Day Trading Stocks & Futures

[against_tides]

Not at all. Implied volatility keep changing all the time. It changes minute to minute.
Lets say an option is trading at 15 rs. Lets assume that Rs 10 reflects the intrinsic value. The remaining 5 rs will reflect the premium for time value and volatility. IV represents expected volatility of a stock for a given period of time i.e lets say till expiry. IV will fluctuate due to demand/supply. more demand for an option means more the IV will tend to rise. Thats why you will see that in bear markets put options will be expensive. Alternatively, when demand for options decreases i.e expectation comes down then volatility reduces.

All of above in layman's words for easier understanding.

Sorry...I was not clear in my question.

I want to buy nifty call at current time(suppose 3pm)...
Is there any way to identify which call to pick from option chain list...

IV normally increase both side from ATM ...

 

[afin]

@iwillwin is keen to visit pune. Maybe you guys can plan something and all traders from pune can meet you

Tha does sound like a great plan if everyone is on board with it!

 

[SarangSood]

It's simple!

1. Costliest would be the deep In The Money Options with the farthest expiry.
2. Cheapest would be the farthest OTM options with the nearest expiry.

I think costliest should be deep In The Money with the NEAREST expiry because it has only intrinsic value left with no premium. So the cheapest option becomes the costliest option in the other leg.

 

[vikas2131]

Yes Bank

 

[Riskyman]

Sorry...I was not clear in my question.

I want to buy nifty call at current time(suppose 3pm)...
Is there any way to identify which call to pick from option chain list...

IV normally increase both side from ATM ...

Lets say Nifty is trading at 11800 with a bullish bias. You want to buy a call option. Lets say below is what the IVs look like.

Strike IV
-- ---
11700 13.0
11750 13.5
11800 14.2
11850 15.0
11900 14.8
11950 15.4

You can see that 11700 and 11750 are in the money so the IVs are lower as compared to IV of 11800 atm. ATM and above OTMs will have higher IVs.. Ideally you should buy ITMs. But if you are looking to buy OTMs then you have to hand pick a strike that has the least IVs. If you are lucky you can find a close by strike which is slightly mispriced.
In the above example you can see 11900 ce is at 14.8 which is less than 11850's IV of 15. So you are marginally better off there.

 

[sumosanammain]

@sanju005ind also lives in Pune. Same with @nitingosavi. I visit pune frequently.

Never had the opportunity to interact with these gentlemen. Ping me when you are in Pune, will meet up.

 

[sumosanammain]

Lagta hai Pune visit marna padega jaldi

Aa Jao,
Most Welcome

 

[Riskyman]

Never had the opportunity to interact with these gentlemen. Ping me when you are in Pune, will meet up.

Thank you sir!! @afin and @iwillwin are making some plans. Hopefully, all can meet soon.
Pune , after monsoon is very nice!.

 

[travi]

isin't iv same for all options at a time?

It is called Volatility Smile. There are some good topics on it.
Apparently, Prior to 1987 Crash, all options had flat pricing based on distance from SPOT.

Traders then realized that extreme events somehow need to be priced in that is why further out on both sides the option strike gets more expensive.

Technically, only going by IV, ATM are cheapest, but then Theta is also highest there so its fairer for both buyer and seller as one is favourable for each.

 

[iwillwin]

Aa Jao,
Most Welcome

Thank you...will plan for sure...TP Bhai aap bhi aa jao....Surat se saath me chalte hain