Understanding different option movements

F&O
1

I wanted to understand why there is a difference of movement size behavior in a deep otm put and call strike which are around 900-1000points away from strike with same delta, Theta etc and have the same remaining days for option expiryy.

Let’s take Banknifty at around 32250, and we take 33200CE and 31200PE, I noticed that say if banknifty decreased by 120-150, the pe would go up 30points while the ce strike would have gone down only 10points. Now I checked and both of these had the same greek values and the implied volatility was also around the same at 28percent, pe might have have 1-2 percent higher implied volatility.

This happened multiple times today wherein the pe was much more reactive as opposed to ce strike. I am assuming this might have been due to the market sentiment for today, as there was a sell-off, the trend was bearish and hence the PE strikes were much more reactive.

Please let me know what exactly is happening.

Thanks

2

The whole market is running with the emotion or feeling of “Buy in the dip”. As you can see in last multiple weeks, Banknifty upward movement is very fast compared to downward. Most of the players know and active in selling PE options and not CE.

CE options are not reactive because the spikes in BNF are very fast ( 300 points move in less than a hour). So CE options are not going down.

Because of the upcoming budget in next 2 weeks, everyone is expecting the market to remain bullish until Feb 1.

1 Like
3

Well the call options are not just not going down but also not going up either. In general no matter what strike the puts were reactive to the underlying on both going up and down as opposed to call options