I buy a call at 8600 of 110 Rs on 3/8/15 expiry on 27.8.15. in Nifty. That time nifty was at 8525. Now today nifty ends at 8568 means 43 bonus point. But today buy price of 8600 call is Rs104. How is it possible that with 43 + point buy price shows 6% loss.??
Can any tell me the exact formula by which the buy price of options r calculated.
You are betting that Nifty will rise 75 points (8600 CALL - 8525 Nifty market price when you bought the call option ),
by paying premium of rs110 to the seller of the call option.
NIFTY points will not affect the premium point by point, its entirely depend on the buyers & sellers of that particular option…
If you are holding till the expiry:
you will be in profit if nifty crosses 8635 (110-75 = 35 + 8600 = 8635).
You read this book you get clear
Nice Explanation … But still u havent answer my question " How is it possible that with 43 + point in nifty buy price shows 6% loss.??"
I think the calculation is done via volatility , rate of price, delta , gamma vega etcc… Still i am not able to understand how they all r calculated
Its simple… forget mathematics… its a contract… of strike price x and spot price y … if y crosses x then you are making profit and if y doesnot reaches x till expiry date …at the end of expiry date … value or premium will start becoming negative and move towards zero
Hi did u find the answer