Zerodha don't allow to hold the position till expiry date. For holding stock option buying position till expiry, zerodha asks for margin almost equal to physical delivery value. So we have to thank zerodha for saving common people.
Yes you are correct. But only upto 2 strike prices from the at the money. I faced the similar problem twice in 2019 and lost huge money. Zerodha or HDFC will warn you for at the money and next 2 strike prices. But on last day suddenly price may shoot up/down and we are put into trouble like this example. Before 2019 all option were cash settled. From 2019 only SEBI introduced physical settlement. Last 2 year no option and future trading.
@@pichaimuthuramachandran9103 sad to know. so this rule is applicable in stock futures also then by logical extension. there it doesn't even matter whether you are ITM/ATM/OTM. If you're long take delivery, and if short then give delivery. Am i right?
this is a rule by sebi, not about zerodha....as the trading member has to deposit cash margin to the exchange on a increasing order from sixth trading day to expiry
@@Ideas4wealthIndia yes but Zerodha also implement this policy on stock option sellers also which is not a rule by sebi but Zerodha does it. This is ridiculous & I had to move my trading from Zerodha to other broker because I sell stock options before expiry.
It's a true story. He was in my feed when he posted the tweet(week back). And bcz I knew you have depth knowledge of the concept ...I tagged you to guide him
PR. Sundar Sir is a true gem. Giving such knowledge for free. This is what I have been looking for. You are a teacher indeed. Thank you so much for this great information. I appreciate you. There are few people in this world who help others without any greed. Thanks for helping us who can't afford courses and webinars.
Sir this reminded me when I had lost 27 Lakhs in Futures during 2004 crash.... those days no one was there to guide us...you are doing very noble job Sir. Stay blessed. Hope you are getting well Sir, even your Son
i thought that the option buyers are always in comfortable zone but after watching this video I came to know that the real sources of risk in stock option buying really it is an eye opening video. Thank you so much sir.
This is a very very very useful video and explains perfectly what happens if we do not square off on the expiry day and ends up in "In the money".. A doubt which I was having for long time and found no one providing the clear picture...Thanks a lot ..
Sir you are the eye opener for innocent traders in India by posting this video I think no one in the globe has presented in such a simple way other than you. Hats off to you . I am following share Markey from 2009. I never came such a clear explanation in social media, the broker should have informed to the guy by 3 20 pm on that day. He is the prime culprit here I feel
Recently I paced a stock buy option three days before expiry . Zerodha has cautioned me if your not taking possession, there will be penalty and advised to take next month option buy.
Nice lesson for everyone. Since your experienced in this market. Kindly share this type of experience you came across in your life to us, so the small traders will be more alert and conscious. Thank you, Sir 🎉
Sundar sir, Fantastic point ! Already burned my hands doing the same, but not this huge a loss. Was wondering why there was a huge loss for me, but now i can connect the dots... This is really something that newcomers to options market should know about. As someone already told, trading in indices makes much more sense.
@@jateenjain To my knowledge physical delivery doesn't happen for index options. Also much more liquidity exists than individual stocks. Such a scenario might happen with index option too where the option goes ITM from OTM. And then you will have to pay the losses. As physical delivery doesn't exist the case of auction market might not be relevant with index options. After I have experienced difficulty to sell in individual stocks towards expiry due to liquidity issues, nowadays I never trade on stock options. I stick to index options.
Well Said Sir. Close price and LTP is different for many instruments trading worldwide. A Piece of Knowledge: The expected close price can be tracked using the indicator "weighted close(29,y)" on 1 minute chart. Such losses could be avoided using this indicator. It might be useful for few. 🙏
Happened with me recently .. I was stuck at sunpharma ce and had no knowledge about physical delivery ... It's was only when zerodha sent me multiple mails n messages .. I researched about it and came out of it.. I wasn't able to sleep for 2 days until I square off my position.
I kept on adding fund to my broker account as per margin required each day on the expiry week ... And thankfully on Tuesday I was able to square off my position with 1k profit ... My advice is if the stock is illiquid then plz square off in loss .. dont wait for its price to go up... otherwise it will be a big trouble
Its really seems ..... how these many people are not aware of this risk in stock options. Beginners trade in equity (delivery not intraday), then if you wish then move to index options and stay away from stock options.
Dear PR Sundar sir, I think as a responsible investment community we should all ask SEBI to rename physical stock delivery only options as obligations. Call option will be called buy obligation and put option will be called sell obligation. It must also be indicated in the contract that buyer has no choice embedded in the option to walk away from excercising it.
@@anandkulkarni2111 it read carefully. You can't call, call options as call obligations because there is no obligation to buy unless it's ITM. Most strike price of contracts expire OTM.
All because of non sense done by SEBI , a fourth grader is sitting on the chair in SEBI , acting arbitrary , previously all options were cash settled .
@@Funnystory50 no : infact the person had bought put option and it ended 35 paise in the money , if it were cash settled then he would have received a pay out at 35 paise per share .
Thanks for the information, I didn't know this! Although I only trade in index option where I don't have to worry about all that, but having additional information is always a good thing!
@@ArunKumar-ve8hv can you please tell me if I have 10k in my account and when I place banknifty option buy order at the same time due to freak trade option value goes to 2k, then due to insufficient balance in my account whether the trade is successful or get rejected? In zerodha..
Never thought book definition and Indian options definition is different. Thanks for highlighting this. Net summary, if you are buying stock option, square off atleast 1 day before expire, else just go for index options (where there is no physical delivery)
@@vanshajmaken8299 bhai muze bhi janana he 😅.....aapko kuch information mili kya....nifty or bank nifty me trading karenge our agar buyer nahi mile to kya panelty lagega
THIS IS WHY I LIKE PR SIR ALWAYS....👍💥 He is a wisdom of stock market & everything will be based on factual.. only a 100% passionate person can do this...
My broker bought the shares on friday itself sir at 471.79 under sblm method. My loss is 471.79-450 = 10 lakh + penalty + brokerage + tax rounded to 12 lakhs
But if u r a option buyer to samaj lo dmat pe 1 lac hai aur option 50000 ke kharide hai ... To whatever no seller no buyer whatever happens ..1 lac se upar kaise jayega aur 10 lakh ka loss hoga to wo paise kahase ayega dmat pe???
@@shrikantborde8143 I have lot of questions same as u. Rules should be made in favour of retail trader and investors not in favour of big bees. Hope sebi listens.
In option trading there will be equal number of buyers and sellers.This is marked as open inerest. Both buyer and seller enter into a contract with different view on the underlying. One's profit is other's loss. How come this physical delivery come to picture when all open positions can be matched after expiry
The delivery mechanism may be physical agreed. But the option buyer has no obligation i.e he has a choice. What if he chooses not to exercise the option in this case? This is a clear case of cheating on the definition by the exchange. Exchange should make it clear in such cases that these options don't have embedded rights but only obligations. Because people paying premiums want to walk away losing premiums why should they be forced? They should redefine the option buying as only the obligation to either buy/sell stock at a given strike price and mention that they don't have any choice i.e no optionality embedded in the option itself. This is nuts to be honest.
Absolutely: The classic defination of option buying stands diluted/nullified by compulsory settlement mechanism ; it brings back the risk in the game exactly what is was meant to attend or manage
this is must watch video for all retailer entered in the market. I was having this question in mind for long time. this video clarifies very clearly about physical delivery. This video should be part of mission options for learners.
A simple way to address the problem would have been to buy futures of same quantity . The positions become opposite and exchange squares F&O net long and short .
Thats almost 42 lots of HINDALCO. Just think how much margin you need? Im sure if he has that much money he would not have bought options in the first place.
Wow. This is one of the Brilliant Eye Opener video for all Option Traders especially Option Buyers who think that their risk limited to the extent of Premium Value. I haven't seen any other 15 minute video like this which has so much of Crucial information all put together in one place. Brilliant Sir. Pls Keep posting more and more Informative videos like this.👍🏼👍🏼👍🏼👍🏼
Sir Definitely You have saved many of us from this . I always buy options in order to hedge and reducing the margin for option selling. OMG How intricate the details are. In-the money, Index vs individual stocks, delivery, obligation,. . I have wondered why last price is not closing price. But never thought it has so much calculations -Averaging of last 30 minutes price and implications. Super Sir. This is very very helpful. Please do more videos on such things where new people to options dont loose money. I can see from the likes that people more people are thankful for this.
Sir, I came across this video of your an year back, but that time I did not view your video completely but yes, recently I did Option in Stock but did remember this HIGH RISK to BUYERS, too, it saved me because I came out with minimum loss because of your VIDEO. JUST NOW, watched your complete video. Really many people would have list big money if they are not AWARE OF THIS, assuming that Option BUYERS have minimum RISK. In Index it may be, but in illiquid stocks or even liquid stocks, HEAVY LOSS MAY BE INCURRED. Thank You.
Great vdo Sir. 1 doubt, if retail participation in stock options is low when compared to index options, then if only the Smart money is trading in Stock options, what really happens to those ITM options on expiry day. Pls explain from both buyer and sellers point of view. Assuming majority of the participants in stock options are the Smart money 😎😎😎
Thanks PR sir I was having this doubt for so long Thanks for clearing that up Thats why expert says option sellers should close their positions mostly till 3rd week
Plz guide me, 1) If we buy OTM option if it becomes ITM, it's profit na. 2) if someone has shares in his account, how can he hedge his stock position from downside risk? Physical delivery is problem then... 3) What is benefit of physical delivery??
Few Principles for Derivatives Trading: 1. Trade in Index options 2. Trade in Stock options only where Liquidity is HUGE - Must condition 3. Square off before 2-3 days of expiry (what if a NSE glitch happens like happened in first qtr of 2021) 4. Know the Pros/Cons of whatever you do 5. Gain complete Knowledge of the Derivatives 6. When you are near to Dec Expiry, one could have Bought Jan expiry, at least one would have got the Time to square-off
Thank you for the valuable lesson. Never realized the consequences for stock option buyer, until you mentioned sir. Grateful for the lesson despite your coping health. Speedy recovery 🙏
Hey, i wanted to ask what if i buy a stock option and when i want to sell it after few days(out of the money) and there are no buyers in the market or very low open interest?
I encountered similar problem in Apollo Hospitals shorted call 5700 CE 5 lots and bought 5400 ce 4 lots. I closed 5400 call at 5734. Prices started going down. Closed at 5674. But Settlement price was 5701.90. I was forced to deliver 750 shares. Highest traded price in next 2 trading sessions was 5965. I crossed my fingers. Literally in auction anyone can sell at 1186 rupees higher. But i was debited 265 rupees on 750 shares. I could have bought 5 lots in futures on Tuesday evening. On Wednesday and Thursday!
@@harsh8660 in stock options if you don't square off your position on the expiry day, you have to get delivery of the same quantity you are holding. That guy didn't knew this so he didn't do anything but the broker has to do it for him, and as it is T+2 settlement the price of the share of which option he was holding increased by 30 rupees so he had to pay 45000x30. Watch video if you didn't understand
How about Futures? Is it the same? Can you make a special seperate video for a stock's future and option trading and expiry... Because when your holding becomes away from spot price..we usually don't get any buyer to exit the position.. need to put some light on it
*When it comes to the world of investing,most people don't know where to start. Fortunately, great investors of the past and present can provide us with guidance*
Sir ease make a video about how to allocate out capital in trading even in the volatile market. Like long term options, monthly weekly ant etc... And also for covered call and secured put please make an video sir
One question though, could he have sold any itm/atm/otm put options, the same quantity as mentioned, and there would be no delivery obligation in such a case? Reason being that such sold put options would be set off against those bought. Kindly guide
"DO NOT EXECUTE ".OPTION BUYER ALWAYS HAS A RIGHTS TO EXECUTE OR NOT TO EXECUTE .... THANKS SIR FOR YOUR GUIDANCE AND KNOWLEDGE. 🙏 I HAVE A QUESTION AS I STATED ABOVE.,THAT BUYER CAN SAY TO BROKER I DONT WANT TO EXECUTE MY OPTION AND READY FORGET MY PREMIUM. THE OPTION SELLER WILL BE HAPPY AND WILL NOT GIVE DELIVERY AND TAKE PREMIUM.
But what about sebi/nse/broker. they won't be happy. They want you to be trapped so that they can milk money from you (in the form of penalty). Rules are never made in favour of retailers.
Long in futures ? how would that help his situation ? The put becomes in the money then and future position too gets in negative ( mark to market ) double vamy for him
@@RajeshSharma-oh2ir for example you buy put option of sbi 450 now the sbin was trading at 400 on expiry day now you go long in futures sbi at 400 thatmeans you are buying at 400 in futures and you have the right to sell at 450 so you were in profit ..... the position is netted off .......
Thanks Sir..You have explained clearly the position of ITM option on expiry day and the risks in option trade..Can you make a video explaining what happens for Index options..We will be much thankful..
As I have mentioned , all index options are cash settled : I e all ITM options of nifty , bank nifty and Fin nifty are cash settled . No worries about that . It's the stock options which pose a headache for both buyers and sellers on the expiry day . My simple suggestion : please square up your stock options on the expiry day at least one hour before closing , and if you still perceive that the next coming days the stock can move in a particular direction ( up or down) you can roll over the option to the next month at the same time : I e square up the current month option and buy next month option ( call or put option ) as per your expectation / analysis / perception.
All these problems can be solved by thinking of option buying and selling in terms of the lot size. Lot size is there for a reason and you are getting into a contract that you will buy/sell that many shares. If you don't have margin/collateral, you shouldn't even involve in this naked buying/selling. Instead, you should do hedged positions.
Thanks for the information Sir. Definitely it will help many people like us to avoid the risk or losing huge money. Hope everyone in your family is better now.
I am a beginner to Options trading. This was something I did not know or even imagine. Thanks a ton for the video. God bless you. I will square off well before the expiry.
One question though If let's say I sell a Stock option of a certain price then will I have to worry about liquidity when I'm trying to square off my trade in near expiry? Someone please help me clear this doubt
Yes. Always square it off atleast 2-3 days before expiry to avoid this. To get the last 5 or 10p you will be taking a big risk unless you have the capital / shares to take / give delivery.
I have been verbose on physical settlement and how broker charge whatever they want for years now. Look at the 20% auction price range. There are case when I am eligible to get money as my opposite side defaulted, I got the money based on the strike price of option & no extra 20% penalty amount which got levied on opposite side. I shall not have any doubt that the difference 20% amount is grabbed by broker.
Example trade: Spot price 41000 Banknifty future 1 lot buy Banknifty 41000 CE option 1 lot buy Banknifty 41000 PE option 1 lot sell Now, at the end of expiry all above positions become in the money, say for example spot price is 41500 What will happen if I don't square off all above open positions?
Thanks for valueable information. What will happen in the case of Index options if it becomes in the money after closing. What is the penalty? will it be settled using nifty bees
According to me this video is worth more than 100000 Rs for me. My name also would have been there in place of that person lost 13 lakhs rs. Thank u so much PR Sundar sir..... You are one of the best teacher of stock market 👏👏👏👏👌👌👌👌
Why do through auction market, if the broker knows immediately he can buy from the open market on Friday and get it on Tuesday and deliver. Instead of going to auction market on Tuesday.?
Sir u share this type of rules to common people who don't have suffcient knowledge and fund. God bless you sir, Keep sharing such video for common and simple/poor people of india.
Squaring is not a must unless one decided to give or take delivery.. in this case the put option seller had money to take delivery of 45000 shares and got a handsome reward due to last minute price action
This video happens to be a wonderful magic for me; since I'm on decision to try experimenting my first option trade this week but still bearing a ton of doubts and fears especially about this exact situation. THANK YOU VERY MUCH...
ok, so if I'm getting it right, 2 solutions to counter this scenario: 1) close stock options 1-2 days before the expiry, or 2) have an equal number of physical stocks in your Demat. (although not economical!) right?
Very informative video Sir. But I have few doubts. Just imagine a scenario where he goes default, meaning he doesn't have the money. What will happen? Also just imagine the situation of that 450PE seller, when it went in the money how much money he should keep in his account to buy 45,000 shares at 450.
@@mandeepsingh-zg4yr OK. But just imagine, I only had 1 lakh and I bought the PE. Say I don't have any other money in my account. Will I have limited liability or they (broker) come behind me?
Zerodha don't allow to hold the position till expiry date. For holding stock option buying position till expiry, zerodha asks for margin almost equal to physical delivery value.
So we have to thank zerodha for saving common people.
Yes you are correct. But only upto 2 strike prices from the at the money. I faced the similar problem twice in 2019 and lost huge money. Zerodha or HDFC will warn you for at the money and next 2 strike prices. But on last day suddenly price may shoot up/down and we are put into trouble like this example. Before 2019 all option were cash settled. From 2019 only SEBI introduced physical settlement. Last 2 year no option and future trading.
@@pichaimuthuramachandran9103 sad to know. so this rule is applicable in stock futures also then by logical extension. there it doesn't even matter whether you are ITM/ATM/OTM. If you're long take delivery, and if short then give delivery. Am i right?
this is a rule by sebi, not about zerodha....as the trading member has to deposit cash margin to the exchange on a increasing order from sixth trading day to expiry
@@Ideas4wealthIndia yes but Zerodha also implement this policy on stock option sellers also which is not a rule by sebi but Zerodha does it. This is ridiculous & I had to move my trading from Zerodha to other broker because I sell stock options before expiry.
@@pichaimuthuramachandran9103 you mean if it in deep ITM zerodha will proceed to physical delivery right ?
It's a true story. He was in my feed when he posted the tweet(week back). And bcz I knew you have depth knowledge of the concept ...I tagged you to guide him
Whats his name . Link plz
@@traderstuckmoment5463 link?
@@traderstuckmoment5463 no issues if we square off.. Right?
What about nifty bank nifty option buy.. Any issue can happen like this?
@@Ranjeetsj Sorry for your friend. This video is definitely informative for others, ppl will think twice about stock options.
PR. Sundar Sir is a true gem. Giving such knowledge for free. This is what I have been looking for. You are a teacher indeed. Thank you so much for this great information. I appreciate you. There are few people in this world who help others without any greed. Thanks for helping us who can't afford courses and webinars.
Sir this reminded me when I had lost 27 Lakhs in Futures during 2004 crash.... those days no one was there to guide us...you are doing very noble job Sir. Stay blessed. Hope you are getting well Sir, even your Son
@sm banakar Banakar sir, are u a full time trader? How did u survive that setback? I entered into market last year, any suggestion to me?
@ ಬಣಕರ್ ಸರ್, ಹಳೆ ಹುಲಿ ನೀವು. ತುಂಬಾ ಅನುಭವ ಇದೆ. 🙏
27 lakhs in 2004 how did you recovery that amount?
27 lakhs in 2004 was huge though I was felt sad when I lost some thousands
@@sandeep_facts_1901 very true, that time it was huge loss, I had to sell my only site in prime location of Bangalore
i thought that the option buyers are always in comfortable zone but after watching this video I came to know that the real sources of risk in stock option buying really it is an eye opening video. Thank you so much sir.
@P R Sundar fake ID🤣🤣🤣🤣
That means Index option is safer than Stock Option.
Don't hold till the Expiry date.Or Square off befo 3PM.
This is a very very very useful video and explains perfectly what happens if we do not square off on the expiry day and ends up in "In the money".. A doubt which I was having for long time and found no one providing the clear picture...Thanks a lot ..
Sir you are the eye opener for innocent traders in India by posting this video I think no one in the globe has presented in such a simple way other than you. Hats off to you . I am following share Markey from 2009. I never came such a clear explanation in social media, the broker should have informed to the guy by 3 20 pm on that day. He is the prime culprit here I feel
As a user you should read about it. Can't always blame others for your mistake
Recently I paced a stock buy option three days before expiry . Zerodha has cautioned me if your not taking possession, there will be penalty and advised to take next month option buy.
Nice lesson for everyone. Since your experienced in this market. Kindly share this type of experience you came across in your life to us, so the small traders will be more alert and conscious. Thank you, Sir 🎉
Great information
This is the most comprehensive explanation I've seen of the issue that happened. Thank you so much, Sir, for the detailed explanation! :-)
@P R Sundar okay faku ji.
This a fake account, others beware
Sundar sir, Fantastic point !
Already burned my hands doing the same, but not this huge a loss. Was wondering why there was a huge loss for me, but now i can connect the dots...
This is really something that newcomers to options market should know about. As someone already told, trading in indices makes much more sense.
What if there is no fund available in demat? How they will charge so much?
It's only for stock options or index options too
@@nikhilbhoite7374 They should be showing a negative balance. Means you will owe them so much.
@@jateenjain To my knowledge physical delivery doesn't happen for index options.
Also much more liquidity exists than individual stocks. Such a scenario might happen with index option too where the option goes ITM from OTM. And then you will have to pay the losses. As physical delivery doesn't exist the case of auction market might not be relevant with index options.
After I have experienced difficulty to sell in individual stocks towards expiry due to liquidity issues, nowadays I never trade on stock options. I stick to index options.
@@004arjun thanks for your valuable information
most brokers start to square up at 3.15 unless you have margin. most brokers dont allow buying and selling in stock options in the expiry week
Well Said Sir. Close price and LTP is different for many instruments trading worldwide.
A Piece of Knowledge: The expected close price can be tracked using the indicator "weighted close(29,y)" on 1 minute chart.
Such losses could be avoided using this indicator.
It might be useful for few. 🙏
Happened with me recently .. I was stuck at sunpharma ce and had no knowledge about physical delivery ... It's was only when zerodha sent me multiple mails n messages .. I researched about it and came out of it.. I wasn't able to sleep for 2 days until I square off my position.
Good for you
Good that you managed to come out of it. Can you please guide how you managed so it can be a lesson to rest of us.. Thanks
I kept on adding fund to my broker account as per margin required each day on the expiry week ... And thankfully on Tuesday I was able to square off my position with 1k profit ... My advice is if the stock is illiquid then plz square off in loss .. dont wait for its price to go up... otherwise it will be a big trouble
Pls explain if ce option only premium is at risk?
This has to be one of the best videos on Stock Option Buying Risks. Thank you Guruji !
what is the best way to make money from investing?
Its really seems ..... how these many people are not aware of this risk in stock options. Beginners trade in equity (delivery not intraday), then if you wish then move to index options and stay away from stock options.
If this is the case, then, it cannot be called as OPTION. As simple as that. Pure nonsense.
True ... Options are not for holding ...
Dear PR Sundar sir, I think as a responsible investment community we should all ask SEBI to rename physical stock delivery only options as obligations. Call option will be called buy obligation and put option will be called sell obligation.
It must also be indicated in the contract that buyer has no choice embedded in the option to walk away from excercising it.
It is not an obligation, if it's ATM/OTM anyways.
It's called the game of big bulls who are trading members who does the rules just like politics ur suggestion are good
@@annamalaian0711 Boss read , understand before u reply.
@@anandkulkarni2111 it read carefully. You can't call, call options as call obligations because there is no obligation to buy unless it's ITM. Most strike price of contracts expire OTM.
Boss what if the the option expired OTM
Just by BY 35 paisa her contract became itm and he lost 13 lakh oh my God such a small difference.
All because of non sense done by SEBI , a fourth grader is sitting on the chair in SEBI , acting arbitrary , previously all options were cash settled .
@@sunilkumartejwani1356 if this happens when stock option were cash settled then there loss will be 1.65*45000= 74250
@@Funnystory50 no : infact the person had bought put option and it ended 35 paise in the money , if it were cash settled then he would have received a pay out at 35 paise per share .
Thanks sir it’s very important information, working for past 6 months but never came to know about this…it’s really scary.
Thanks for the information, I didn't know this! Although I only trade in index option where I don't have to worry about all that, but having additional information is always a good thing!
True best and safe way to trade is Nifty and Bank nifty..
@@ArunKumar-ve8hv can you please tell me if I have 10k in my account and when I place banknifty option buy order at the same time due to freak trade option value goes to 2k, then due to insufficient balance in my account whether the trade is successful or get rejected? In zerodha..
@@shashipakhare It will get rejected ...
@@ArunKumar-ve8hv means it won't go in negative due to insufficient funds in account. No more excess funds now onwards..
Thanks 👍 a lot sir...... I didn't know about this, fortunately I square off my options postion before the expiry last month in HDFC Bank.....
Never thought book definition and Indian options definition is different. Thanks for highlighting this. Net summary, if you are buying stock option, square off atleast 1 day before expire, else just go for index options (where there is no physical delivery)
are u sure..in indexes there isnt any physical delivery?
@@vanshajmaken8299 Like delivery of stocks, there is nothing like delivery of indexes right?
@@myinvestmentideas are sir..seedha seedha btao..isme delivery uthane wala scene to nahi hai na
Nifty or bank nifty me to aaisa rule nahi he na sir
@@vanshajmaken8299 bhai muze bhi janana he 😅.....aapko kuch information mili kya....nifty or bank nifty me trading karenge our agar buyer nahi mile to kya panelty lagega
THIS IS WHY I LIKE PR SIR ALWAYS....👍💥
He is a wisdom of stock market & everything will be based on factual.. only a 100% passionate person can do this...
My broker bought the shares on friday itself sir at 471.79 under sblm method. My loss is 471.79-450 = 10 lakh + penalty + brokerage + tax rounded to 12 lakhs
But if u r a option buyer to samaj lo dmat pe 1 lac hai aur option 50000 ke kharide hai ... To whatever no seller no buyer whatever happens ..1 lac se upar kaise jayega aur 10 lakh ka loss hoga to wo paise kahase ayega dmat pe???
@@shrikantborde8143 I have lot of questions same as u. Rules should be made in favour of retail trader and investors not in favour of big bees. Hope sebi listens.
@@traderstuckmoment5463 .. so .. Is your trading account showing -12 lac ?
@@alvarakesh yes sir
@@traderstuckmoment5463 so how would broker recover that amount from you because you have only 1 lakh
This video is sooo worth. Immense gratitude to you for sharing your knowledge. Yesss information is wealth. 😊❤️
Nice lesson. More understanding on Option buying consequences. Thank you so much
In option trading there will be equal number of buyers and sellers.This is marked as open inerest. Both buyer and seller enter into a contract with different view on the underlying. One's profit is other's loss. How come this physical delivery come to picture when all open positions can be matched after expiry
In they money option in stock now settled with actual delivery
The delivery mechanism may be physical agreed. But the option buyer has no obligation i.e he has a choice. What if he chooses not to exercise the option in this case?
This is a clear case of cheating on the definition by the exchange. Exchange should make it clear in such cases that these options don't have embedded rights but only obligations.
Because people paying premiums want to walk away losing premiums why should they be forced?
They should redefine the option buying as only the obligation to either buy/sell stock at a given strike price and mention that they don't have any choice i.e no optionality embedded
in the option itself. This is nuts to be honest.
Absolutely: The classic defination of option buying stands diluted/nullified by compulsory settlement mechanism ; it brings back the risk in the game exactly what is was meant to attend or manage
Eye Opener video. Never thought of it till date.
Great lesson sir..also plz make a video on STT tax imposed on the bought option not squared off and it goes in the money..
this is must watch video for all retailer entered in the market. I was having this question in mind for long time. this video clarifies very clearly about physical delivery. This video should be part of mission options for learners.
A simple way to address the problem would have been to buy futures of same quantity . The positions become opposite and exchange squares F&O net long and short .
Thats almost 42 lots of HINDALCO. Just think how much margin you need? Im sure if he has that much money he would not have bought options in the first place.
Wow. This is one of the Brilliant Eye Opener video for all Option Traders especially Option Buyers who think that their risk limited to the extent of Premium Value. I haven't seen any other 15 minute video like this which has so much of Crucial information all put together in one place. Brilliant Sir. Pls Keep posting more and more Informative videos like this.👍🏼👍🏼👍🏼👍🏼
This is for stock option buyer not index
Sir Definitely You have saved many of us from this . I always buy options in order to hedge and reducing the margin for option selling. OMG How intricate the details are. In-the money, Index vs individual stocks, delivery, obligation,. . I have wondered why last price is not closing price. But never thought it has so much calculations -Averaging of last 30 minutes price and implications. Super Sir. This is very very helpful. Please do more videos on such things where new people to options dont loose money. I can see from the likes that people more people are thankful for this.
Sir, I came across this video of your an year back, but that time I did not view your video completely but yes, recently I did Option in Stock but did remember this HIGH RISK to BUYERS, too, it saved me because I came out with minimum loss because of your VIDEO.
JUST NOW, watched your complete video. Really many people would have list big money if they are not AWARE OF THIS, assuming that Option BUYERS have minimum RISK. In Index it may be, but in illiquid stocks or even liquid stocks, HEAVY LOSS MAY BE INCURRED. Thank You.
Great vdo Sir. 1 doubt, if retail participation in stock options is low when compared to index options, then if only the Smart money is trading in Stock options, what really happens to those ITM options on expiry day. Pls explain from both buyer and sellers point of view. Assuming majority of the participants in stock options are the Smart money 😎😎😎
Thanks PR sir
I was having this doubt for so long
Thanks for clearing that up
Thats why expert says option sellers should close their positions mostly till 3rd week
Learnt a big lesson in the last 30 seconds of the video. Thanks Mr Sundar
Plz guide me,
1) If we buy OTM option if it becomes ITM, it's profit na.
2) if someone has shares in his account, how can he hedge his stock position from downside risk? Physical delivery is problem then...
3) What is benefit of physical delivery??
But how does broker recover the amount from that option buyer?
Same doubt what if I didn't have that much money in my account
Very powerful video sir. This concept has bugged me a lot and I almost panicked on the expiry day. Thanks
Thanks you've actually explained in the most simplest way
Few Principles for Derivatives Trading:
1. Trade in Index options
2. Trade in Stock options only where Liquidity is HUGE - Must condition
3. Square off before 2-3 days of expiry (what if a NSE glitch happens like happened in first qtr of 2021)
4. Know the Pros/Cons of whatever you do
5. Gain complete Knowledge of the Derivatives
6. When you are near to Dec Expiry, one could have Bought Jan expiry, at least one would have got the Time to square-off
Can we do in intraday option buying of stock options ?
Moral: never let your futures or options to expire. Square off or roll over to next month before expiry day.
Most anticipated and logical video for all option buyer...Those who buy Stock option....Priceless.
Sir, what will happen if his demat a/c balance was 1 lack only?
Sir, this kind practical cases you in your video weekly one or two. This is an eye opener for all.
Thank you for the valuable lesson. Never realized the consequences for stock option buyer, until you mentioned sir. Grateful for the lesson despite your coping health. Speedy recovery 🙏
This rule has changed in 2019. Before that the risk was limited for an option buyer.
Absolutely either a buyer or seller doesn't matter your should know the game rules.
Perfect answer... For this video....
Putting an auction in closed doors and it's called regulated. Stock exchanges still operate by this mechanics in 2022😂😂😂.
Where is digital India?
Eye opener to all option buyers....Mind blowing video
What a simple and clear-cut explanation, Sir. Thanks for the knowledge.
Hey, i wanted to ask what if i buy a stock option and when i want to sell it after few days(out of the money) and there are no buyers in the market or very low open interest?
My avg price was 0.38 paisa. So capital was just 15-17k . Thanks for the video and making everyone aware. 🙏
PR.. dear PR.. you are really an EYE OPENER
I encountered similar problem in Apollo Hospitals shorted call 5700 CE 5 lots and bought 5400 ce 4 lots. I closed 5400 call at 5734. Prices started going down. Closed at 5674. But Settlement price was 5701.90. I was forced to deliver 750 shares. Highest traded price in next 2 trading sessions was 5965. I crossed my fingers. Literally in auction anyone can sell at 1186 rupees higher. But i was debited 265 rupees on 750 shares. I could have bought 5 lots in futures on Tuesday evening. On Wednesday and Thursday!
So did you end up paying rs.1.98 lac as penalty or more??
Bhai mere to sab upr se jara hai...
Index Option me to sub safe hena aisa kuch ni hena ❓
@@RahulKumar-dy4gr safe nahi hota bhai, very volatile. Please learn and then invest my suggestion
Can anybody tell me how would he pay back 13 lakh rupees
Because he only trade from 1 lakh?
@@harsh8660 in stock options if you don't square off your position on the expiry day, you have to get delivery of the same quantity you are holding. That guy didn't knew this so he didn't do anything but the broker has to do it for him, and as it is T+2 settlement the price of the share of which option he was holding increased by 30 rupees so he had to pay 45000x30. Watch video if you didn't understand
How about Futures? Is it the same?
Can you make a special seperate video for a stock's future and option trading and expiry... Because when your holding becomes away from spot price..we usually don't get any buyer to exit the position.. need to put some light on it
*When it comes to the world of investing,most people don't know where to start. Fortunately, great investors of the past and present can provide us with guidance*
Thank u soo much sir... Got clarity today
Sir ease make a video about how to allocate out capital in trading even in the volatile market. Like long term options, monthly weekly ant etc... And also for covered call and secured put please make an video sir
what happens if i don't have 13L in my account ?
One question though, could he have sold any itm/atm/otm put options, the same quantity as mentioned, and there would be no delivery obligation in such a case? Reason being that such sold put options would be set off against those bought. Kindly guide
yes
no need physical delivery. Physical delivery is only for unhedged positions.
I am not on Twitter or any other platform apart from TH-cam and I am shocked to my core!
"DO NOT EXECUTE ".OPTION BUYER ALWAYS HAS A RIGHTS TO EXECUTE OR NOT TO EXECUTE ....
THANKS SIR FOR YOUR GUIDANCE AND KNOWLEDGE. 🙏
I HAVE A QUESTION AS I STATED ABOVE.,THAT BUYER CAN SAY TO BROKER I DONT WANT TO EXECUTE MY OPTION AND READY FORGET MY PREMIUM. THE OPTION SELLER WILL BE HAPPY AND WILL NOT GIVE DELIVERY AND TAKE PREMIUM.
But what about sebi/nse/broker. they won't be happy. They want you to be trapped so that they can milk money from you (in the form of penalty). Rules are never made in favour of retailers.
Very informative video 👌👏 thanks 👍
if bought put option then go long in futures on expiry day if the option is illiquid....... just take COUNTER POSITION IN FUTURES
Long in futures ? how would that help his situation ? The put becomes in the money then and future position too gets in negative ( mark to market ) double vamy for him
He could have bought itm call but brain doesn't work at such times. Also, one need to have such amount to buy.
@@RajeshSharma-oh2ir for example you buy put option of sbi 450 now the sbin was trading at 400 on expiry day now you go long in futures sbi at 400 thatmeans you are buying at 400 in futures and you have the right to sell at 450 so you were in profit ..... the position is netted off .......
@@geethanjalin8186 please re-examine your stand
Regards
@@RajeshSharma-oh2ir i know it is hard to understand ...... its ok ...... i explained to my best ...... it was upto you .....
What a learning from Pr sundar.....Thanks sir...i have seen many experts that's buyer risk is only the price they bought and where are they now?
Thanks Sir..You have explained clearly the position of ITM option on expiry day and the risks in option trade..Can you make a video explaining what happens for Index options..We will be much thankful..
As I have mentioned , all index options are cash settled : I e all ITM options of nifty , bank nifty and Fin nifty are cash settled . No worries about that . It's the stock options which pose a headache for both buyers and sellers on the expiry day . My simple suggestion : please square up your stock options on the expiry day at least one hour before closing , and if you still perceive that the next coming days the stock can move in a particular direction ( up or down) you can roll over the option to the next month at the same time : I e square up the current month option and buy next month option ( call or put option ) as per your expectation / analysis / perception.
@@sunilkumartejwani1356 Thanks
All these problems can be solved by thinking of option buying and selling in terms of the lot size. Lot size is there for a reason and you are getting into a contract that you will buy/sell that many shares. If you don't have margin/collateral, you shouldn't even involve in this naked buying/selling. Instead, you should do hedged positions.
Thanks for the information Sir. Definitely it will help many people like us to avoid the risk or losing huge money. Hope everyone in your family is better now.
I am a beginner to Options trading. This was something I did not know or even imagine. Thanks a ton for the video. God bless you. I will square off well before the expiry.
One question though If let's say I sell a Stock option of a certain price then will I have to worry about liquidity when I'm trying to square off my trade in near expiry? Someone please help me clear this doubt
Sometimes. Depends on the stock
Yes it can happen
Yes. Always square it off atleast 2-3 days before expiry to avoid this. To get the last 5 or 10p you will be taking a big risk unless you have the capital / shares to take / give delivery.
Same logic for selling as well. If the closing price is ITM, you have to settle physically.
@@herodotus425 if i am selling my ce delivery on same day then am i required to keep peak margin in my account please reply
Very good explanation. I do F&O trades in stocks, but I meticulously square off a day before only. Thanks for the video.
If I bought 1 lot of SBIN OPTION at Re1 and it shoots off to Rs20 near expiry . won't I be able to book it ???
I have been verbose on physical settlement and how broker charge whatever they want for years now. Look at the 20% auction price range. There are case when I am eligible to get money as my opposite side defaulted, I got the money based on the strike price of option & no extra 20% penalty amount which got levied on opposite side. I shall not have any doubt that the difference 20% amount is grabbed by broker.
Example trade:
Spot price 41000
Banknifty future 1 lot buy
Banknifty 41000 CE option 1 lot buy
Banknifty 41000 PE option 1 lot sell
Now, at the end of expiry all above positions become in the money, say for example spot price is 41500
What will happen if I don't square off all above open positions?
Thanks for valueable information. What will happen in the case of Index options if it becomes in the money after closing. What is the penalty? will it be settled using nifty bees
No need to worry
no need of settlement in index options or futures whether it is ITM ATM OTM
According to me this video is worth more than 100000 Rs for me. My name also would have been there in place of that person lost 13 lakhs rs. Thank u so much PR Sundar sir..... You are one of the best teacher of stock market 👏👏👏👏👌👌👌👌
Valuable information sir.. Tq
💯
Great information sir, didn't knew this. Thanks a lot.
Why do through auction market, if the broker knows immediately he can buy from the open market on Friday and get it on Tuesday and deliver. Instead of going to auction market on Tuesday.?
To teach lesson to his client. 😅😅 😅
Even if broker buys from normal market it's still T+2 for him from Friday, so won't serve the purpose
Broker can tempararily provide shares through shares lending mechanism as he has resources.
@@abhijitprabhu7874 he will get on Tuesday, instead of going on Tuesday to the auction market as in this example
Sir u share this type of rules to common people who don't have suffcient knowledge and fund. God bless you sir, Keep sharing such video for common and simple/poor people of india.
In that case, the person could have bought those shares from CASH market in the last moment and could have given delivery on t+2 right?
ya but for that 2.2 crore was required dont you think that is too much
@@tanmaychoudhary5141 2.2 crore 😢
@@tanmaychoudhary5141 didn't think about that. Thank you
Sir, what happened to the trader who sold him the 450 option?
Finally he or someone should square off his sell option position, right?
Squaring is not a must unless one decided to give or take delivery.. in this case the put option seller had money to take delivery of 45000 shares and got a handsome reward due to last minute price action
A gem to retail traders
i understood completely, crystal clear explanation, thank you very much
With respect, I think its much better off to say "hope you got some value from the video, thank you for watching"
Much Respect to your position
Cleared my doubts very well
Moral of lesson, just trade in index options 😂
So there is no unlimited loss right?
Great information, many thanks !!
I think this was a new rule introduced by SEBI recently
@Gourab just imagine what happens in agricultural commodities if we need to take physical delivery
No, this has been there always since start of options market, it is always required
It's 2021 October. Check my true story in my TH-cam video
Thanks for your knowledgeable vedio with deep discussion. 🙏🏻🙏🏻🙏🏻
Hello sir, Iam a big fun of you, and follow u since long time, hope to learn from u r experience 🙏
💯
This video happens to be a wonderful magic for me; since I'm on decision to try experimenting my first option trade this week but still bearing a ton of doubts and fears especially about this exact situation. THANK YOU VERY MUCH...
Now question is what happens if he doesn't have 13 lacks to pay to broker ?
Please explain this sir. So it will help us to many people.
Thanks
Got very very important learning from today's topic. Thanks a lot for the information.
ok,
so if I'm getting it right,
2 solutions to counter this scenario:
1) close stock options 1-2 days before the expiry,
or
2) have an equal number of physical stocks in your Demat. (although not economical!)
right?
Yes
Why 2 days before. 2 seconds before should work. But only if buyers available
@@tirupatiraogogula4485 most of these stocks have no reliable volume hours before expiry.....
A lucid explanation of this kind of scenario. Helpful. Hats off to Mr Sundar..
Very informative video Sir. But I have few doubts. Just imagine a scenario where he goes default, meaning he doesn't have the money. What will happen?
Also just imagine the situation of that 450PE seller, when it went in the money how much money he should keep in his account to buy 45,000 shares at 450.
Penality
@@mandeepsingh-zg4yr OK. But just imagine, I only had 1 lakh and I bought the PE. Say I don't have any other money in my account. Will I have limited liability or they (broker) come behind me?
@@liteacademy it's like loan default, court, etc
2.5 Cr required
See my reply to akhildas above
No one... but Sunder sir. He is an Institution. Love you sir. Keep making such videos.