It would be really kind if someone can please clear this doubt-
I want to take a long call position on Nifty with a strike of 10500
Currently it is 10118
Now my doubt it, i want to take position for either Dec series or Jan Series.
Dec series is Rs 55 and Jan series is Rs 102
Now i want to clear the higher premium for Jan series is due to number of days to expiry is more and hence commands a higher premium ??
Say if I purchase Jan series assuming my target will be achieved somewhere in Jan, but 10500 has been reached somewhere in mid December only, naturally both the series call premium will rise right, but now query is which series call will be more profitable given this scenario.
Time value is not the only thing that determines option price, bunch of other factors like volatility and etc. No one line answer to this question. Suggest you to go through the options module here: https://zerodha.com/varsity/
The price of call/ put option will be function of time and risk prem in addition to the base price hence if same strike price call of dec month is moving then the same strike price call for jan or feb will also move but not necessarily in same proportion because of different time value and risk premium which market players are expecting…
Depends on when it reaches that price and whether it also crosses that target.
When and if it crosses 10500 and becomes in the money and expires, you’ll earn because of its intrinsic value. In that case, I’ll buy the one with lower premium right now.
But if it just reaches the mark or if you want to square off before expiry, then its very much dependent on the price and time to expiry.
Generally, farther calendar options moves slowing with the change in Spot price… so it really depends what happen to Nifty in Dec. Also, options will lose a lot more value (time premium) in the last week of expiry. So it depends when you are able to achieve your targets. If I am bullish until Jan then I will buy Jan series…
In Indian market always trade in the Current month Option contracts. Unlike other active derivative markets, in India except current month, other month option contracts are inactive becos of low liquidity resulting in mis-pricing of option contracts. So it will not be advantageous trading them.