pls confirm from where we calculate option premium of bank nifty from bank nifty index or bank nifty future.
like if bank nifty index in 25650
bank nfty future is 25780
bank nifty option ce is 25700 price is 140
pls cofirm how much premium is n this and how we calculate the same
Hi,
Premium is calculated on the price of underlying asset. In this case Bank Nifty Index.
Premium in this case = 25700 + 140 - 25650 = 190/-
As percentage ; 190/25650 * 100 = .74% premium
A higher future price 25780 is a clear positive indication.
If you are interested in reading more about this, please refer https://www.investopedia.com/articles/active-trading/112213/getting-handle-options-premium.asp
as per ur answare ce price should be 190 and its good to buy at 140 because the premium in this involved in 140 is only 0.74 %
pls confirm if i am right
Hi,
Premium of .74% doesn’t always mean a good buy. It depends on market conditions, number of days left for expiry , sector trend in general, any major policy announcements etc. among many other factors. Apply your discretion and study well before making a buy/sell .
The calculation does NOT mean ‘CE price SHOULD BE 190’. It rather specifies that you have a chance to make profit only if the index moves up by 190 points or more.