why are next month option permium so high ?

why are next month nifty option premium so high ?

Hi,
i was looking at nifty option premiums for oct and nov.
the 6000, 6100 call option premium are so high, around 100. whereas a 5900 option of sept are around 75.

so assume nifty reaches to 6100 in oct end, its price will be around 75. so how will one profit from buying oct/nov options if i bought it now ?

Re: why are next month nifty option premium so high ?

Options always have time decay value + Intrinsic value.
if number of days are more to the expiry more premium is collected by option seller.
As we progress towards expiry option value will keep on reducing.

In above case 6100 call does have zero intrinsic value & have 100 as pure time value.
If NS never reach beyond 6100 till expiry then time decay will keep on reducing.
Just rough calculation. We have 40days left for Oct expiry then 100/40 =2.5
option value will keep on reducing by Rs 2.5every day.

If NS cross 6100 then only it will have some intrinsic value or else at expiry this option will cost zero.

If you see Sept 6100CE then it is costing just Rs13 as only 10days are left for expiry & option buyers are willing to pay less premium for time decay as they are not sure if market will cross 6100before Sept expiry.

Thanks for the prompt reply.

In such a case what should i buy ? as i do not day trade i want something long term inv in options (3 weeks to 2 months)

btw i bought a 6400 nifty nov call @ 34. is it a good bet ?

Otion is too risky & potential to loose all the capital. (study www.888option.com). Hence hedging is required.
First decide your view on market.
You are buying Nov 6400call. This mean you are expecting market to go beyond 6434 (6400 strike +34 premium). As you will be profitable only after this.
If this is your firm belief then it is good buy.
If 6434 is not crossed by nov then you will be loosing Rs34.

rrmhatre72,

If the market goes down say by 5400 before October, 2010 expiry and if i had bought at strike price 5800 wouldnt i be making profit even if the price of the Option goes down to 56 Rs.

Re: why are next month nifty option premium so high ?

If the prices were too high then everyone would be sellers.
You are paying for approx 35 days of time value + other factors. Except current month options, others have zero liquidity.

I think in this point of time buying put option is good even if it is of next months. Ok. I have 5800 put option of september.. can any one say what will be the result of that by this settlement.

6000+............. nov 6400+