Hi Friends,
Can someone clarify what makes the Option sellers to write the far strike options where margin required is high and premium is very low ?
Example:
Date: 23-Mar-2021
Strike: Nifty15500 PE
Margin Required: 1,05,000/-
Premium: 1.90/-
Open Interest:38.8 Lakhs (Huge open interest)
Appreciate your reply and Thanks in advance.
Yes, its the first obvious reason that came to your mind
Its CE could not be PE
as the LTP while you posted is around 14800, so according to you it will be a ITMCE, & ITMCE should have good value + some premium.
My friend, the details I have given are correct.
If someone looks at Option chain, the far out of money options either PEs or CEs are traded at very low premium. So, the qtn is that what makes the option sellers to write such options where they get very low premiums (less than a Rs.100 per lot) with a very high margin requirement. Say, the ROI will be in decimals.