How Option Pricing is done/Who is deciding

F&O
1

Who decides the Option price? please explain baced on the below example.

for eg.

INFY dont have any call option trading at 1380 Strike. suppose if i want to write a call (Sell) at 1380, at what price i can sell? is it demand supply? or is it have any relation with 1360 strike Call and put?

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2

Option price is based on Time to Expiry, Implied Volatility etc. You can read the Options module on Varsity, everything has been explained in detail there.

3

That I know, I’m asking practically. There is no contract trading 1380 and I want to write a call, on what price I will write and put a sell order?

4

Strikes beyond 1360 haven’t been made available by exchange in Infosys. If you want to you can take position in Strikes which are available.

5

Dude I know that, I’m asking how the calculation? Is it the market decides, or exchange? An option contract is born from a seller (writer) right? Who decides the initial price?

6

You can quote the price you want to Sell at, if there is counterparty ready to pay that much to you, your order will be filled.

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7

You can calculate theoretical value using some values.

More on that you can add more value if you think there will be demand.

Calculators available on net for those

You require Underlying price, Strike price, Interest rate, Volatility, Days to expire etc. to calculate value

You can check on this http://option-price.com/

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8

It’s totally demand & supply and money power.

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9

Thanks