call @Rs 450. Spot Price is 4000 & Strike Price is 3800.

Intrinsic Value = 200

Premium = 450
Time value = 450- 200 = 250.
Pooja buys a Put. Strike Price is 200 & Spot Price is 240. Premium is 10.
Intrinsic Value = 0
Premium = 10
Time value = 10
An option which is out of the money will have an Intrinsic Value as 0
Pooja buys a call @ Rs 20. Strike price is 400 & spot price is 400.
Intrinsic Value = 0
Premium = 20
Time value = 20

Delta = Change in Value of premium with respect to change in value of underlying

Asset
Gamma= Change in Delta with respect to change in value of underlying Asset
Vega = Change in Volatility with respect to change in value of underlying Asset
Theta = Change in Time to Expiration with respect to change in value of
underlying Asset
Rho = Change in Risk Free Interest rate with respect to change in value of
underlying Asset.

Call Put
Increase in Delta Increase Decrease
Increase in Gamma Increase Decrease
Increase in Vega Increase Increase
Decrease in Theta Decrease Decrease
Increase in Rho Increase Decrease
Futures
Contract Value = Future Price * Lot Size
Initial Margin calculation = Contract Value* Initial margin %.
Pranshi wants to buy a future contract.
Future Price = 2000
Lot size = 400
Margin required = 25%.
Initial Margin = 2000*400*25%= 2 lakh.

Mr A wants to buy three contracts & Mr B wants to sell 3 contracts.

Lot size for the same is 600. Future price is 6800 for Mr A & 8000 for Mr B.
Margin required is 20%.
Mr A = 6800*600*3*20% = 24,48,000
Mr B = 8000*600*3*20% = 28,80,000
Total Initial Margin required = 53,28,000/-

Mark to Market Margin

Profit/Loss for the client.
Pranshi wants to buy a future contract.
Future Price = 2000
Lot size = 400
Margin required = 25%.
Next day the rate of the share goes to 2100
Calculate the MTM = 100*400= 40000 MTM Profit
There are chances of Unlimited Loss in case you buy/sell a future or sell an
option.
Margin needs to be paid when one buys/sells a future or sells an option.
Client needs to pay premium when he buys an option
Client receives the premium when he sells an option.

Right to Buy = Call

Right to Sell = Put
CE = Call European
PE = Put European
CA = Call American
PA = Put American
American call or put= Can exercise on or before the expiry date
European call or put = Can exercise only on the expiry date
Only the specified quantity can be exercised.
A right to buy on or before the expiry date is feature of __________.

Impact cost is high when Volume/Liquidity is Low.

Impact cost is low when Volume/Liquidity is high.
Bid = Buyer price
Ask = Seller Price
Difference between the bid & ask is known as bid ask spread
Spot price = Cash Price = Price of the Underlying Asset.
Jan expiry 28th Jan
Feb
March
April month will start on 29th Jan
Share is trading at Rs 100. Tick size is 0.05. The next downward tick will be 99.95.
Contract Size= Lot size
Contract Value= Future Price* Lot Size
Basis= Difference between Spot price & future price is called Basis
Spot Price>Future price = Basis is positive/Backwardation
Spot Price < Future price = Basis is negative/Contango
Cost of carry = Future Price - Spot Price

PNR/100

Spot price = 200

Rate of Interest = 9%
Duration = 2 years

Cost of carry = 200*9*2

100
= 36 Rs
Future Price = 200+36 = 236.

Spot price = 150

Rate of Interest = 6%
Duration = 3 months

Cost of Carry = 150 * 6 * 3 = 2.25

100 12
Future price = 150 +2.25 = 152.25

Open Interest
Pro A B Total Firm
Buy 1000 100 50
Sell 3000 50 10
2000 50 40 2090

Calendar Spread position

Buy/Sell This month future & Sell/Buy next month future for the same underlying
1. It has only basis risk
2. Lower Margin required
3. If the near month contract expires the next month becomes a regular Open
position/naked Position.
Unsystematic risk: Risk for a specific share or a sector. It can be diversified
Systematic risk: Risk for the entire market. It can be hedged.
Buyer of an option = Holder of an option
Seller of an option = Writer of an option
Closing of a position = Offsetting of a position= Square off

Entities in a trading system

Professional clearing members
Trading cum clearing members
Self Clearing Members
Trading Members - Brokers
Participants - Investor/ traders
Trading Members can only trade for:
Pro = Proprietory desk
Cli = Client Desk

Self Clearing Members can trade & clear their (own trades only)
Pro = Proprietory desk
Cli = Client Desk
Trading cum clearing members
Can trade & clear trades for all

Professional clearing member

Can only clear trades but cannot trade
Clearing Member Eligiblity norms
1. Net worth 300 lakhs (3 crores)
If its a trading member then the net worth requirement is 100 lakhs.
1. Deposit 50 lakh
2. Incremental deposit of Rs 10 lakh per trading member.
Corporate Hierarchy
Corporate manager
Branch Manager
Dealer

Ban Period = MWPL (Market Wide Position Limit) is more than 95%
Removed from ban when MWPL is less than 80%.

Position limits
15% of total Open Interest or 500 crores whichever is higher