TCS is down by 1. 6%, ideally PUT prices should increase. But even it is down by more than 25%. How is it possible?
yes, u r right.
I think the market expectation is that TCS would not fall much more than today’s, thts y the put premiums are getting eaten. Put premiums might increase if the market expectation changes.
I am not into options, so cross check this with someone else. I guess its because of time decay that it is falling. My guess is that you are trading naked puts, which most option traders suggest not to do.
It has been answered earlier, check this - http://tradingqna.com/1566/volatility-announcement-election-trapping-participants?show=1573#a1573
this is the effect of volatility collapse. Typically, before an event (corporate result), volatility increases which leads to increase in premiums on both calls and puts.
Once the event happens, volatility collapses and the premiums dissolves.
Can you explain this mathematically, using Option greeks or something?