Market scenario

Bank nifty spot is falling but far out of the money (1000 points away) price is increasing ,why? no change in VIX

other than greeks or volatility, demand and supply also plays role in price fluctuations… so vix might not have changed but there might be interest in buying that option and hence price changed…

now why would there be interest in buying such deep OTM option, no-one knows…

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Deep OTM are bought to reduced margin required for selling ATM contracts.

Other reason I could think of is arbitrage opportunity which is explored by big players.

how ?
can u pls explain ?

There are so many ways in which you can design a risk less strategy.

Let me give one example. The premium that I am stating is just to make arbitrage work.

Nifty spot 17600
Nifty 17600ce at 120
Nifty 17700 ce at 80
Nifty 17800ce at 20

Buy 1 lot 17600ce
Sell 2 lot 17700ce
Buy 1 lot 17800ce

Total premium received is 80Ă—2-120-20=20
Premium per lot equals Rs.1000.
No matter where the expiry happens there is profit here. So now only thing to be seen is the margin required for this. Lets say margin required is 1lakh.
Return per week is 1 percent. This is riskless return. So the premium of 17800 has to move up to eliminate this riskless gain.
To get deep OTM premium also you can continue with the same Strategy. Take 17700ce, 17800ce and 17900ce.

This is just one way. There are so many may other ways arbitrage can happen using spot, futures and options.
Sometimes you might see the underlying price coming down. Obviously put value should increase but then call prices also increases. Now this is because of PUT CALL Parity Theorm. Like if it doesn’t hold good then again there is riskless gain.

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How you find the opportunity when the price is moving so fast ? with call and puts and futures

Probably HFTs will only be doing arbitrage trades.
Human can do it but algorithms are preferred.(in a huge scale)


There are players in this particular segment doing only this. They have systems to take care of such things.

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Is there a way to find out world indices future trade timings. Also does bank nifty trade on Singapore exchange? @ShubhS9

Not sure about this. Might be available in

No, Bank Nifty doesn’t trade on SGX.

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It is changing because of the demand and supply. Because of this, it gets tough to decide what we need to do and place our next move.