Yesterday 16th April 2024, at 3:25 PM, Finnifty was trading at ₹21100, 21100 CE (expires today) at ₹0.15 and 21150 PE (expires today) at ₹52. IV of the CE at this time was 3% with vega as 4. And in the matter of 5 minutes, at 3:29, Finnifty was trading at 21140, but the price of the call option and put option didn’t even move by bit, at 3:29, the 21100 CE closed at ₹0.05 and 21150 PE closed at ₹50. Why didn’t the option premium reflect the underlying even after such a big movement in underlying in a short period?
And at 3:40 (after market hours), the Finnifty market closed at ₹21100, why is this so? Why did the market move even after market closing time?
Why didn’t the options premium with expiry less than 5 minute didn’t move in spite of large movement in the underlying? wouldn’t the moneyness of the option be effected by this behaviour?
I’ve also observed the same in Nifty few days ago. I can’t clearly say why it’s happened But after 3:40 We have Post market session to 4:00. So it’ll be a one of reason and after market closed it won’t show us the actual closing price of the Index or stock but the closing price is calculated by volume weighted avarage price of last 30 minutes i guess
This happens due to the price being the weighted average price of the last half hour before closing. Which means the current price is the weighted average of the price from 3:00 pm. If FINNIFTY spent more time below 21100 after 3:00 pm and moved by 20-30 points above 21100 say after 3:25 pm, the settlement price will still be lesser than 21100.
Explained here at NSE.
Now how do you know or calculate this price while trading. It will be difficult for retail traders, so better add a FINNIFTY 20800 CE to your watch list. That price + 20800 will be the approximate price (variation of 2-3 points) .
that means that option premium depends on the Weighted average and not LTP during the last 30 minutes of the market ?
thank you very much for sharing your knowledge @sanjayn and @sanjay_lavudya