As a trader, we might have observed that the premium of the call option and put option, which are equidistant from the spot price are not equal. Either the call option is trading at a premium or discount viz a viz put option. The question that comes to our end is why it is happening.
In this video, we will discuss and answer the following 3 questions.
- Why the premiums of the equidistant call option and put option are not the same i.e. why one of the options is trading at a premium or discount?
- What is the reason for the discrepancy in the premium of a call and put option in this scenario?
- If you are using a short straddle or iron condor option strategy then what adjustment do you need to make in your strategy so that you do not incur loss due to this anomaly or maximize your profit
HAPPY GURUPURNIMA SIRJI
Thanks a ton bro
Beautifully explained sir.
But I observed that
1.in weekly expiry future always trade in premium , but not all expiry come on higher side
2.during the monthly expiry , future premium is completely eroded , means spot price and future price are almost same.
Can you explain in these scenario?
1.As i mentioned in the video that if future is at premium, it means participants are expecting market to close near future. However, it does not mean that it will happen for sure. Basically, i use this data only to fine tune and adjust the short straddle or iron condor strategy which i explained in point no 3 of the video
2. Ideally futures and spot should trade at same level. At the beginning of expiry, due to anticipation of market movement on expiry day, the future trade at premium or discount. However, near expiry, it is more of realistic and idealistic scenario therefore, premium/discount becomes zero.
In my past videos, i always mentioned to look at next month’s expiry data, a week before the current’s month expiry to check the sentiments.
Thank you sir,
Very nicely explained. might be very basic but many of us dint knew this in spite of trading futures and option regularly.
SIr,Thankyou for the video.Can you please tell what should we use while calculating the IV of options?Futures or spot?
Spot
While doing premium decay analysis,how to remove the effect of intrinsic value?
Just consider only the time value
Sir,if the futures is in premium and the call option is more than put option,what to conclude?
We cannot conclude market direction from the same. Basically, i use this data only to fine tune and adjust the short straddle or iron condor strategy which i explained in point no 3 of the video
Today future is trading in premium by Rs.8 but put premium of ATM i.e. 24500 is Rs. 15 less (nearly) than call premium instead being greater. Is it an anomaly as expiry is near?
During live market anomaly may occur due to demand supply mismatch. On closing basis, Futures is trading at same price as spot price which normally occurs near expiry. Equidistant options on call side is trading at premium compared to put premium indicating that option buyers are expecting market to expire above today’s closing. Just to add that premium on call side does not mean necessarily that market will move up, it is only indication that retail traders are bullish and buying call option.
Nitinji, thank you for all recent learning videos.Lets suppose spot is at 20000 and future is at prem 50 points.The big players active in itm( Put)and sometimes in ATM.With big players activity strike price and money flow, currently able to predict direction 60 to 70 points(keeping iv in mind).But, sometimes spot move more than 150/200 points.
Q1 With above example whether one should calculate again from the start fut(prem/disc) together with big players activity and money flow at 20070 to test its further upward/downward movement
Q2-Whats the best mode to invest in index fund SIP/lumpsum.
1. Move maybe bigger than expected depending on the market dynamics. Personally, i will not suggest.
2. I already shared in my videos that i prefer MF utility backed by AMFI for my investments. It is not a suggestion from my end and You may decide based on your requirement. Disclaimer: I have NO business relationship with MF utility.
THANKS SIR.
nitin ji, mera sujhaw hai ki websight par ek alag section bna kar daily market analysys ka live stream ya video kar sakte hain… Membership program shuru karne ke liye bhi bola tha uska kya hua……
Bro..I will start sharing daily analysis soon.
Sir,In many videos you explained the option premium movement with respect to the nifty movement.You said that if nifty moves 50 points ,the call also should move 50 points but how is this possible sir.The call or put premium should move according to the delta and iv right?Please explain this once more sir.I am struggling to understand how to correlate premium and market movement.Under ideal conditions how much should the premium move?what is the calculation method?
Technically you are right but I use simple concept of time value and intrinsic value for my calculations
Pranam Guruji, SSTS 2.0 mea aap Exit kaisea lete hain?
I will share the strategy shortly
Sir, regarding today’s expiry movement 12/09/24, u tweeted that the ATM premium was around 60Rs and that it was unusual.
1. The ATM strike around opening was 25050. Premium of PE was around 96 and CE was 45. So what do you meant by ATM premium being 60 rupees.
2. Why did you say that it was unusual that there was such a big premium (60) in the morning.
1. I consider average of PE and CE ATM premium as average premium as explained in one of the videos
2. I compare with last 7 days expiry average and it is normally around 30 Rs
Last 7 days expiry average meaning the average considered for different indices(the one that has expiry) of last 7 days. Am I interpreting correctly?
Last 7 weekly expiry of nifty 50
Can it be analysed on daily basis or only help during expiry days?
You may analyze daily as we know the intrinsic value therefore time value can be calculated.
Thank you Nitinji.Can it be tested on BankNifty?I know you have said in multiple times you never trade in BankNifty.There are times when Bank nifty shoots up but nifty remain dull for whole day.Just curious to know if you have analysed it on Banknfty.Thank you.
Yes. It should work on bank nifty also as the basic concepts remains the same.
Nitinji, if there is no premium or discount observed and suddenly big players active, then the direction of the big move and whether it is stop loss move or real move is getting difficult for me to predict.No such problem facing if there is prem or discount.
Q1 Is it because I am analyzing only future and not option?
Q2 If yes, whether the price volume concept of call & put side of the option chain as mentioned in one of the video will help.
Q3 Is it compulsory to analyse big players activity in near ATM strike prices?