Guys,
Can you please explain why are Bank nifty options trading at discount from spot price?
For e.g. 26500 12th July call is trading at 365 while, spot price of Bank nifty is 26910
@Sensibull can you please help on this?
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Even BANKNIFTY JUL FUT is at discount
All are shorting it seems
But its going up continuously
As newbie (have no idea why he calls himself that) pointed out
Bank NIFTY Jul is at a dscount
Further if you do put call parity on 12 July 26500, you can see that
C-P= 387-19 = 368 = F-Strike
=>F = 26500 + 368 = 26868, so future is at a 41 point discount
The one angle which is playing here could be STT, at the option has gone 400 pt ITM, and people have started STT factoring. But even with that, there is discount
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Thanks for your reply. @Sensibull.
I too did that calculation and saw that even after factoring in STT there was discount.
I wanted to know when this type of situation occurs as you have more than a decade experience in trading options.
I am just few months old in BN options.
Many thanks, awaiting your inputs.
I am fairly new to Bank Nifty options too, spent most time in NIFTY and currencies. We might just be equally old here 
The answer to your question is yes, have seen this quite a few times even in my limited time with this thing. Especially in weekly expiries.
Lower the time to expiry, lower will be the premium of futures. To put a 2 month future to discount, the shorts need to overcome a lot of premium. With 2-3 days to go to expiry, there is hardly any premium to overcome. And going into a discount is easy. STT adds to this
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Thanks for your reply.
I am making a wild guess.
ICICI BANK, has declared dividend is Rs.1.5 per share, record date 23/07/18, has a weightage of 28.75% in Bank Nifty. At current market price of 274, this dividend works out to 42 points.
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ICICI Bank’s wtage has been changed to ~15% and Kotak has slightly more wtage than ICICI.
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@Sensibull I am noticing that Nifty weekly options tend to be trading at a good discount. Now that the STT is charged only on the intrinsic value would it then mean that any discount would vanish at settlement and we will settle at an option value that is at par with spot ?
For e.g now the NIFTY APR 9100 CE is 359 when Nifty is 9479. So there is a 20 point discount. Even if STT is Rs.4.7 is factored in we will get around 15 point discount. So if I allow the in the money option to expire on 30 April will I gain back the 15 point that I seem to loose now ?
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This is not l[quote=“t7support, post:9, topic:42087”]
I am noticing that Nifty weekly options tend to be trading at a good discount. Now that the STT is charged only on the intrinsic value would it then mean that any discount would vanish at settlement and we will settle at an option value that is at par with spot ?
For e.g now the NIFTY APR 9100 CE is 359 when Nifty is 9479. So there is a 20 point discount. Even if STT is Rs.4.7 is factored in we will get around 15 point discount. So if I allow the in the money option to expire on 30 April will I gain back the 15 point that I seem to loose now ?
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This is not STT. This is just future < spot
Thanks @sensibull. Do you mean to say that option discount with respect to spot is because future is trading at a discount from spot ? But options are settled at spot prices on expiry right ?
But then futures are also settled with spot right? So why should there be any discount at all even on futures ?
Futures and Options reflect expectations on spot. And options, though settled with spot, are priced on non expiry days using spot.
To be technical about it in Black Scholes there is a Se^rt component, to get option price from spot, but Se^rt is actually the formula for future price
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K then that brings me to the original question. Shouldn’t the option price discount vanish at expiry as it will converge to spot price - strike differential…?
Sir
I want NEUTRAL STRATGEY ON CURRENCY WEEKLY OPTIONS.
I KNOW two of them, can you explain me
- LONG BOX OR CONVERSION,
2.PUT CALL PARITY