I am beginner in trading.
So scenario is: For e.g. until the expiry date i want the stock value to stay at $50 or less. But what happen if the stock price went high and then go down near expiry date?
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Sign up to join this communityI am beginner in trading.
So scenario is: For e.g. until the expiry date i want the stock value to stay at $50 or less. But what happen if the stock price went high and then go down near expiry date?
But what happen if the stock price went high and then go down near expiry date?
When you hold a short (sold) call option position that has an underlying price that is increasing, what will happen (in general) is that your net margin requirements will increase day by day. Thus, you will be required to put up more money as margin to finance your position. Margin money is simply a "good faith" deposit held by your broker. It is not money that is debited as cash from the accounting ledger of your trading account, but is held by your broker to cover any potential losses that may arise when you finally settle you position.
Conversely, when the underlying share price is decreasing, the net margin requirements will tend to decrease day by day.
(Net margin is the net of "Initial Margin" and "Variation Margin".)
As the expiry date approaches, the "time value" component of the option price will be decreasing.