@ShubhS9
Good Evening!
Namaste.
I would like to know how Delta and Vega contribute in price change of an option in different expiry of same strike price.
Suppose, BN while trading at 22299.00 the 27 Aug -22400 CE price is 235 and 03 Sep- 22400 CE price is 385.
Q1. So, if spot moves 100 pts up or down what will be expected value of Delta for both the option? (will it be same around 0.5, i.e. 50 pt here? Or something different?). Please throw some light on it.
Q2. what will be the effect of Vega for these two options? Will the value of vega be same for two options in any point of time. Kindly confirm it…
Awaiting your knowledge.
Bank Nifty 27 AUG 22400 CE has Delta of 0.45 so for 100 point move in Bank Nifty, the 22400 CE should theoretically move 45 points, while BN 3 SEP 22400 CE has Delta of 0.47 so for 100 point move in BN, it should move 47 points.
This is all theoretically, but in reality things are different, because there are other Greeks which play vital role in pricing as well, especially. Theta.
Vega for AUG 22400 is 11 while for 3 SEP 22400 is 17.
You can easily get values of all the Greeks on Sensibull’s Option Chain.
While you can learn about Greeks and their effect on Option pricing from Varsity.
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Thank you very much for your kind response. I have already read this chapter of varsity as you’ve suggested. So I have some basic ideas on Greeks. I know their individual role in changing the price of option. I just wanted to compare their effects on different Expiry of options. Since theta is time valued definitely it will contribute much differently. Gama is very negligible for retail traders as I understand. So rest two Delta and Vega play a crucial role.
However, I failed to understand here why value of Delta and Vega is different for same strike price of different expiry of options of same underlying. As we know delta measures the change of price of underlying and Vega measures the Volatility. So both the greeks have nothing to do with time spread, yet their values differ. Little confused.
Could you please elaborate it?
Difference in Delta across two expires is minimal, while difference in Vega is understandable as Vega for Options which have more time for expiry is always on the higher side compared to those Options which have fewer days to expire.
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Much indebted for enlightenment. 