Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.
Sign up to join this community
If the current price of a stock is at 2000 and I take a call option buy at strike price 2100 weekly expiry with 80 ltp. Suppose now ltp increases by 5 points and yet the price does not go above 2100, will I make profit if the price is below while LTP is increased?
In my Portfolio it is showing profit, while the price does not go above. Please help me understand.
Option basics: You paid 80 for the right to buy the stock at 2100. If you can sell the option for 85 (which means the bid is 85 - the last traded price is irrelevant), then yes, you could sell your option for 85 and make a profit regardless of whether the stock is above or below the strike. It just means someone else spent 85 for the right to buy stock at 2100.
You only get a payout at expiry if the stock goes above the strike , and profit if it is more than the premium you paid. Before expiry there are other factors that could cause a profit even if the stock price is below the strike. The expected volatility (uncertainty) of the stock could have gone up or the price could have gone up some but not enough to cross the strike.
But yes, you can sell options for a profit even if the stock does not cross the strike.
