Hi guys, newbie here trying to learn and looking for some help. On 2021-12-24, around 1:30 p.m., I bought a bank nifty call option at 35000 strike price expiring on 2021-12-30 when it was trading at 34901. Immediately after, I saw profit was being generated when bank nifty was still trading below 35000. If profit = spot price - strike price - premium , shouldn’t it be a loss? Been trying to understand how this is being calculated over the weekend but couldn’t figure this out, would appreciate if someone can help me out.
See if you bought 35000 call at say 100 rs when spot was 34901, now if the spot moves up say by 100 point …then you will gain close to 40-50 rs (because the delta will be close to say 0.4-.05) , your will be in profit and vice versa , but if on 30th say bank nifty closes below 35000, the premium you paid will be zero…so in this case you lose the whole 100 rs …and if it closes say at 35500 on 30th …then your 100 rs will be 500 (spot on expiry - strike price=35500-35000)