Can I use the options premium received to place new orders in F&O?
When you sell options contracts, the premium received can indeed be used to place new orders for option buying. However, it's essential to understand the specific conditions under which this can be done.
Let's illustrate with an example: If Mr. X shorts (sells) one lot of Nifty 18000PE trading at ₹100, he'll receive a premium of ₹5,000 (50 Qty x ₹100). This premium will be credited to his account on the same trading day. Notably, he can only use this credited premium to buy other options.
Key Points to Remember:
- The premium received can only be utilised for buying options.
- You can't use this premium to trade in Equity, Futures, or for option selling.
- It's crucial to note that the premium must be used on the same exchange.
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