How do we calculate Nifty/Bank Nifty option premium price for a strike price after pre market and before opening the market?
Here is the example for better understanding.
Nifty 15000 CE which expires on May 12th, 2021 traded at Rs 39.85 at market close on May 6th, 2021 and Nifty closed at 14724.80. 15000 CE option had implied volatility (IV) 19.92 on May 6th, 2021 when market closed.
But, next day i.e. May 7th nifty was gapped up during pre market to 14816.85 and Nifty 15000 CE option’s opening premium shot up to Rs 69.70 at 9.15am.
So, I tried to use previous day IV 19.92 to calculate opening price of the Nifty 15000 CE after pre market and before opening the market (i.e. between 9.08am to 09.15am) with previous day IV 19.92 using Black & Scholes Option Pricing Formula.
But when market opened the opening premium was much higher than what I got calculated through the formula.
So, does it mean IV changes during pre market. If so, how do we calculate IV and option premium before market opens and after pre-market?
Can someone please help me on this?
Black & Scholes Option Pricing Formula. Link