I saw this anomaly in the option chain. I could not find an explanation myself so gathered the courage to ask the experts.
I have attached a snap of the relevant option chain (downloaded after close of trade), in case of the 19800 PE (24-2-22 expiry)
The Intrinsic value of 19800PE: (Rs.19800 - Rs.17617 = Rs.2,183)
Ask price: Rs. 2122.85
which means negative time value of Rs. 60
Is it possible to have negative time value ,does that easy money?
Thanks in advance
January 25, 2022, 8:57am
illiquid contracts can have wide bid/ask spreads.
Hi Joyesh! thanks for the reply. I don’t think low liquidity is the reason in this case. In this case, a person was willing to write an option at lower than intrinsic value (that too way deep in the money). What if it was bought and held till expiry-
January 25, 2022, 9:43am
@Hemant_Prasad, most likely wanted to get out of their long position.
Yeah, can’t think of anything else. Funny part is that the bidder was not willing to pay that also. Options are indeed risky ( in all sense of the term)