I want to know and had some doubts about a trade that i took today . I bought 3 lots of 51100 bank nifty around 35 at that time bank nifty was around 51180 as i was expecting the market to fall but the market was range bound and today was expiry and the premium got decay and the premium became 0.5 and after that there was a big move downside the index moved from 51240 to 51020 but there zero movement in option premium . there was movement in 51200 strike price but not in 51100 . Can anyone explain me the reason ,It will be a great help .
Hi Ashutosh,
Yesterday was the Bank Nifty expiry day, which means all contracts had to expire by the end of the day. The movement you noticed, where Bank Nifty dropped from 51,240 to 51,020, occurred between 2:50 PM and 3:30 PM. The significant drop happened mostly after 3:15 PM.
Around 3:00 PM, the exchange begins calculating the average closing price for settlement. This average determines the final settlement price of options. In this case, the average closing price came out to be around 51,150.
Because the average settlement price was 51,150, your 51,100 Put Option (which would profit if the price closed below 51,100) ended up being out of the money (worthless). This means that the strike price of your option was higher than the settlement price, so the option did not gain any value and expired worthless.
The option premiums on expiry, especially in the last 30 minutes of the market, don’t depend on LTP, but rather rely on the weighted average price of the underlying.
even I had the same doubt and posted it in the community, you can refer to this for more understanding.