I am new to options trading. I would like to know?

Question

I am new to options trading. I would like to know how to understand that we are in profit? i mean like I have purchased a lot of call option at 100 rs per share and strike price is 105 and in a day or intraday it reaches to 106 then can I sell it at 106 price? and what will happen if it comes down to 100 or 99 again ,still I have achieved strike price or not. I mean if stock price goes up to 106 and comes down to 99 can i say i have achieved strike price or I should sell it when it is at 106? Pl explain and help. thanks '

Answer 1

1. yes, you can

2. you are in profit, if the stock price above the strike price. You can ask the broker to sell the call option at 106.

Answer 2

You question is confusing because it is often unclear if you are talking about the price of the option or the price of the underlying stock. Here is what I think you meant to say:

Question: "Assume I purchased call options with a strike price of 105 rs when a stock was at 100 rs per share. If the stock goes to 106 rs can I sell the option at that time?"

Answer: Yes. You can sell the option any time prior to expiration. It does not matter if the stock is (or ever has been) above the strike price.

Question: "It the stock goes up to 106 then comes back down to 99 can I say it reached the strike price?"

Answer: Yes, it reached the strike price, but that makes no difference whatsoever. The price of the option depends upon several factors, one of which is the current price of the stock. Any previous price at which the stock traded is not a factor.

Question: "Should I have sold the option when the stock was at 106 rs?"

Answer: You would get more money by selling the option when the stock was at the higher price, but at the time the stock was at 106 rs you had no way of knowing if the stock would keep going up or if it would go down. Consequently, when the stock was at 106 rs you had no way of knowing that it would be better to sell it at that time.

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From your question I strongly encourage you to learn more about options trading before investing any real money in options.