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stevenmat
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Joined: 27 Dec 2011
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Post: #3676  Posted: Wed Jul 11, 2012 3:50 pm Post subject: |
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| psalm wrote: | | stevenmat wrote: | | psalm wrote: | | stevenmat wrote: | apka/sam/vinat
need your help..why are both OTM puts and calls for INFY trading in green? how is it mathematically/logically possible? |
Steven, one reason is the supply-demand phenomenon...the other thing is the Risk premium associated with it.....the writers will demand more premium as the event is pretty risky......there is huge risk associated with both the PUTs and CALLs right?...that's why both the prices will go up....  |
isnt supply and demand driven by plain logic?
i thought option prices imbibe two types of prices - 1. actual value (S-X or X-S) and 2. Time value. Dint know that it had a premium for risk...are you sure? |
Supply-demand thing may not be driven by plain logic all the time....that's the reason why bubbles get formed at times....  |
true true !
your comments on the other risk part? |
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psalm
Black Belt
Joined: 12 Nov 2011
Posts: 5368
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| Post: #3677 Posted: Wed Jul 11, 2012 3:52 pm Post subject: |
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| stevenmat wrote: | | psalm wrote: | | stevenmat wrote: | | psalm wrote: | | stevenmat wrote: | apka/sam/vinat
need your help..why are both OTM puts and calls for INFY trading in green? how is it mathematically/logically possible? |
Steven, one reason is the supply-demand phenomenon...the other thing is the Risk premium associated with it.....the writers will demand more premium as the event is pretty risky......there is huge risk associated with both the PUTs and CALLs right?...that's why both the prices will go up.... |
isnt supply and demand driven by plain logic?
i thought option prices imbibe two types of prices - 1. actual value (S-X or X-S) and 2. Time value. Dint know that it had a premium for risk...are you sure? |
Supply-demand thing may not be driven by plain logic all the time....that's the reason why bubbles get formed at times.... |
true true !
your comments on the other risk part? |
I have already mentioned it in my previous message, right?...... |
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stevenmat
White Belt
Joined: 27 Dec 2011
Posts: 478
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| Post: #3678 Posted: Wed Jul 11, 2012 4:04 pm Post subject: |
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lol..i was expecting a more elaborate reply  |
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psalm
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Joined: 12 Nov 2011
Posts: 5368
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| Post: #3679 Posted: Wed Jul 11, 2012 4:12 pm Post subject: |
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| psalm wrote: | | stevenmat wrote: | | psalm wrote: | | stevenmat wrote: | apka/sam/vinat
need your help..why are both OTM puts and calls for INFY trading in green? how is it mathematically/logically possible? |
Steven, one reason is the supply-demand phenomenon...the other thing is the Risk premium associated with it.....the writers will demand more premium as the event is pretty risky......there is huge risk associated with both the PUTs and CALLs right?...that's why both the prices will go up.... |
isnt supply and demand driven by plain logic?
i thought option prices imbibe two types of prices - 1. actual value (S-X or X-S) and 2. Time value. Dint know that it had a premium for risk...are you sure? |
Time value is basically the risk premium that the option seller requires to provide the option buyer the right to buy/sell the stock up to the date the option expires. It is like an insurance premium of the option; the higher the risk, the higher the cost to buy the option. For more on Option pricing, please check the following link, Steven:
http://www.investopedia.com/articles/optioninvestor/07/options_beat_market.asp#axzz20J6HL64w |
Steve, have you seen this message?...if you have already seen this, then I'll try to explain it in detail....by the way, that link has most of the things regarding the option pricing details I guess.... |
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stevenmat
White Belt
Joined: 27 Dec 2011
Posts: 478
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| Post: #3680 Posted: Wed Jul 11, 2012 4:49 pm Post subject: |
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| psalm wrote: | | psalm wrote: | | stevenmat wrote: | | psalm wrote: | | stevenmat wrote: | apka/sam/vinat
need your help..why are both OTM puts and calls for INFY trading in green? how is it mathematically/logically possible? |
Steven, one reason is the supply-demand phenomenon...the other thing is the Risk premium associated with it.....the writers will demand more premium as the event is pretty risky......there is huge risk associated with both the PUTs and CALLs right?...that's why both the prices will go up.... |
isnt supply and demand driven by plain logic?
i thought option prices imbibe two types of prices - 1. actual value (S-X or X-S) and 2. Time value. Dint know that it had a premium for risk...are you sure? |
Time value is basically the risk premium that the option seller requires to provide the option buyer the right to buy/sell the stock up to the date the option expires. It is like an insurance premium of the option; the higher the risk, the higher the cost to buy the option. For more on Option pricing, please check the following link, Steven:
http://www.investopedia.com/articles/optioninvestor/07/options_beat_market.asp#axzz20J6HL64w |
Steve, have you seen this message?...if you have already seen this, then I'll try to explain it in detail....by the way, that link has most of the things regarding the option pricing details I guess.... |
thanks |
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apka
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Joined: 13 Dec 2011
Posts: 6137
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| Post: #3681 Posted: Wed Jul 11, 2012 5:40 pm Post subject: |
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| stevenmat wrote: | apka/sam/vinat
need your help..why are both OTM puts and calls for INFY trading in green? how is it mathematically/logically possible? |
volatility drives the premiums in options. no tom, dick and harry would want to miss call or put because it is 5 points above than nrml in INFY, we know how it moves on result day. so every dip is being bought. See intraday how volatile it was.
Even in nifty because VIX is under 20 the premiums for current strikes are less than what we normally see. If VIX increases at the same spot of nifty and fut then option premium would increase, because bigger movments are expected -- so there is extra readiness to pay more premium.
Your trading software may have a option calculator, if not search for 1 online, put the values of nifty spot, strike, call / put price and the current Volitity (VIX) value and the trading days remaining for expiry, you will see the value comes near about same as the option price today. Increase the VIX value to 25, 27, 30 and see from the same figures how the premium increases. |
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apka
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Joined: 13 Dec 2011
Posts: 6137
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| Post: #3682 Posted: Wed Jul 11, 2012 6:12 pm Post subject: |
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vinay ka green red toh ho gaya jaisa bola, ab aagey kal green hoga kya.  |
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vinay28
Black Belt
Joined: 24 Dec 2010
Posts: 11748
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| Post: #3683 Posted: Wed Jul 11, 2012 7:06 pm Post subject: |
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| may be you missed my earlier post apka where I have already mentioned that I booked my shorts and went long. |
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apka
Black Belt
Joined: 13 Dec 2011
Posts: 6137
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| Post: #3684 Posted: Wed Jul 11, 2012 7:17 pm Post subject: |
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| vinay28 wrote: | | may be you missed my earlier post apka where I have already mentioned that I booked my shorts and went long. |
8.30am INFY result
11.00am IIP data
............ tcs result
 keep your pop corn and colas ready tomorrow. |
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vinay28
Black Belt
Joined: 24 Dec 2010
Posts: 11748
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| Post: #3685 Posted: Wed Jul 11, 2012 8:24 pm Post subject: |
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| I have also bought 2500CE and 2300PE of infy |
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apka
Black Belt
Joined: 13 Dec 2011
Posts: 6137
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| Post: #3686 Posted: Wed Jul 11, 2012 9:22 pm Post subject: |
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| vinay28 wrote: | | I have also bought 2500CE and 2300PE of infy |
here's another rumour for you
buyback will be announced on INFY tomorrow. |
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vinay28
Black Belt
Joined: 24 Dec 2010
Posts: 11748
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| Post: #3687 Posted: Wed Jul 11, 2012 9:25 pm Post subject: |
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my dear I have already posted it here during day time.  |
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apka
Black Belt
Joined: 13 Dec 2011
Posts: 6137
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| Post: #3688 Posted: Wed Jul 11, 2012 9:49 pm Post subject: |
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| vinay28 wrote: | | my dear I have already posted it here during day time. |
aha, i thought the rumour spreading was my job here  |
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pkholla
Black Belt
Joined: 04 Nov 2010
Posts: 2890
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| Post: #3689 Posted: Wed Jul 11, 2012 11:20 pm Post subject: |
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| stevenmat wrote: | | apka/sam/vinat need your help..why are both OTM puts and calls for INFY trading in green? how is it mathematically/logically possible? |
Is it possible that Infy results + buyback announcement will take Infy up at 0915, and 11 AM bad news will bring it down so Bombay experts are preparing for both Matinee and First Show?
Prakash Holla |
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apka
Black Belt
Joined: 13 Dec 2011
Posts: 6137
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| Post: #3690 Posted: Wed Jul 11, 2012 11:53 pm Post subject: |
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| pkholla wrote: | | stevenmat wrote: | | apka/sam/vinat need your help..why are both OTM puts and calls for INFY trading in green? how is it mathematically/logically possible? |
Is it possible that Infy results + buyback announcement will take Infy up at 0915, and 11 AM bad news will bring it down so Bombay experts are preparing for both Matinee and First Show?
Prakash Holla |
IIP is industrial production numbers, IT will not effected by it. |
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