Options selling calculator helps in selecting right strike price to sell options.
Out of the money options have high chances of loosing time value on expiry.
General Instructions to use our options selling calculator
1.Best results when used 3 days before option contract expiry.
2.Do not use this on last day of expiry.
2.Kindly choose the best nearest option strike price.For example-if our calculator shows call option strike price to sell as 103 and your stock has 100 and 110 as option strike price,than choose 100 as it is the nearest strike price.
Why should you focus on options selling rather than buying options
As we all know,a coin has two sides.Same way a trade has two sides,a buyer and a seller.Together they make a transaction.
For buying options,you need to pay the premium amount and your risk will not go below zero.
For example an option of ABC limited company has a lot size of 100 and its premium value is 10,you pay just 1000 for buying the option.Look below at real example of margin required for option buying.
In above image,lot size=quantity is 600 and premium price for option is 10
Your loss is limited to just 6000 and you need 6000 in your account to buy this option.
But when you sell the same option,you need high margin amount in your account to make the transaction.
For the same option to sell, you need 100336.5 in your account.
So the question is who are the sellers of options ??
Option sellers need heavy margin to receive premium credit and have to exit there position on expiry.
There is a high chance that institutions and big players in the market having large funds are the option sellers.
They take time decay factor theta in there favor and sell options premium.
Value of ABC limited company option can go upto 110,120,130 or even above 200 in a month.We don’t know how much can a stock move upside during a high volatility situation.
So when selling options risk is unlimited.You need to know exact way of minimizing your risk and exiting the short trade with profits.
Option sellers are most probably institutional traders or HNI clients.
Options selling calculator can tell you which is the best strike price of options to sell.You just have to enter underlying spot value and annualized volatility.Hope this above mentioned information helps you.