Reason for premium value less than intrensic value

F&O
1

hello everyone…i am new to options …i started long straddle on 1st feb at 11100 strike rate 22feb expiry .today when i saw my premium was less than the internsic value …

Quote As on Feb 05, 2018 15:30:30 IST Submit
Nifty 50 - NIFTY closed at 10666
LTP- 404.05
Prev. Close 362.80
Open 499.70
High 499.70
Low 388.20
Close 423.75

11100-10666=434 intrensic value
LTP -404…what i understand is it should have been more than 434 …intrensic value + extrensic value (17 days to expiry still left)

waiting for experts opinion

2

you have to consider the future price rather than the nifty spot …
Nifty future 10684 ( closing price )
11100 put - 423 ( closing price )

and when the contract becomes illiquid or deep inside the money , you wont get the exact price

1 Like
3

thank you for reply …

  1. but last traded price was 404 and 423 was was settelement price …
  2. if i wish to sell my option then i will get 404 not 423 …?
    3.undelying is nifty do we have to always consider nifty future value for spot .?

thank you

4

You are really lucky :smiley: Long straddle must have made lot of money as both direction(Delta) and volatility(IV) have worked so much in favour!

1 Like
5
  1. Closing price is the weighted average price of all trades during the last 30 minutes, which is 423.75. The last trade was at 404. Nifty was going up and the spot value was 10692, so 11100 PE value was going down.
  2. Your selling price will only be the best buyer price at the time of the order execution, if it is a market order. There are other order types too.
6

ur are absolulety right i was indeed very lucky …i realised this after executing my order in high volatlity …i was my first options trade…will be careful next time…

1 Like
7

thank you for clarifying …