I purchased 10400 CE @ 100 few days ago. when nifty was around 10385 and today nifty was trading around 10420, but the premium was just 85 Rs despite being ITM
Later nifty rose to 10450 when the premium became 100, for me to breakeven. So my doubt is despite nifty being above my strike still its premium was below my cost or nearly at my cost. Why is this so?
secondly if say nifty closes at 10450 at expiry, and I dont square off , so i would just get 10450 - 10400 ? that is rs 50 only? despite having paid 100 for this ?
The answer is again similar to what was answered in your previous post “Query on Nifty Option Trade”. It’s because of volatility. A few days ago volatility levels were high due to impending election results because of which premiums were ‘expensive’. Now election results are over and volatility has cooled off significantly because of which the Time value component in Option premiums have significantly reduced (plus time decay is happening faster as expiry is approaching near).
If Nifty closes at 10450 at expiry then it will end up in a loss of 50 as you had paid 100 to buy the Call option (without considering taxes and other charges).