Options: Need to clarify a few doubts

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Hi,,

Experienced Option Traders & Seniors:

I am posting this post for clarifying some doubts regarding options using a hypothetical example. My questions are more on safety of capital, exchange/broker's operations, margin requirements & settlement procedure etc:

TRADE EXAMPLE:

Short 1050 CALL at 25
and
Short 1100 PUT at 30

Both positions are open till expiry & will not be covered. Rough calculation shows 5 profit at the time of expiry.

My questions:

1) Is this trade a perfectly safe trade with no chance of loosing money, which ever way the market goes ?

2) What is the worst case scenario of loosing money in this trade ?

3) Should I invest really big in such a trade, if I am happy with the return % ?

4) Do I need to keep MTM funds for daily margin requirements ?

5) I will hold the positions till expiry & will not cover it. At what price will the trade will be settled by the exchange ? Is it at the spot price OR the settlement/expiry price is discovered thru any other mechanism ?

6) Do I need to compulsarily sqaure off the trades in order to book profit ? OR I will get profit automatically from exchange.

7) Margin: Do I need to pay margin for both the lots or only one ?

8) Will there be any charges / bkg or otherwise if options are not covered & are settled by exchange on expiry ?

Thanks,


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