I had a question about Options strike price.
Suppose Nifty is trading at 4000. Calls for Nifty at strike price 4100 are available at (say) 150 and calls for Nifty at strike price 4300 are available at (say) 25.
So, basically, if I buy:
- Calls for strike price 4100, total premium I pay = 150*50 = Rs. 7,500
- Calls for strike price 4300, total premium I pay = 25*50 = Rs. 1,250
Now, if Nifty increases to 4050, I am assuming that if the premium for 4300 strike price becomes 25+x, the premium for 4100 strike price will become 25+x+y. Is this correct? Otherwise, why would anyone want to go with 4100 strike price (and pay a larger premium, if the premium appreciation is also not larger, than it would be for 4300 strike price).
I understand premium pricing is derived from BS formula, which I find difficult to use (especially the volatility part).
Thanks
Bharosey.