Reason for higher increase in put option premium as compared to call option premium.

#1
Hello. Options noob here. Today I paper traded the following strategy:

-1 NIFTY 9000 PE - Rs. 129.00

-1 NIFTY 9000 CE - Rs. 132.90

Spot price at the time of initiation of trade : 9013.00

When the underlying breached 9000 from above, the premium of 9000 PE increased to 139 and at the same time, the 9000 CE decreased to 127 only.

Why did the premium of the put option increase much more as compared to the call option? Is it because the put option went in the money and thus had both intrinsic and extrinsic value or is there some other reason?
 
#2
Hello. Options noob here. Today I paper traded the following strategy:

-1 NIFTY 9000 PE - Rs. 129.00

-1 NIFTY 9000 CE - Rs. 132.90

Spot price at the time of initiation of trade : 9013.00

When the underlying breached 9000 from above, the premium of 9000 PE increased to 139 and at the same time, the 9000 CE decreased to 127 only.

Why did the premium of the put option increase much more as compared to the call option? Is it because the put option went in the money and thus had both intrinsic and extrinsic value or is there some other reason?
check with reference to futures
 

mohan.sic

Well-Known Member
#3
Hello. Options noob here. Today I paper traded the following strategy:

-1 NIFTY 9000 PE - Rs. 129.00

-1 NIFTY 9000 CE - Rs. 132.90

Spot price at the time of initiation of trade : 9013.00

When the underlying breached 9000 from above, the premium of 9000 PE increased to 139 and at the same time, the 9000 CE decreased to 127 only.

Why did the premium of the put option increase much more as compared to the call option? Is it because the put option went in the money and thus had both intrinsic and extrinsic value or is there some other reason?

part of the option price is the premium quoted for expected volatility. Its driven by sentiment. So sometimes pe prices react more than ce prices or could be vice-versa. No technical reason why it happens. Its just market sentiment driven by option sellers/writer.
 
#4
part of the option price is the premium quoted for expected volatility. Its driven by sentiment. So sometimes pe prices react more than ce prices or could be vice-versa. No technical reason why it happens. Its just market sentiment driven by option sellers/writer.
I too think that due to the sudden drop in price the implied volatility of the put option increased and hence the price increased much significantly. Is this an appropriate conclusion according to you?
 

mohan.sic

Well-Known Member
#5
I too think that due to the sudden drop in price the implied volatility of the put option increased and hence the price increased much significantly. Is this an appropriate conclusion according to you?
not exactly. implied volt does not make the price increase/decrease. iv is just a number used to denote the increase/decrease in price caused by the sentiment.
 

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