Path to Consistency

[mohan.sic]

Sorry sir i take back my comment. You feel free to treat Options to be based on futures. I know for a fact that they are based on spot prices. 3 people tried to reason out with you but you seemed adamant. No more comments from my side. Sorry once again. The reason i chose to correct you was that you had use fyi in your message to Subhadip ji. Meaning that you knew it all and were correcting him. You were not using the word "i Think"

You said you took back your statement, but came back with new word adamant:lol: and now you want to teach me English.

fyi.. yes i mean it. Now have a look at Subha's last post and try to open up.

 

[mohan.sic]

Option price settled seeing spot price. But in real time it follows future price.

What I have told is always there are fallacies in price.

So we have to utilise the fallacies.

First, that 9200 pe example was not about expiry. That's real time.
So, please explain to members here how it works.

Future and spot converge on expiry. There was no need to mention that option price settle based on spot. There is no other price except spot on expiry.

So the simple fact is options follow Future not spot.

 

[varunkochhar]

Sir the word fallacy has been used to that effect only. For example BN 21500 Put closed at 407 whereas the spot closed at 21056 and future at 21094. The intrinsic value of 21500 put is (21500-21056) Rs.444 and it is trading at a discount of (444-407) 37. People are under the fallacy that it is at a premium of Rs.1 on the future value.

 

[varunkochhar]

Subhadip ji pls see if my understanding is correct or not.

 

[Subhadip]

Sir the word fallacy has been used to that effect only. For example BN 21500 Put closed at 407 whereas the spot closed at 21056 and future at 21094. The intrinsic value of 21500 put is (21500-21056) Rs.444 and it is trading at a discount of (444-407) 37. People are under the fallacy that it is at a premium of Rs.6 on the future value.

Exactly sir. Hopefully some r enjoying that fallacies to earn big.

My idea is to tell all that do not sell PE when vix is low.

 

[Smart_trade]

First, that 9200 pe example was not about expiry. That's real time.
So, please explain to members here how it works.

Future and spot converge on expiry. There was no need to mention that option price settle based on spot. There is no other price except spot on expiry.

So the simple fact is options follow Future not spot.

Brother,you seem to be very knowledgeable in options....so please start a new thread and educate us but let this thread progress with whatever little knowledge the thread starter has ,consider that this thread is much below your expertise level...and ignore it.

Smart_trade

 

[mohan.sic]

Sir the word fallacy has been used to that effect only. For example BN 21500 Put closed at 407 whereas the spot closed at 21056 and future at 21094. The intrinsic value of 21500 put is (21500-21056) Rs.444 and it is trading at a discount of (444-407) 37. People are under the fallacy that it is at a premium of Rs.1 on the future value.

If you want me to say in your style:

Options prices follow futures. That's it.

No fallacy in that. You think all option prices are fallacy:lol:

 

[cinderblock]

Theres no future price in Black Scholes. Theoretically, options are valued based on spot.

In any case, Futures are itself valued based on spot and hence called Derivatives since its value is derived from Spot.

So you may choose to believe options are based on Futures but Futures prices are themselves valued based on Spot.

 

[varunkochhar]

Subhadip ji the second point i wanted to make was that instead of selling 21500 PE, one should be buying it (if one wants to go short) as in this case there is going to be time enhancement instead of decay(at least to reach the intrinsic value). There is no incentive to sell it as you rightly pointed out. (so efectively you end up saving the 37 points which is the discount to intrinsic value.)

 

[Smart_trade]

As it is this thread is progressing very slowly...if we keep arguing on each point, it won't move any further...if we have different views, post them once but if the others don't agree,so be it...move on...

Smart_trade