Ntrader,
Would u kindly elaborate it. I understand that the premium will be much lower; but then the time dacay will also be much higher. At the same time the volatility also increases towards the expiry. I'm not sure whether that would be to our advanatage or disadvantage.
Laksh
Would u kindly elaborate it. I understand that the premium will be much lower; but then the time dacay will also be much higher. At the same time the volatility also increases towards the expiry. I'm not sure whether that would be to our advanatage or disadvantage.
Laksh
ITM options - Price of far month option increases/decreases slower than the near month option
OTM options
If underlying does not move much - Price of far month option decreases slower than the near month option
If the underlying gives a favourable move - Price of far month option increases faster than the near month option, until it becomes ITM
If the underlying gives a unfavourable move - Price of far month option decreases slower than the near month option, until a point where the near month options doesn't have much premium to lose.
For now, my preference is the near month option, but that may change.
Here's the link that contains the Close of Nifty Futures and near and far month ITM and OTM options - data from 13 Feb to 23 Feb. Lack of liquidity in some options is an issue - so even the Close price will not show the correct picture in those cases.
https://docs.google.com/spreadsheet/ccc?key=0ArXbrH1rDEu0dEhmS2lPUzJEM3o1enJMZVhWQjFsMkE