On 18-SEP-2015 NIFTY closed at 7981.90 (+82.75 from previous closing). Why both nifty CALL and PUT option prices has decreased on that day? Attaching the option chain screen shot from NSE website and link.
http://www.nseindia.com/live_market/dynaContent/live_watch/option_chain/optionKeys.jsp?symbol=NIFTY&instrument=-&date=-
Anyone please explain.
Volatility increases by speculation. When volatility increases, movement of the underlying index or stock could move drastically up & down. Option sellers wont take very high risk for limited profit. So they wont write options with less premium as they know the risk involved in it because of volatility. If there is no option sellers then option buyers cant buy option. So option sellers sell at high premium in both calls & puts taking the volatility into the account. When the news is out volatility would be triggered. The underlying stock would moved up or down, validating either upward movement or downward movement. If upward movement happens, speculated premium in the puts will be ate on that day. This is what exactly happened on 18th Sep.
before events vix increases . increase in vix causes high premium . which states that traders are speculating high movement in index . when ever the event over the vix decreases . so the premiums too decrease . its just greed factor before any news causes high speculation