Why people are buying calls or puts?
The answer must be
1. They have a view/intution/news about the particular movement of Index......based on it they buy calls or puts.
2. They want to trade in more qty because of lack of funds.
3. They dont want to take naked positions.......and want to reduce the risk...so going for options.
Ok what ever may it be..
Buying any option is very easy...if u have money..u can buy any option call or puts
Ok what about profit booking.........? U want to wait for your particular level to come and sell the position...or will u wait for further fall or rise even if market reached ur levels?
Every month, crores worth Nifty and Bank nifty options are being written by big hni and funds.
Retailers buy the options calls and options along with other funds.
Here the problem is while funds must be hedging their positions in Index, small players will be buying them for quick gins which never happens and we lose all of money every month...whats the reason?
Lets c...how a small call or put buyer lose money every month..
Market is at 9500....market has given negative closing.
Mr. G.T ( General Trader) thinks market will further fall and goes for Put buying..
He expect market to hit 9400,,,,,market falls..
rate of puts goes up and he finds a lot of sell calls and crash calls..
instead of selling...he keeps holding it for bigger gains..market again moves up after retracement and make highs..his puts are getting eroded every day..
the problem with options buyers are ......not market...but their behaviour..when they buy for some small profits, market mood and general news flows stop them from selling...
If u want to play in options...remember.
U should have ur profit as soon as ur levels comes..dont expect for more...thats for others who buys it from u. U r job finishes when ur target reaches..
If u r a put buyer dont heed calls of big falls crash etc ........better go and liquidate ur positions
If u r a call buyer..dont heed for calls like 9800-9900-10000 etc....,market will make wild swings both sides.To make money in exact lows and highs u must have information from HNi...
otherwise........u lose..so next time before buying an option make preparation for liquidating it at ur profit making levels