In this article read to know the important factors that determine Option Pricing.
I assume anyone who has directly landed in this page knows what an option is. If you do not know then in simple terms an Option is a derivative contract that give the holder the right, but not a compulsion to buy it back if sold or to sell it if bought when the Option expires on the Expiry day. Expiry day is usually last trading Thursday of the month in India. If Thursday is a holiday expiry happens on Wednesday. Of course one can buy an Option expiring in 2 months or more.
Though I personally close all In The Money (ITM) Options on the expiry day which I hold because most brokers as a risk management will close the ITM Options at around 3.15 pm at prevailing market prices which you need to accept. I would rather close myself.
Of course you can leave all Out Of The Money (OTM) Options to expire worthless whether you bought or sold them to save on Brokerage charges.
Anyway lets discuss today’s topic Option Pricing: The Factors That Determine Option Price.
A few days back I got this email from one of my email subscriber:
I am S. MD (CA Student). I am avid reader of your website articles. I started Nifty Options trading from last 2 months. It’s actually mock trading but with small amount like Rs 1000.
I would like to join your course as soon as I start earning and to my best of knowledge. All of your articles are very informative and educative.
Thanks a lot, you introduced me to ZERODHA (greatest platform for all kind of traders in India).
Sir, today I came across a situation where my Nifty Call Option didn’t increase but the next call options increased. (By next he meant further Out of The Money)
I will explain in detail.
I bought Nifty July 8900 CE at Rs.5/- one lot at that time Nifty July 9000 CE was Rs.3.75 only. At the end of the day my Option was at Rs.5.25 and 9000 CE Option was at Rs.6.90.
Literally I could not believe my eyes because 8900 CE Option opens at 6.15 and 9000 Option at 4.35, but at the end of day 8900 CE Option was 5.25 and 9000 CE Option was 6.15.
What is this Dilip? I am looking for true answer. I need your analyses because I believe you.
I am attaching you the screen short also for your reference.
S. MD (CA Student)
I know a lot of you must be surprised after reading his email by now. So let’s discuss The Factors That Determine Option Price.
Before reading further I would suggest read one article written by me a few months back because this will form the basis of what we will discuss further:
Next we will discuss some Option Basics and Terms used while trading Options which will help you to understand Options even more clearly.
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Hi, I am Dilip Shaw, owner of this website. I am a trader like you. I have been trading since 2007, but lost a lot of money till 2010. I then stopped trading and studied options like college exams. Started trading again from 2011 and never looked back since. I did a lot of research, read books and did countless paper-trading before being profitable. You can read about me here.
My conservative trading course since 2014 is helping many retail traders just like you who have a job or business make consistent profits like this:
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One Of My Client Is Making Rs.25k Per Week
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You can do this course from your home. Some traders make amazing profits like Rs. 16.26 lakhs profit in 5 days though results may differ for all.
This course helps you learn to trade conservative option strategies for monthly income. Once you finish the course you can start trading immediately. You can start trading from any day. No need to wait for expiry. You will make profits consistently.
This course is good if you have a regular job or business. You DO NOT NEED to monitor your trades every second.
What You Get?
Before reading please understand that for all 5 strategies, strike selection will be taught. Strike selection while trading Options is the most essential part to succeed.
You get two conservative non-directional strategies on options, one conservative stock option strategy and two conservative directional strategies on Future & Option combination.
Non directional trades are profitable 80% of the times and make 3-5% per trade (Results may vary).
Directional strategy makes money fast. It does not matter which side the stock moves. In fact you make more when you are wrong in the Future trade. 🙂 Some amazing profits possible here.
The stock option trade makes 30,000 in one trade and if SL is hit there is a way to recover losses plus make 30k in that trade.
Technical knowledge is NOT required. No need to monitor trades every second.
In the course you will learn how to select the strike prices. You learn when to trade, which strikes to sell which to buy, how much profit target you should be looking for, the best place to take stop loss and what to do after taking stop loss – means how to get that money back. The success rate is more than 80%.
Since trades are properly hedged there is no stress in trading my strategies.
I am very confident that you will make money trading my strategies. To help you succeed I offer few months support for FREE.
11 Reasons Why You Should Do The Course:
1. TA Knowledge NOT required
2. NO Software Required
3. Regular Monitoring NOT Required
4. Continue with Your Job
5. Do Course From Your Home
6. 100% Hedged
7. Stress-Free Trading
8. Not too much money needed to trade
9. Scaling Possible
10. One Time Fee
11. FREE Support For Months
To know more Call/SMS/WhatsApp me on 9051143004 or email me now. I know English and Hindi.
Read the details of the course here.
If you want to enroll for the course you can do so here.
P.S: So many years of trading has thought me one thing - it is always better to make small profits month after month, rather than lose money month after month trying to make too much money. It never happens. But small money accumulated month after month can become very big in only a few years.
WhatsApp or Call me: 9051143004
If you have any question you can contact me.
You can read about me here and my trading mistakes here.
Dilip Shaw, Founder
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