Banknifty falls 1% and far away CE option premium raises 50%!

Here is a weird chart of banknifty 38000 ce (march 18 expiry).
The 38000 CE option premium kept increasing though the underlying BANKNIFTY index value kept falling… yes, the vix increased by a % or so but this is ridiculous… Can anyone share the logic behind this behavior?

@siva @Bhuvan is chart/reading from zerodha correct? sometimes I have seen some PE strike displayed as CE strike in kite (couple of years ago).


Far away options are hedging instruments eg: People sell current ATM CE and BUY FAR OTM CE to get the margin benefit. Its the usual business nothing unusual about this . No issue in Zerodha!!

These are super far OTM, no logical reasoning can be given to their movement just before closing when there is 1 day to expiry, these becoming ITM has lesser chances than winning in Russian roulette. Also today night FED outcome is expected, so few may be closing their position or taking a gamble.


Can a Fed decision influence banknifty to move 10% in one day?
am really scratching my head as to which intelligent person would be buying at such prices and in huge quantities at the end of the day.

I understood this part of your answer: “People sell current ATM CE and BUY FAR OTM CE to get the margin benefit”

  • Is availing margin benefit is the only logic behind this?
  • Are there any other reason/logic behind people buying too far OTM CE at this close to expiry?

I mentioned the general trend; main reason for your instrument ->38000CE is due huge square off of sell options. People who Sold 38000CE and sitting on profit have square off there positions. Change in OI will tell you that.

Square off -> Means Buying Interest -> Causes Sellers catering to such Buying Interest

correct, 3 days before you have shorted this instrument around 130 now you are sitting on profit and you square off in bulk which increases premium 3 rs from 6 to 9 , would you care about these pennies:stuck_out_tongue_closed_eyes: