I’m trying to understand exactly how the ATM strike is decided for NIFTY options.
Is the ATM strike based on:
The strike price closest to the NIFTY spot price?
The strike price closest to the NIFTY futures price?
The strike whose Delta is closest to 0.50?
Or some other methodology defined by the exchange/broker?
Also, can the next weekly options contract have a different ATM strike from the current weekly contract at the same point in time?
For example, if the current weekly expiry considers 24,300 as ATM, could the next weekly expiry consider 24,400 as ATM because of differences in futures pricing or some other factor?
The ATM strike for NIFTY options is determined based on the NIFTY index (spot) price, and not based on the option’s Delta or the futures price.
The exchange defines the applicable strike intervals, and the strike closest to the underlying price is considered ATM.
So, different expiry contracts would not have different ATM strikes. The ATM designation is based on the underlying NIFTY level and the available strikes.
This is a very good question and even trips up experienced traders.
Nifty options are index options akin to SPX, not futures options like ES.
What @KarthikAcharya said can be visualized when looking at the NSE or Kite option chain. Regardless of the expiry, the ATM is around 24350 as spot is 24350 now.
The confusion comes from trading platforms like Sensibull where ATM is shown based on futures or synthetic futures price and/or delta. This is more useful for greek trading and hedging.
Looking at your profile, it seems you’re from a technical background too. I’m attaching a piece of code that’s widely used to determine the ATM strike. Maybe you can explain the logic to the OP and help them understand it. If you don’t, I’ll do it after market close.
