Understanding CE & PE

CE (Call) PE (PUT)

Q) When I will buy CE?

Q) When I will buy PE?

Ans) when my view is bullish. When my Ans) when my view is bearish. My study will
study will indicate the particular stock/index indicate stock/index will fall compared to current
will move up compared to current spot price
spot price.

Q) How will I buy CE?

Q) How will I buy PE?

Ans) will search for different strike in context Ans) will search for different strike in context to
to spot, and buy on my broking platform.
spot, and buy on my broking platform.

Q) Which is correct CE for me?

Q) Which is correct PE for me?

Ans) will be ans in main seminar

Ans) will be ans in main seminar

Q) What is premium?
Q) What is premium?

Ans) like buying shares I have to pay share Ans) like buying shares I have to pay share value
value similarly to buy a particular CE there is similarly to buy a particular PE there is price it is
price it is called premium.
called premium.

Q) How will I make profit in CE?

Q) How will I make profit in PE?

Ans) if the spot (share/index value) starts Ans) if the spot (share/index value) starts moving in
moving in moving in my direction my moving in my direction my premium price Strats
premium price Strats going up this show I going up this show I am making profit.

am making profit.

Q) For CE to make profit is it compulsory spot

Q) For CE to make profit is it compulsory should move in down trend?

spot should move in uptrend? Ans) Yes

Ans) Yes

Q) How should I build a view (in case of PE

Q) How should I build a view (in case of CE bearish)?

bullish)?
Ans) by applying SMM & PAPA and studying spot/
Ans) by applying SMM & PAPA and studying index charts mostly on daily TF

spot/index charts mostly on daily TF

Q) What is BEP in PE & its benefits?

Q) What is BEP in CE & its benefits?

Ans) BEP is Strike - Premium Paid. It is beneficial
Ans) BEP is Strike + Premium Paid. It is for calculating and understanding profit/loss at
beneficial for calculating and understanding expire only. (note one will be still in profit if PE is
profit/loss at expire only. (note one will be moving in my direction)

still in profit if CE is moving in my direction)

Q) How IV is calculated in PE?

Q) What is IV?
Ans) Stike - Spot price.

Ans) It is the value (aukat) of particular CE.

Q) In PE can IV be negative?

Q) How IV is calculated for CE?

Ans) No, so IV will be “0”

Ans) Spot Price - Strike.

Q) In PE is TV concept similar to CE?

Q) in CE Can IV be negative & if IV is Ans) Yes.

negative what numerical value should be
consider?

Ans) IV cannot be negative so IV should be

considered “0”
 Understanding CE & PE

CE (Call) PE (PUT)

Q) What is time value (TV) in CE?

Q) Can TV become “0” in PE?

Ans) TV is part of premium (if premium is 10 Ans) Yes at expire.

then it is comprise of IV+TV). E.g if a CE is

DOTM it has higher TV.
Q) What is ITM for PE?

Ans) If my view is bearish and I buy ICICI PE 500

Q) Can TV become “0” in CE
and spot is 400 then I am ITM. It means Spot has
Ans) Yes at expire.
fallen below CE strike.

Q) Whenever buying CE which value (IV or Q) what is ATM in PE?

TV) should be higher?

Ans) if my PE & Spot is at same price e.g if I buy
Ans) IV should be higher then TV when ICICI PE 500 and spot is at 500 then I am ATM.

buying CE. IV:TV should be higher.

Q) What is OTM in PE?

Q) Which is ITM for CE?

Ans) If my view Is bearish and I buy ICICI PE 500
Ans) If my view is bullish and I buy RIL CE and spot is at 600 then I am OTM.

500 and spot is at 600 then I am ITM. I.e my

CE should be inside spot.
Q) If I buy PE and Spot chart goes “down” then my
PE chart will go up?

Q) What is ATM for CE?

Ans) Yes, (my PE will start making profit)

Ans) if my view is bullish and I buy RIL CE

500 and spot is at 500 then I am ATM. I.e my Q) If I buy PE and Spot chart goes “UP” then my
CE & Spot are at same place/value.
PE chart will go “down”?

Ans) Yes, (my PE will start making loss)

Q) What is OTM?

Ans if my view is bullish and I buy RIL CE

500 and spot is at 450 then I am OTM. I.e
my CE is out side of spot.

Q) If I buy CE and Spot chart goes “UP” then

my CE chart will go UP?

Ans) Yes (my CE will start making profit)

Q) If I buy CE and Spot chart goes “down”

then my CE chart will go down?

Ans) Yes (my CE will start making loss)

Q) what is delta and it’s significance?

Ans) Delta can be 0-1, is a CE is ITM/DITM

then delta is 1 or near to 1 that mens if spot
moves by 10 points CE will move by 10
points. If CE is OTM /DOTM then delta is
less than 1 that mens if spot moves by 10
points the OTM/DOTM will move by 1-2
points (slow movement)