Option Pricing

M

markidharhai

Active Member
#1
#1
Hello Friends,

I am bewildered by the pricing of options.

This the story of last week.

The underlying stock was ADANIENT.

I bought ADANIENT 380 Call at 15.15. ADANIENT itself was at 373. This was monday.
I sold ADANIENT on thursday when it touched 450. The call was priceed at 51.

Confusion is this, the call should have been priced at (450-380) = 70.

Why is this difference?
 
M

markidharhai

Active Member
#3
#3
TradeJoker said:
Thats bcos of the time decay of option as the asset near the expiry. :)
Click to expand...
As you know options have two values, Intrinsic Value and Time Value.

I am not even counting Time Value.

I am only concerned about the Intrinsic Value, Which is 450 - 380 = 70.

That option should have been priced at 70 when the stock hit 450.

Dont you think?

Anybody else has any idea?
 
Somatung

Somatung

Banned
#8
#8
@Markidharhai

Beside IV, Low volume and Speed of execution at the given levels, you have to watch your Orders. Market orders or limit orders (or even other orders) can show very different out come results. Considering those points, you should be done for the moment as some of those points result in an absolute bad bid ask competition which will be paid in general from the retailer and not from the broker. Get a word with your broker to may find out which one of the mentioned facts did result in your mentioned number Take care and have a nice weekend :)
 
M

markidharhai

Active Member
#9
#9
Somatung said:
@Markidharhai

Beside IV, Low volume and Speed of execution at the given levels, you have to watch your Orders. Market orders or limit orders (or even other orders) can show very different out come results. Considering those points, you should be done for the moment as some of those points result in an absolute bad bid ask competition which will be paid in general from the retailer and not from the broker. Get a word with your broker to may find out which one of the mentioned facts did result in your mentioned number Take care and have a nice weekend :)
Click to expand...
It delights me to see such a nice post.
 
U

umash2000

Active Member
#10
#10
markidharhai said:
Hello Friends,

I am bewildered by the pricing of options.

This the story of last week.

The underlying stock was ADANIENT.

I bought ADANIENT 380 Call at 15.15. ADANIENT itself was at 373. This was monday.
I sold ADANIENT on thursday when it touched 450. The call was priceed at 51.

Confusion is this, the call should have been priced at (450-380) = 70.

Why is this difference?
Click to expand...
IV was around 52-54 on Monday & Delta was around 0.47.On Thursday,IV fell down drastically & Delta is seen racing towards 0.99..Gamma is zero below IV 34. Thus,despite a move in delta,option price was lagging behind...
 
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