Weekly expiry below 17400, signals options data
Premium- The premium is already down from an intraday high of ₹67 a share to ₹19.55, causing a significant loss to option buyers who didn’t place a stop loss
Mumbai: Heavy selling has been witnessed at the 17400 strike weekly call option in the Nifty, making the level a strong resistance today. The weekly option expires today.
The premium is already down from an intraday high of ₹67 a share (50 shares make one options contract) to ₹19.55, causing a significant loss to option buyers who didn’t place a stop loss.
A call option seller is bearish as he/she expects the Nifty, in this case, to close at or below 17400 allowing him to pocket almost all of the premium paid by the option buyer, who is bullish.
The call buyer will make money only if the Nifty trades or expires above 17400 plus the premium paid to the seller.
The average price at which much of buying has happened is ₹37.29. The current price of ₹19.55 a share shows how the sellers have managed to pocket premium paid by the buyers.
A call buyer has the right to buy an underlying at the locked price for delivery on a future date in exchange for a premium paid to the seller. In actuality, index options are cash-settled.
A call buyer’s profit is unlimited but the maximum loss is limited to the premium. A call seller’s maximum profit is limited to the premium received while losses can be unlimited.
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Hence, selling options is usually done by experienced traders or investors . Support based on options kicks in at 17300.
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