When an option expires ITM, what will be its value? Let’s Nifty closed at 17316 on an expiry day, the 17350PE for that expiry will have what value after expiration?
My understanding is that it should have an intrinsic value of 17350 - 17316 = 34/-. However, I see that it expired at 18.
Could someone please explain what am i missing here?
The final closing price of Nifty is 17331.8, the final closing price is the weighted average price of the last 30 minutes of trading. This can differ from the LTP you see at 3:30 PM. You can learn more about this here: How to determine closing price in F&O? - #2 by Karthik
So the 17350 PE will expire with an intrinsic value of Rs. 18.2 (17331.8 - 17350).
Thanks. It makes sense.
However, for one who is looking at charts and trading this will be a surprise(like me today). 34 and 18 have a huge difference.
I have similar issue and I dont think the above explanation fully answers it. Please help me answer this
I took a trade in NIFTY 24850CE today’s expiry day around 3:10 PM. The option price at that time was around Rs 1 and NIFTY was trading around 24845. So far so good.
Now NIFTY went up by another 30 points and at around 3:28 PM, the NIFTY was at 24880, however, the option premium was still Rs 0.5. (It should have been ITM now and should be trading around Rs 30). What am I missing here?
NIFTY LTP was 24880 at 3:30 PM and NIFTY closing (average) was determined as 24833.
Based on market closing, option should be 0, but not at 3:28 PM. Because I didnt see the right option premium, I had to suffer huge loss.
Any help?
The last 10 minutes especially are mostly about final few rupees(like 2-3 rupees) adjustments in the In the Money options price. For eg: 24800 CE in this case would have been trading between 30-35 and settled finally at 35
One trick I can suggest you is…to check the deep ITM options in the last 15 minutes to get clarity on possible expiry price
Like 24800 CE and 24900 PE or 24700 CE and 25000 PE
You would get a very decent idea 10 minutes before market closing about where the index is going to settle
Due to the above reason, 24850 ce was pricing in closing at 24833 probably 10 minutes before closing itself
