Option Buy sell game

A silly question :slightly_smiling_face: Just sharing my thoughts please correct me if i am wrong –
Let’s take example (Option Buying & Selling) suppose BhartiAirtel strike price 500.
Qw 1) So at first option seller comes first in game with bid price 12 Rs per lot. & Option buyer buys at Rs.12.

Qw.2) So the option seller decide the option premium price.?

Qw.3) Can we interpret like if call option side premium is higher means it’s bearish sentiment ?

Yeah can be possible…that if the options sellers are bearish at that strike… then they can short call… And that will be ask price not bid at which option buyer will buy…

No it is defined by the intrinsic value and extrinsic value ( option greeks) of the options strike.

You can consider OI and PCR to gauge the sentiment…

1 Like

No. Demand and Supply does (or buyers and sellers together decides the price). In other words, When seller places a sell order at Rs.12 he decides the price in a way, but it only gets reflected as LTP when a buyer also become interested in Rs.12 and places and buy order. So its mutual.

Firstly, if call option side premium is higher(than the put side), it could simply be because of the spot price being closer to the strike. For Example when the spot price is 397, the 390 CE will be expensive than 390 PE and when the price is 392 390PE will be more expensive.

But you should not interpret price as a standalone but only by pairing with the Open Interest.

If for a call option strike when;-

  1. Price is Up and OI is Up it is a bullish indication (new buyers coming in)
  2. Price is Up and OI is down it is an indication of Short-covering (sellers squaring off)
  3. Price is Down and OI is Up it is a bearish indication (new Sellers coming in)
  4. Price is Down and OI is down it is an indication of Long unwinding (buyers squaring off)

You can use similar logic to put side as well.

Good Luck!

1 Like

actually underlying decides the price ofcourse with scholes formula the underlying’s “option” is priced.
well in this case any movement in airtel stock (equity) will move your corresponding option price