What is the impact of moneyness on options premium?

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• What does Premium mean in options?

  Premium is the downpayment that the buyer is required to make to the seller for entering into the options contract.

• Can I use the Options Premium received to place new orders in F&O?

  Yes, Options premium received on selling options contracts can be used to place new option buy orders. For Example, Mr. X shorted 1 lot of Nifty 18000PE trading at ₹100. The premium of ₹5000 (50 Qty*100) will be credited to his account on the same ...

• What is an options debit spread?

  A debit spread occurs when the investor buys options with a higher premium and sells options with a lower premium thereby resulting in a net premium outflow.

• What is an options credit spread?

  A credit spread occurs when the investor buys options with a lower premium and sells options with a higher premium, thereby resulting in a net premium inflow.

• How is the margin calculated for buying options?

  To buy either calls or puts, the margin requirement is only to the extent of the premium. Margin for buying options = Premium * Total Quantity