TCS is up, but CE Option is down?

[HashOptions]

TCS went up by 1.79% today. Considerable gain for a day.

However, "OPT-TCS-27-Oct-2016-2600-CE" on ICICIDirect went down by 47%, considerable drop for a day.

There is of course time decay of CE, but its just middle of the month now and how else should one try to understand this inverse correlation?

 

[vijaych]

IV's have impact on deciding option price. Since the event was over (i.e. Q1 result) iv's crashed and price dropped

 

[Subhadip]

TCS went up by 1.79% today. Considerable gain for a day.

However, "OPT-TCS-27-Oct-2016-2600-CE" on ICICIDirect went down by 47%, considerable drop for a day.

There is of course time decay of CE, but its just middle of the month now and how else should one try to understand this inverse correlation?

VIX - volatility down......

 

[mastermind007]

First thing I checked upon reading your post was whether you were talking of an ITM Call or an OTM Call.

This kind on inverted co-relation can also happen with ITM calls too but it is more or less guaranteed to happen with OTM Calls.

"TCS-27-Oct-2016-2600-CE" is OTM call and in all probability, it is abundantly clear that there is no chance (or very less) of TCS reaching remotely close near 2600 on or before 27 Oct 2016 3:30 PM. This means that this option is going to expire worthless.

This means that there will be very few buyers for this call but plenty of writers.

When demand is too low, price _________ rise (fill in the blank)

 

[mravi]

TCS went up by 1.79% today. Considerable gain for a day.

However, "OPT-TCS-27-Oct-2016-2600-CE" on ICICIDirect went down by 47%, considerable drop for a day.

There is of course time decay of CE, but its just middle of the month now and how else should one try to understand this inverse correlation?

I asked the same question to my friend some 5 years ago. My bad luck I was holding a position. TCS up 100 rupees, the OTM option did not change a single paisa the next day morning.. slowly started loosing the value. Took some loss and closed the position.

It is amazing how much similar situations we go through in stock market. He he..:lol:

 

[davincy]

TCS current market price is 2370.60. 2600ce is very deep otm call option. Never ever buy deep otm call option.it will always result in loss.


Davincy

 

[HashOptions]

Thanks guys! @davincy made a good observation of too deep a OTM call. And @mravi - LOL :_

 

[RISK_REWARD]

IV's have impact on deciding option price. Since the event was over (i.e. Q1 result) iv's crashed and price dropped

Yes,IV is main criminal for that http://economictimes.indiatimes.com...nfosys-to-make-money/articleshow/49295662.cms

 

[RISK_REWARD]

TCS went up by 1.79% today. Considerable gain for a day.

However, "OPT-TCS-27-Oct-2016-2600-CE" on ICICIDirect went down by 47%, considerable drop for a day.

There is of course time decay of CE, but its just middle of the month now and how else should one try to understand this inverse correlation?

Never jump on stocks option,If you are newbie practice Index option.

 

[TradeOptions]

As many friends already mentioned, IV CRASH is the main reason for it. I posted a thread on the same topic last year -
http://www.traderji.com/options/99958-crash-iv.html

Thanks and regards