On the intraday basis, is there a way to know about the change in option premium as per change in Nifty ?
For example at 9:30 am Nifty is trading at 10370 and option premium of 10300 CE is 56
At 11 am Nifty goes to 10450 i.e a movement of 80 points.
Is there a method to know what will be call option premium at that time.
I am aware it won’t move exactly 80 points.
Any formula that can determine the value of option premium with as nifty goes up or down from current level ?
Let’s assume volatility stays same during this session.
Every Option has Delta value, which tells Change in Option price for each point movement in underlying.
In your example if 10300CE is trading at 56 and has Delta of 0.5 then for each point move in Nifty 10300CE will move 0.5 points.
So if Nifty moves 80 points, with Delta of 0.5, 10300CE will move 40 points given other all things stay constant.
Delta isn’t the only Greek that affects price movement, there are other Greeks like Theta, Vega and Gaama. You can learn about Option Greeks and their effect on price behaviour of Option here.
Thanks for the answer.
On the day intraday basis, how much does these Greek factor changes ?
I have noticed that atm and near atm Nifty call options mimic Nifty to a great extent, almost 95 percent, and put option is exact opposite.
Actually in trading view there is a custom indicator that provides support and resistance level.
I can use it for the nifty but options are not there in trading view.
So if there is a resistance zone between 10400-10450 , and if I could calculate corresponding zone for call option it would be great.
Can I go with delta calculation for this one ?
These levels are available at 9:15 am
Don’t trade Options by using indicators on them, whatever analysis you want to do, do it on underlying and use Options to take position according to entry signal you get from your strategy.
Delta isn’t the only Greek that affects Option price, there are other Greeks as well which play vital part. Read the Options Greek article I linked to you.
Thanks for the tip.
Will checkout the article.
Enjoy the weekend