In the nearby time we can see a huge difference in option premiums. Call premium in nifty and bank nifty is very high compared to put. Its almost double.vso in this case straddle strangle, delta neutral strategies with risk managing is difficult. So in this case which option strategy is more safe? And why this happening?
Whenever option nears expiry u will get high premium at ATM strike, nearing expiry has high IV, & as option nears expiry it loses its value, so buying an option nearing expiry shud be avoided as investors can lose money due to high volatility
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Always check based on futures price, not with respect to spot, eventually futures will close at spot on expiry day at 3.30 but till then we need to follow futures prices only as future is the traded instrument and options always follows futures.
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Call premiums being way higher than put premiums for the same strike price and same expiry can be theoretically explained using implied volatility concept which is easily available on the web and someone has done it here as well. But practically for me the meaning of it is that - the market makers are expecting markets to go up significantly tomorrow and so they - read option writers - want to cover their risk by demanding very high premiums today that will deter buyers from buying them. Now tomorrow if the market indeed goes up then there will be huge option writing at slightly otm calls leading to literally freezing the markets from going up beyond a limit and thus by tomorrow EOD call writers will pocket the huge premiums charged today and make profits. On the other hand If huge physical buying comes in key scrips comprising the index tomorrow then option writers will be trapped and will make losses which is unlikely to happen given the March end (financial year end) where only 2 trading sessions are remaining, investors will most likely postpone their stock buying to the next financial year…
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