# Understanding option premium price

I bought Infy 960 CE 23feb on Jan 27th ; 1 lot(size 500) at a premium of 22.2.
Infy closing price today was 968 however the premium price was 20.2 .

How much would be my loss in this case?

hello trader,

(22.2 - 20.2) * 500 = 1000

Hello,

When it comes to option trading, one should always check the Market Depth/Snap Quote of the option. Here, you will find the top 5 Bid(Buy) and Ask(Sell) rates. The premium price of 20.2 that you are quoting is the Last Traded Price(LTP). This need not necessarily be the Bid/Buyer price. To exit at market, you can exit your option only at the best Bid price.

This will make the best Bid price your best exit price.

If the best Bid price is at 21.20, then you are currently losing 1 rupee in your premium ( loss = 1 * 500 = Rs.500).

If the best Bid price is at 19.20, then you are currently losing 3 rupees in your premium ( loss = 3 * 500 = Rs.1500).

For an Option Buy position, you always calculate your profit/loss with respect to the best Bid price. Similarly, for an Option sell position, you calculate your P/L wrt the best Ask price.