A question regarding option

[vagar11]

Suppose NIFTY MAR CE Strike Price 7500 is trading at a premium of 112.40.

Then nifty goes down by 200 pts and then rise back by 200 pts.

Now, will the NIFTY MAR CE Strike Price 7500 trade at the same premium or it can vary a lot ?

I am a newbie in options.

 

[samip2u]

It would likely be trading at a premium less than 112.4 because :

1. Premium is the time value till expiry ..hence chances of it coming above 7500 ..with more time lapses ...the likelihood of it staying above 7500 few days from now is less than today. Hence low premium

2. The volatility also plays a role in premium ..but with rise in index..volaliity like to fall further ...in case of calls ..

Hence in all probability...call would price of less ...if it falls n comes back near 7500/spot

 

[Help_Mee]

Suppose NIFTY MAR CE Strike Price 7500 is trading at a premium of 112.40.

Then nifty goes down by 200 pts and then rise back by 200 pts.

Now, will the NIFTY MAR CE Strike Price 7500 trade at the same premium or it can vary a lot ?

I am a newbie in options.

Just define Current Market scenario
Since you said 200 point down and up , if current market is ahead of its price and this stuff works different for ce and pe .

and yesterday before when market rise 7200 ce was around 340-350 it rises like 48 points something, yesterday market fallen roughly same point ..
but when market rise it , 7200ce rise more than it should be fallen as time decay... as 7200 ce is ITM so time decay work different ..

but as general , not to be confusing generally premium not gonna be same ..

as they say Selling has positive theta decay
but yes , it difference for itm and otm..
dont confuse too much about itm and otm ,it's just the strike price that you choose. as per otm and itm defined.

 

[NewStarS]

Study the options Greeks, it will give answer to your questions....In this case looked into theta...as Help_Mee suggested..

Keep a option calculator always with your side...its helpful..