Operação de opções da zerodha

Re-introdução Call & # 038; Opções de colocação.

22.1 - Por que agora?

Suponho que o título deste capítulo possa confundir você. Depois de passar rigorosamente pelo conceito de opções nos últimos 21 capítulos, por que agora vamos voltar para "Call & amp; Colocar opções "novamente? Na verdade, iniciamos o módulo ao discutir o Call & amp; Coloque as opções, então por que de novo?

Bem, isso é porque eu pessoalmente acredito que existem dois níveis de aprendizagem em opções - antes de descobrir a opção Gregos e depois de descobrir a opção Gregos. Agora que passamos o tempo aprendendo os Griegos da Opção, talvez seja hora de dar uma nova olhada no básico da chamada e colocar opções, mantendo a opção Gregos em perspectiva.

Vamos ter um rápido recapitulação de alto nível -

Você compra uma opção de Chamada quando espera que o preço subjacente aumente (você está fora do ponto de vista optimista) Você vende uma opção de Chamada quando espera que o preço subjacente não aumente (você espera que o mercado permaneça plano ou desça, mas certamente não ) Você compra uma opção de venda quando você espera que o preço subjacente diminua (você está corretamente danificado) Você vende uma opção de venda quando espera que o preço subjacente não diminua (você espera que o mercado permaneça plano ou suba, mas certamente não está para baixo )

É claro que os primeiros capítulos nos deram uma compreensão sobre o chamado e colocamos as opções básicas, mas a agenda agora é entender o básico das opções de chamada e colocação, mantendo a volatilidade eo tempo em perspectiva. Então vamos começar.

22.2 - Efeito da Volatilidade.

Sabemos que é preciso comprar uma opção de compra quando espera que o bem subjacente se mova mais alto. Justo o suficiente, por um momento, vamos assumir que Nifty deve subir por um certo percentual, dado que você compraria uma opção de chamada se -

Espera-se que a volatilidade diminua, enquanto espera que o Nifty vá subir? O que você faria se o prazo de caducidade estiver a apenas 2 dias de distância? O que você faria se o prazo de caducidade for maior que 15 dias? Qual greve você optaria por negociar nos dois casos acima - OTM, ATM ou ITM e por que você escolheria o mesmo?

Essas perguntas demonstram claramente que a compra de uma opção de compra (ou opção de venda) não é realmente uma tarefa direta. Existe um certo grau de trabalho no solo antes de comprar uma opção. O trabalho de base gira principalmente em torno da avaliação da volatilidade, do tempo de expiração e, claro, do movimento direcional do próprio mercado.

Não vou falar sobre a avaliação da direção do mercado aqui; Isso é algo que você terá que descobrir por si mesmo com base em teorias como análise técnica, análise quantitativa ou qualquer outra técnica que considere adequada.

Por exemplo, você poderia usar análises técnicas para identificar que Nifty provavelmente subisse de 2 a 3% nos próximos dias. Tendo estabelecido isso, o que você faria? Você compraria uma opção ATM ou opção ITM? Dado o fato de que Nifty vai subir em 2-3% nos próximos 2 dias, qual greve dá o máximo de explosão para o dólar? Este é o ângulo que eu gostaria de discutir neste capítulo.

Comecemos por analisar o seguinte gráfico, se você se lembrar, discutimos isso no capítulo sobre Vega -

O gráfico acima mostra como um prêmio de opção de compra se comporta com relação ao aumento da volatilidade em diferentes prazos de expiração. Por exemplo, a linha azul mostra como o prêmio da opção de chamada se comporta quando há 30 dias para expirar, verde por 15 dias para expirar e vermelho por 5 dias para expirar.

Com a ajuda do gráfico acima, podemos chegar a algumas conclusões práticas que podemos incorporar ao comprar / vender opções de compra.

Independentemente do prazo de caducidade, o prêmio sempre aumenta com o aumento da volatilidade e a diminuição do prêmio com diminuição da volatilidade. Para que a volatilidade funcione em favor de uma opção de chamada longa, um deve comprar uma opção de compra quando a expectativa de aumento da volatilidade e evitar a compra opção quando a volatilidade deverá diminuir. Para que a volatilidade funcione em favor de uma opção de chamada curta, um deve vender uma opção de compra no momento em que a volatilidade deverá cair e evitar a venda de uma opção de compra quando a volatilidade deverá aumentar.

Aqui está o gráfico da opção de compra premium versus volatilidade -

Este gráfico é muito semelhante ao gráfico do prémio de chamada versus volatilidade - portanto, o mesmo conjunto de conclusões é válido para opções de venda também.

Essas conclusões tornam clara uma coisa - comprar opções quando você espera que a volatilidade aumente e as opções curtas quando você espera que a volatilidade diminua. Agora, a próxima pergunta óbvia é - que greve para escolher quando você decide comprar ou vender opções? É aqui que a avaliação do prazo de caducidade entra em jogo.

22.3 - Efeito do tempo.

Vamos apenas assumir que a volatilidade deverá aumentar, juntamente com o aumento dos preços subjacentes. Claramente, a compra de uma opção de chamada faz sentido. No entanto, o aspecto mais importante é identificar a greve certa para comprar. De fato, quando você deseja comprar uma opção, é importante analisar o quão longe estamos em relação à expiração do mercado. A seleção da greve depende do prazo de caducidade.

Nota: entender o gráfico abaixo pode parecer um pouco confuso no início, mas não é. Então não fique desanimado se você não conseguir a primeira vez que você lê, apenas dê outro tiro 

Antes de prosseguir, precisamos controlar primeiro as linhas de tempo. Uma série típica de F & amp; O tem cerca de 30 dias antes da expiração (bloqueando a série de fevereiro). Para ajudá-lo a entender melhor, dividi a série em 2 metades - a primeira metade refere-se aos primeiros 15 dias da série e a 2ª metade refere-se aos últimos 15 dias da série F & amp; O. Por favor, mantenha isso em perspectiva ao ler abaixo.

Dê uma olhada na imagem abaixo; contém 4 gráficos de barras que representam a rentabilidade de diferentes greves. O gráfico assume -

O estoque é em 5000 no mercado à vista, daí o ataque 5000 é ATM O comércio é executado em algum ponto na 1ª metade da série, ou seja, entre o início da série F e O e 15 do mês Esperamos que o estoque para mover 4%, ou seja, de 5000 para 5200.

Diante do exposto, o gráfico tenta investigar qual ataque seria o mais lucrativo dado o objetivo de 4% ser alcançado dentro -

5 dias de início comercial 15 dias de início comercial 25 dias de início comercial No prazo de validade.

Então, vamos começar do primeiro gráfico no topo esquerdo. Este gráfico mostra a rentabilidade de diferentes greves de opções de chamadas, dado que o comércio é executado na primeira metade da série F & amp; O. Espera-se que o objetivo seja alcançado dentro de 5 dias da execução comercial.

Aqui está um exemplo clássico - hoje é 7 de outubro, os resultados da Infosys estão em 12 de outubro e você é otimista nos resultados. Você quer comprar uma opção de chamada com a intenção de esquivá-la dentro de 5 dias, qual ataque você escolheria?

Do gráfico está claro # 8211; quando há tempo suficiente para expirar (lembre-se que estamos em algum ponto na 1ª metade da série), e o estoque se move na direção esperada, então todas as greves tendem a ganhar dinheiro. No entanto, as greves que fazem o máximo de dinheiro são (longe) das opções OTM. Como podemos notar no gráfico, o máximo de dinheiro é feito pela greve 5400 e 5500.

Conclusão - Quando estamos na 1ª metade da série de expiração, e você espera que o objetivo seja alcançado rapidamente (digamos, durante alguns dias), comprar opções OTM. Na verdade, eu sugiro que você compre 2 ou 3 ataques fora do caixa eletrônico e não além disso.

Olhe para o 2º gráfico (canto superior direito) - aqui o pressuposto é que o comércio é executado na 1ª metade da série, espera-se que o estoque se mova em 4%, mas o objetivo deverá ser alcançado em 15 dias. Com exceção do prazo (alvo a ser alcançado), tudo o resto permanece o mesmo. Observe como a rentabilidade muda, a compra clara de uma opção OTM distante não faz sentido. Na verdade, você pode até perder dinheiro quando compra essas opções OTM (veja a rentabilidade da greve 5500).

Conclusão - Quando nós na 1 ª metade da série de expiração, e você espera que o objetivo seja alcançado ao longo de 15 dias, faz sentido comprar ATM ou algumas opções de OTM. Eu não recomendaria opções de compra que estejam a mais de 1 ataque do ATM. Certamente, você deve evitar a compra de opções OTM distantes.

No 3º gráfico (inferior esquerdo), o comércio é executado na 1ª metade, a série e a expectativa de destino (4% de movimento) permanecem iguais, mas o período de tempo do destino é diferente. Aqui, o objetivo deve ser alcançado 25 dias a partir do momento da execução comercial. Claramente, como podemos ver as opções OTM, não vale a pena comprar. Na maioria dos casos, um acaba perdendo dinheiro com opções OTM. Em vez disso, o que faz sentido é comprar opções de ITM.

Além disso, nesta fase eu tenho que mencionar isso - as pessoas acabam comprando OTM opções simplesmente porque os prémios são mais baixos. Não se apaixone por isso, o baixo prêmio das opções de OTM cria uma ilusão de que você não perderá muito, mas, na realidade, há uma probabilidade muito alta para você perder todo o dinheiro, embora pequenas quantidades. Isto é especialmente verdadeiro nos casos em que o mercado se move, mas não na velocidade certa. Por exemplo, o mercado pode mover 4%, mas se esse movimento se espalhar por 15 dias, então não faz sentido mantendo as opções de OTM distantes. No entanto, as opções OTM distantes ganham dinheiro quando o movimento no mercado é rápido - por exemplo, um movimento de 4% dentro de 1 ou dizer 2 dias. Isto é, quando as opções OTM distantes se movem inteligentemente.

Conclusão - Quando estamos no início da série de expiração, e você espera que o objetivo seja alcançado ao longo de 25 dias, faz sentido comprar opções de ITM. Certamente, você deve evitar comprar ATM ou OTM.

O último gráfico (inferior direito) é bastante semelhante ao 3º gráfico, exceto que você espera que o objetivo seja alcançado no dia da expiração (muito próximo do prazo de validade). A conclusão é simples - em tal cenário, todas as opções atingem, exceto ITM perder dinheiro. Os comerciantes devem evitar comprar opções ATM ou OTM.

Deixe-nos olhar para outro conjunto de gráficos - a idéia aqui é descobrir quais os ataques a escolher, dado que o comércio é executado na 2ª metade da série, ou seja, em qualquer ponto do 15º do mês até o término. Tenha em mente que o efeito da decadência do tempo acelera nesse período; portanto, quando estamos nos aproximando do prazo de validade, a dinâmica das opções muda.

Os 4 gráficos abaixo ajudam-nos a identificar a greve certa para diferentes prazos durante os quais o alvo é alcançado. É claro que fazemos isso mantendo Theta em perspectiva.

O gráfico 1 (superior esquerdo) avalia a rentabilidade de diferentes greves em que o comércio é executado na 2ª metade da série eo alvo é alcançado no mesmo dia do início do comércio. O comércio de opções orientadas por notícias, como a compra de uma opção devido a um anúncio corporativo, é um exemplo clássico. A compra de uma opção de índice com base na decisão de política monetária da RBI é outro exemplo. Claramente, como podemos ver no gráfico, todas as greves tendem a ganhar dinheiro quando o alvo é alcançado no mesmo dia, no entanto, o impacto máximo seria em (longe) as opções OTM.

Lembre-se da discussão que tivemos anteriormente - quando o mercado se move rapidamente (como 4% em 1 dia), as melhores greves para o comércio são sempre OTM distantes.

Conclusão - Quando você espera que o objetivo seja alcançado no mesmo dia (independentemente do prazo para caducidade), compre opções OTM distantes. Eu sugiro que você compre 2 ou 3 pontos fora das opções de ATM e não além disso. Não vale a pena comprar opções de ITM ou ATM.

O gráfico 2 (canto superior direito) avalia a rentabilidade de diferentes greves onde o comércio é executado na 2ª metade da série e o alvo é alcançado dentro de 5 dias após o início do comércio. Observe como a rentabilidade das opções distantes do OTM diminui. No caso acima (gráfico 1), o objetivo deve ser alcançado em 1 dia, portanto, comprar (longe) as opções de OTM tiveram sentido, mas aqui o objetivo é alcançado em 5 dias, e porque o comércio é mantido aberto por 5 dias, especialmente durante A 2 ª metade da série, o impacto de theta é maior. Por isso, não faz sentido arriscar com as opções OTM distantes. A aposta mais segura nesse cenário é a greve que é ligeiramente OTM.

Conclusão & # 8211; Quando você está na 2 ª metade da série e espera que o objetivo seja alcançado em torno de 5 dias a partir do momento da operação comercial, compram greves ligeiramente OTM. Eu sugiro que você compre 1 ataque de opções de ATM e não além disso.

O gráfico 3 (inferior direito) e o gráfico 4 (inferior esquerdo) - ambos os gráficos são similares esperados no gráfico 3, o objetivo é alcançado 10 dias a partir do início do comércio e no gráfico 4, o objetivo é esperado no dia da termo. Suponho que a diferença em termos de número de dias não será muito, portanto, eu os trataria como bastante semelhantes. A partir de ambos os gráficos, podemos chegar a uma conclusão - as opções OTM distantes tendem a perder dinheiro quando o objetivo deverá ser alcançado perto do prazo de validade. Na verdade, quando o alvo é alcançado mais perto do prazo de validade, mais pesadas as opções distantes de OTM sangram. As únicas greves que ganham dinheiro são ATM ou ligeiramente a opção ITM.

Enquanto as discussões que tivemos até agora são com relação à compra de uma opção de chamada, observações semelhantes também podem ser feitas para opções PUT. Aqui estão dois gráficos que nos ajudam a entender o que ataca para comprar em várias situações -

Esses gráficos nos ajudam a entender o que atinge o comércio quando o comércio é iniciado na primeira metade da série e o alvo é alcançado em diferentes intervalos de tempo.

Embora essas tabelas nos ajudem a entender o que atinge o comércio quando o comércio é executado na 2ª metade da série e o alvo é alcançado em diferentes intervalos de tempo.

Se você passar pelas cartas com cuidado, você perceberá que as conclusões para as opções de chamada são válidas para as opções Put. Dado isso, podemos generalizar as melhores práticas para opções de compra # 8211;

Então, na próxima vez que pretender comprar uma opção de chamada ou colocação nua, certifique-se de mapear o período (tanto na metade do meio quanto na 2ª metade da série) e no período durante o qual o alvo deverá ser alcançado. Uma vez que você fizer isso, com a ajuda da tabela acima, você saberá quais as greves para o comércio e, mais importante, você saberá o que ataca para evitar comprar.

Com isso, estamos agora à beira da conclusão deste módulo. No próximo capítulo, gostaria de discutir alguns dos simples negócios que eu iniciei nos últimos dias e também compartilhamos minha lógica comercial por trás de cada comércio. Espero que os estudos de caso que eu apresentarei no próximo capítulo lhe darão uma perspectiva sobre o processo de pensamento geral por trás de negociações de opções simples.

Key takeaways deste capítulo.

A volatilidade desempenha um papel crucial na sua decisão de comprar opções Em geral, opções de compra quando você espera que a volatilidade vá para as opções de venda mais altas quando você espera que a volatilidade diminua. Além da volatilidade, o prazo de caducidade e o prazo durante o qual o objetivo deve ser alcançado também é importante.

150 comentários.

Muito boa informação senhor ... muito obrigado e estou muito curioso para saber seus negócios.

Você saberá no próximo capítulo 🙂

Impressionante. Tinha algumas perguntas sobre as greves adequadas para vários negócios, ao passar pelos capítulos anteriores. Este capítulo eliminou quase todas as minhas dúvidas. Obrigado. 😀

Hey Karthik! Homem impressionante. Depois de pesquisar em diferentes corretores, entrei em Zerodha por mês. Ou eu não tinha apresentado o time do time ou eu negligenciei isso. Vocês estão balançando. Eu estava pesquisando em toda a internet sobre informações e estratégias comerciais e, acidentalmente, encontrei o time do time e isso terminou minha busca. Em nenhum lugar eu poderia encontrar toda a informação tão compilada, completa e simplificada.

Seu trabalho duro é muito apreciado. Continue com o bom trabalho.

Esperando ansiosamente pelo próximo módulo.

Viren, muito obrigado pelas palavras gentis 🙂

Por favor, fique atento para mais informações no Varsity!

Informações muito importantes ou direi que é extrair o módulo completo de uma maneira muito prática. Muito obrigado por isso. Na verdade, há cerca de um ano atrás, eu estava tentando entender o mesmo olhando os dados históricos no site da NSE e copiando-os para se destacarem e fazendo algum cálculo. Mas foi muito tedioso e entrei sem sucesso. É bom que você tenha dado uma forma perfeita.

O curto-circuito da opção * foi abordado em capítulos anteriores, mas pode explicar mais a maneira como as opções de log são explicadas?

* O que é alto ou baixo para a volatilidade com base nos quais podemos julgar as chances de movimento de volatilidade. Quero dizer, se a volatilidade já é alta, as chances de subir podem não ser altas mesmo em algum gatilho no futuro próximo. O mercado já deve ter considerado o fator de volatilidade.

* É possível que os preços no local possam subir, mas a volatilidade vai cair? Então, o que fazer nas opções?

Eu acho que você prometeu dar um caso a partir da opção TA e / ou FA e mostrando a opção comercial. Vai entrar no próximo capítulo.

Esperando ansiosamente pelo próximo capítulo e próximo módulo.

1) Existe alguma coisa especifica que você está observando quando abre as opções? Suponho que a maior parte disso tenha sido explicada.

2) Para Vix ard 17-18% é considerado normal. Você pode manter isso como valor de referência.

3) O próximo capítulo tem poucos estudos de caso.

Eu pensei que o curto-circuito das opções também pode ser explicado com gráficos, como é feito para opções de longo comércio, mostrando pagamento.

Todos os 4 & # 8211; Ligue por muito tempo, chame curto, coloque longo, e ponha curto foi explicado.

Senhor, a partir do próximo mês, as margens de futuros r dramatocalmente aumentaram, isso levará ao aumento da negociação de opções (os comerciantes de varejo bcoz não podem pagar esse marginsin fut para que eles possam mudar) eu posso ser um entre, esclarecer.

Não com certeza Narsimha & # 8211; precisamos esperar e assistir.

Outro capítulo Brilhante & # 8230;.Thanks a ton! & # 8230; & # 8230; Talvez neste momento, também pode valer a pena rever o interesse aberto no contexto das opções. ou seja, como interpretar o atual intervalo de negociação usando informações de interesse aberto? É amplamente acreditado (embora talvez não seja necessariamente verdadeiro) que os escritores de opções controlam os mercados das opções e, portanto, sua ação pode dar alguma indicação da direção provável do mercado de curto prazo. Portanto, a capacidade de interpretar OI e sua dinâmica em mudança no contexto de opções pode ser útil?

Na verdade, toda a teoria das opções de dor & # 8221; decorre do conceito Options + OI. Estará a discutir isso no próximo módulo.

Eu pedi sinceramente que você esclareça gentilmente o seguinte, de acordo com o meu entendimento de Key takeaways deste capítulo, que:

(1) Compre opções quando eu espero que a volatilidade aumentará, o que em outros mercados irá diminuir devido à pressão de venda. Para supor, se eu comprar chamadas e colocar opções, ambas na mesma greve, a chamada irá diminuir e colocar aumentará. E também.

(2) Opções de venda quando eu espero que a volatilidade diminua, o que, em outras palavras, o mercado aumentará. Se eu vender opções de chamada e colocação, tanto quando eu espero que a volatilidade diminua, tanto os valores das chamadas quanto os valores das opções aumentarão após a diminuição da volatilidade. Ficarei muito agradecido se você puder aconselhar se o meu está certo ou errado e se o meu entendimento é errado, esclareça sobre minha observação. Espero sinceramente que você me guie com uma resposta adequada Senhor. Esperando ansiosamente pelo seu conselho no assunto. Obrigado por você. Com os melhores cumprimentos, Deus abençoe você senhor, R. V.N. Stry.

1) A volatilidade aumentada não significa que o mercado diminuirá.

2) Da mesma forma, a diminuição da volatilidade não significa realmente que o mercado aumentará.

Oi Zerodha, esta é uma informação muito útil, obrigada por compartilhar. Eu queria saber aproximadamente aprox. O que% pessoas (de todo o total de pessoas negociadas) realmente ganham dinheiro na negociação F & O? Quando eu verificar na web, vejo informações muito dispersas, mas mais ou menos varejistas na maioria das vezes (& gt; 70%) perdem muito dinheiro. Como uma instituição que faz negócios na trading FO, você deve ter informações apropriadas.

Desde já, obrigado.

Ramu & # 8211; Tudo o que posso dizer é que os clientes de Zerodha são poucos entalhes melhores do que outros 🙂

Querido karthik, se a minha pergunta for irrelevante, evite, caso contrário, responda gentilmente, olhe abaixo, esta é uma captura de tela de nifty hoje 9.53am, eu tenho uma dúvida nifty futuros taxa de abertura do contrato de outubro 8400, alta taxa8723.85, como esse comércio é possível na abertura, exceto que as taxas de comércio de 99,9% estão em níveis de 8350-8250, mais cedo, também esse tipo de negócios estranhos vistos com astúcia ... claro, claro a minha dúvida.

Citação como em 26 de outubro de 2018 09:53:04 IST.

CNX Nifty & # 8211; NIFTY.

Ah, deve ser um desses comércios abertos. Não se preocupe muito com isso.

Mais uma vez, aprecio por seu trabalho digno, aguardando aulas de moeda e commodities.

Chegando lá em breve 🙂

Próximo Capítulo, por favor.

E quanto ao aumento do comércio no mesmo dia durante a 1ª parte da série? Qual Strike deve ser selecionado?

2 ataques de ATM devem ser bons.

De acordo com os dados de hoje, o Nifty 8400 CE está negociando às 31.25 e o 8400PE está negociando às 353.15 ..

Minha visão é que o lugar Nifty não atravessará 8400 até o final de novembro ...

Então, o que devo fazer .. Venda 8400 CE e colete os prêmios ou compre 8400 PE e segure até expirar ...

Estou confuso ... Você pode explicar o porquê e o que devo fazer?

Vender uma opção Put é assustador e # 8230; eu sugiro que você venda CE em vez disso. Alternativamente, você poderia seguir a estratégia aqui zerodha / varsity / chapter / volatility-applications /

Thnks para lições. Eu li o seu módulo 4 & amp; 5.

Eu sou novo para Trde.

Quer saber como posso identificar o alvo e% alvo (aqui 4% acima).

Uma das melhores maneiras de identificar o alvo / SL é analisando as regiões S & # 038; R. Este capítulo deve ajudar "# 8211; zerodha / varsity / chapter / support-resistance /

Obrigado por compartilhar essas dicas maravilhosas.

No entanto, tenho uma pergunta sobre a liquidação das opções no prazo de validade. Por exemplo, suponho que eu compre Nifty 8000 [email & # 160; protected] 15 & # 8211; Qtd total 1000 no dia anterior à expiração. Nifty falha no dia de validade e termina em 7910. O que acontecerá se eu não vender as 8000 postas que eu mantenho? Será que o zerodha será auto-ajustado? Caso contrário, quais os danos que terei de enfrentar como penality-excesso de taxas / impostos?

Neste caso, você terá lucro de 8000 e # 8211; 7910 & # 8211; 15 = 75. Uma vez que você não fechou a posição, a troca fará a liquidação em seu nome. Depois de deduzir os impostos, seu dinheiro de lucro será creditado em sua conta. Além disso, se você estiver em situação como sempre é aconselhável fechar a posição em lugar de permitir que a troca faça isso para evitar a carga STT. Mais sobre isso aqui & # 8211; zerodha / z-connect / queries / stock-and-fo-queries / stt-options-nse-bse-mcx-sx.

Obrigado por capítulos detalhados. Eu li o seu módulo 4 & amp; 5.

Peça-lhe, por favor, disponibilize-o no módulo formato pdf 5.

Agora está disponível no formato PDF. Por favor, verifique.

O que é uma opção nua? Por favor explique.

Quando você compra / vende opções sem qualquer hedge é chamado como uma transação nua. Por exemplo, se eu comprar uma opção de cal & # 8211; É chamada de uma opção de chamada longa nua.

No entanto, algo como um Bull Put Spread & # 8211; zerodha / varsity / chapter / bull-put-spread / não é uma transação nua porque o comércio tem duas pernas.

Adorei o assunto Re introdução ao CALL & # 8211; PUT opções e o processo de tomada de decisão em relação ao qual atinge comprar com base no prazo. Gostaria de uma perspectiva semelhante ao selecionar quais opções escrever com base nas diretrizes acima. Se você achar que é demais para dar os detalhes como acima, por favor, dê-nos algumas diretrizes n como proceder sobre o mesmo que nos ajudará a fazer os cálculos. Estou certo de que será de grande ajuda para todos os membros aqui. Obrigado.

Adorei o assunto Re introdução às opções CALL - PUT e ao processo de tomada de decisão sobre o qual as greves para comprar com base no prazo. Gostaria de uma perspectiva semelhante ao selecionar quais opções escrever com base nas diretrizes acima. Se você achar que é demais para dar os detalhes como acima, por favor, dê-nos algumas diretrizes n como proceder sobre o mesmo que nos ajudará a fazer os cálculos. Estou certo de que será de grande ajuda para todos os membros aqui. Obrigado.

Bem, o que não vale a pena comprar talvez valha a pena escrever 🙂

Dá uma perspectiva sobre a escrita de opções.

Senhor, você deve ter explicado, mas quero saber novamente como colocar o alvo e parar a perda em uma chamada nua ou colocar a opção. Sabemos apenas o movimento do preço à vista e a sua provável extensão. Será que o alvo e Sl serão definidos no preço à vista ou na opção & # 8217; s premium?

O melhor do SL é baseado no preço à vista.

Eu acho que eu comecei a obter um & # 8220; sentir & # 8221; sobre quais são as opções. Parece bem sabendo essas coisas. Graças a Deus, eu descobri sobre Zerodha & amp; Varsity 🙂

Tenho poucas consultas sobre a volatilidade e, como eu entendo, é como:

1) Eu sei se há algum evento, então a volatilidade dispara.

2) Eu sei se não há nada especial (sem eventos) vai ficar no nível de referência (ou seja, como você disse VIX de 18).

3) Pergunta: quando exatamente o VIX desce? Por que a volatilidade diminui? Eu tenho poucos supostos como um mercado aborrecido devido a férias, etc., mas eu preciso da sua resposta especializada 🙂

Obrigado Karthik, irmão!

1) Antes de qualquer evento importante, a volatilidade aumenta.

2) Os eventos não são a única coisa que impulsiona a volatilidade e o aumento da atividade comercial também pode impulsionar a volatilidade.

3) Normalmente, o VIX desce quando o medo desaparecer, pois o mercado deve subir.

Quando o aumento da volatilidade, o prémio das opções também aumenta ... também, no caso de uma volatilidade idêntica, significa volatilidade implícita ou Índia vix, & # 8230 ;?

quando o vix cai e o aumento da opção iv of call significa que há uma chance de aumentar a opção premium & # 8230; Certo?

e último qusition na opção greek calculator que iv entramos na opção de chamada de caixa de volatilidade ou colocamos a opção & # 8217; s IV.

Para Nifty você pode usar o Vix como referência para IV. Então, quando a IV cai, provavelmente é mais favorável comprar opções desde que você também tenha uma visão direcional.

IV é invariável igual para CE e amp; PE.

e sobre usd inr, qual é a volatilidade que para os bs calcs?

A volatilidade histórica pode ser usada aqui.

Olá karthik ji.

artigo maravilhoso, eu tenho uma pergunta que é de dados de hoje, arvind ltd OI mais alto em 330 hoje no lado da chamada, mas, de acordo com o gráfico, indica que o preço deu uma ruptura e pode voltar ainda mais, o que é interpretá-lo do que.

Parece que o mercado é otimista no estoque!

Obrigado pelo maravilhoso artigo.

Como você dividiu o intervalo de tempo em 15 dias, e quanto a quando queremos comprar o prazo de validade, que está a dois meses de distância. Será que os mesmos gráficos / conclusões funcionam?

Sim, 2 meses de distância ainda é tão bom quanto o início da série & # 8217; para que você possa manter essas diretrizes.

Você poderia sugerir, como Hedging pode ser feito com a ajuda de Opções?

É bom o suficiente para dizer COMPRAR Opções de venda de NIFTY para hedging & # 8211; mas como determinar quantos contratos e qual o preço de exercício?

Suponha que você tenha 2 lotes de futuro longo, o equivalente delta para esses dois lotes seria +2. Para proteger esta posição, você precisará comprar peças que somam até -2. Isso significaria que você compra 4 caixas de ATM.

Obrigado. Devemos desligar a posição em qualquer mudança no dinheiro ou simplesmente deixar expirar no dia eventualmente?

Bem, você pára quando você é lucrativo 🙂

Levando Theta em consideração, se eu vender opção MIS e gostaria de coletar prémio, então seria melhor vender ATM ou OTM?

OTM. Além disso, para capturar o efeito de Theta, você precisa manter a posição da opção vendida durante vários dias.

1.) O subjacente Nifty é 8629.15. Se eu fosse pegar compra de chamada CE no strike 8500, com um prémio de 139,50. Então, no final da expiração, por exemplo, 25-Ago, o subjacente deve estar acima de 8639.50 para considerar um lucro. Digamos no final da expiração que o subjacente foi de 8650, então é 10,50 * no. de muito, considerou o lucro?

2.) se eu fosse escrever uma opção de compra de venda para 8800 strike na prem 5.30 e dizer que no final do prazo é em 8650, então eu consigo manter o prémio de 5.30 ou se vários lotes foram comprados, então é 5.30 * não . de lotes. Isso esta certo.

Desde já, obrigado.

1) Nifty deve ser 8500 + 140 = 8640 para você fechar e # 8230; e você obtém lucro além disso. Sim, seria 10.5 * tamanho do lote.

2) Sim, você manterá o prêmio desde que Nifty esteja em ou abaixo de 8800.

Obrigado pelo esclarecimento acima, Senhor, diga, se eu quiser optar por qualquer uma das opções acima para o prazo de validade atual, posso fazer isso mesmo no último dia de expiração, ou seja, 25 de agosto. & amp; são 3:30 da tarde o corte.

No prazo de validade do contrato do mês atual expira & # 8230; e, portanto, você não pode negociar nesse contrato. No entanto, você pode comprar / vender outros contratos.

Diga o que você quer dizer com o fato de não podermos negociar o contrato no prazo de validade. Não podemos vender quando o prémio sobe?

No prazo de validade, o contrato deixa de existir. No entanto, você pode negociar até expirar.

Excelente site para ganhar conhecimento. Kudos para o time Zerodha.

Eu gostaria de validar a minha observação, que está no dia 1 de setembro, série Nifty fechou em 8572, sep futuros em 8628 e 8500CE no 8702 (o delta seria a 0,85). Foi uma boa idéia para Compre futuros e 8500CE curtos? Desta forma, poderíamos pagar prémio de 8702-8628 = 74 pontos como 8500CE e os futuros ambos convergirão para terminar no mesmo nível?

Quando esta estratégia falhará?

Feliz de saber que Kamal!

September 8500 CE não pode estar no 8702, acho que você está perdendo alguma coisa, foi 87.02?

Desculpe Karthik, It & # 8217; s 202 e não 8702 ..

Guess tanto quanto 🙂

Muito obrigado pela explicação detalhada; Se eu quiser julgar se a volatilidade implícita está se movendo alta ou baixa para um estoque individual (para tomar uma decisão de curta ou longa opção), como posso obter os dados da Volatilidade Implícita histórica; Entendo, podemos calcular facilmente a volatilidade histórica, mas como conhecer o movimento IV histórico? Eu tentei o link abaixo, mas não captura Implied Volatility.

Este é um pouco complicado. A maneira suja de fazer isso é comparando o IV de hoje com a volatilidade histórica e faz uma avaliação.

Obrigado Karthik.

Oi Karthik, eu sou novo aqui. Conheço as opções de spreads / vol trading, mas eu não passei a mergulhar e fiz qualquer negociação real em uma conta pessoal. Qual a melhor maneira de começar?

A melhor maneira seria executar a estratégia seria implementá-la realmente em mercados reais e começar a fazer pequenas apostas 🙂

Como saber de antemão que a volatilidade de uma determinada opção vai aumentar?

Existe algum mecanismo particular para prever isso.

devemos continuar observando a cadeia de opções do subjacente para ver se a sua volatilidade está aumentando?

Você pode prever a volatilidade empregando modelos de previsão de volatilidade como o GARCH. Este é um tópico elevado e exige que você tenha algum histórico nas estatísticas.

Existe um capítulo sobre o que especificamente explica em que preço de exercício uma opção deve ser comprada?

Este capítulo ajuda a identificar as greves 🙂

Opção de chamada de pinturas asiáticas de preço de ataque 960 é de 1,25 ₹, se amanhã as tintas asiáticas caírem novamente, então então, essa opção de chamada se tornará zero? E se um dia depois de amanhã as pinturas asiáticas aumentarem, minha opção de chamada continuará a aumentar ou meu contrato será encerrado assim que o valor da opção de chamada for zero?

Sim, é assim que funciona uma opção de chamada. No entanto, o preço da opção não vai para zero, pois tem valor de tempo.

Há uma tabela no final deste módulo, que destaca a "Melhor greve para o comércio" com base na linha de tempo de expectativa de destino e na linha de tempo de iniciação de posição. É aplicável para todos os 4: Chamada longa, chamada curta, longa, curta.

Há uma tabela no final deste módulo, que destaca a "Melhor greve para o comércio" com base na linha de tempo de expectativa de destino e na linha de tempo de iniciação de posição. HOW DOES THIS HELPS IN STRIKE SELECTION IN SELLING CALL/PUT. Sugere-se.

Best strikes to trade – by trade I mean to say both buy and sell.

Greetings. In Chapter 22, monthly series is divided in to 2 halves and results of the trading is explained with the help of 8+8 bar charts. Is Volatility Cone is the basis for these bar charts ? or any other thing. Request your clarification on this.

No, these charts are developed using R, basically an algorithm which suggests which is the best strike to trade for a given timeframe.

Thnks for reply.

When back calculating IV, taking nse option prices, using BS Model and Binomial Model, IV values are differing significantly. Binomial Model, resulting lesser IV. Any explanation? Which Model is correct wrt profitability ?

I know both binominal and B&S models lead to similar premium values. However, I’ve never tested for historical IV’s. So I guess I wont be able to comment to this.

While trading options is it important to look just at the volume figures for liquidity purpose or should we look into the Open interest figures as well? If yes for both, then could you tell how much is the ideal level for a contract to be liquid (volume and OI separately)? Also, I see that some call option contracts rise tremendously in value even if the underlying has fallen in value..for example on 24 march, TV18BRDCST CE of 27th apr 17 expiry, and strike of 52.5 rose by 3300% from the previous day close.. this has happened even if the underlying fell by 0.57% from previous close. Is there any way to spot such contracts and cash the gains by selling the contract soon ? 🙂

While both are important, I particularly look at volumes. Always compare today’s volume with respect to average volumes for a particular timeframe. For example, I’d look at today’s volume with respect to last 10 day average. Ditto for OI. Its hard to spot such trades, but with good amount of skill and luck, you certainly can 🙂

When I see the open interest and volume data for equity options, most of the times the open interest is extremely high when compared to volume throughout the trading month. So since volume is the number of contracts traded and open interest is the number of positions that are still open, if say for example I see the NIFTY 8000 call of 25 jan 17 expiry, till the expiry date the volume was around 8403 and open interest was 95925.

1) Does this mean that after market close 87522 contracts (95925-8403) were exercised?. This seems to be the same case where most of the options are exercised for other underlyings as well. Note that this is an ITM option.

2) Doesn this indirectly mean that a lot of people are ending up losing money because there is a greater STT that is levied on exercising options? And why are people exercising instead of squaring off?

3) what will happen if I try to square off an ITM option on the day of expiry but I don’t find any buyer for my option?

1) Not exercised, but closed. Remember exercise happens only on expiry day.

2) No – hard to judge the profitability based on the movement on OI/volume data.

3) If there is no counter party, then you cannot square off. But upon expiry, the exchange will settle it on your behalf, although you will end up paying a huge STT for ITM option. Verifique este & # 8211; zerodha/z-connect/queries/stock-and-fo-queries/stt-options-nse-bse-mcx-sx.

Hello karthik sir,

I have a question i am tracking May, 2017 currency option(USDINR) for sometime.

today(21 april) underlying in red but ATM and slightly Atm & OTM puts mean close to underlying price also declining not much but little bit why this happining as per my calculation volatility is normal not decreasing , and there is lot more time to expiry then no problem with theta.

Then why this happening.

I guess this is due to all options contains excess value to protect Seller s and as this option going to be current months the price reaching towards normal or fair range.

Am i right sir pls…..correct me if neccsesory….

Maybe due to liquidity issues. Keep track of the traded prices, sometimes when liquidity is low, the option premiums misbehaves 🙂

SInce STT on exercised options is quite high and eat up profits made in ITM options, then how can traders square off contracts whose daily volume are also low? for example if you look for SBI CE strike 275 with expiry 27 apr 2017, from 27 mar till 27 april in the following link https://nseindia/products/content/derivatives/equities/historical_fo. htm the daily contracts traded for this option of SBI till the day of expiry is quite low. In this case will you suggest that the trader buys only one or two contracts so that he can sell it easily before expiry and he can avoid the trap of any options not getting squared off due to insufficient buyers? Second question is, you can see in the data that the open interest figures are quite high even till the date of expiry. so does this mean that lacs of contracts got exercised on their own on expiry day and the option holders ended up paying the high stt?

Yes, in fact ample liquidity is one of the key criteria for selecting stocks for intraday purpose. Its tough to find liquidity beyond 4-5 big names (ICIC, RIL, Infy TCS etc). Yes, many contracts gets exercised upon expiry. For people who dont know, they end up paying high STT.

How can I find liquid stock option contracts (with specific strikes) and be sure that I will be able to find a buyer easily if I want to sell my contract before expiry? Also, if a contract for a specific strike has had over 1000 daily volume in past month then does it indicate that in the future months also it is more likely to have good volume? in general how do I know that a particular strike of a stock option is going to attract good volumes?

You just need to scan the market to figure out where the liquidity lies. Usually, it is concentrated in few names such as – Nifty, Bank Nifty, ICICI, Infy, SBI, HDFC, RIL, TCS etc.

No, today’s volume does not guarantee future volume.

How do you arrive at the 8 graphs in section 22.3 of module 5-2. These are used in module 6 also. Are these based on historical data and remain unchanged or one has to plot them for every strategy. Plz ignore if the question is too dumb.

These are used extensively through out the module. They are created busing a software called, R. It essentially captures the general behavior in which the option strikes behave wrt to time to expiry.

Can you please guide me how to trade in option from Zerodha pi/kite.

Start with this very module, Uday 🙂

Option chain contains current month, Mid month & Far month. For example My doubt is if current month not available volume, open interest or Bis ask spread is more so I wouldn’t take any option position. Then I drill it down find a mid month or far month options satisfied with Volume, Bid and ask spread. So if I want to select the option (ITM, ATM & OTM) how to consider or think 1st half of the series or the 2nd half of the series to initiate the trade.

In the present Indian context, you will not find this situation. Liquidity is available in the current month as opposed to mid or far month.

Do you have modules on option strategies??

The above charts really get to the core of why successfully trading options remains a challenge to many retail investors as myself. That said, a chart of Theta vs Strike Price will also help in understanding the core concept, IMO. I ended up searching for the chart when I realized that time value of ITM options is less than that of ATM options, which I found quite confusing.

I’d read on the internet that Deep ITM naked options are a relatively safe bet but the above charts along with Theta-vs-Strike-price is really driving the point home for me.

Thank you once again for this excellent material.

Happy learning, Rahul 🙂

Why is 5th module not available for download??

Excelente material. If possible, please post table of Position Initiation Target Expectation Best Strike To Trade for banknifty weekly options.

Is it a correct strategy to buying two strike price Call / Put when banknifty did not have trend of more than 200 points and forecasting it would rise / fall ? Please do let me your views. Is there any formulae to predict the premium based on predicted index if I know all the geeks and implied volatility. Thanks and Regards, Arijit.

Ah yes, that table has been pending for a while now 🙂

Any strategy requires backtesting, Arijit. Cannot make a blind statement 🙂

Thanks for your prompt reply and the suggestion for backtesting. Will confirm my theory with sample from 01/01/17 should suffice.

Do you know or where can I find Black Scholes formular to predict the premium based on predicted index if I know all the geeks and implied volatility?

Thanks and Regards,

I’d suggest you take more data points, at least for the last 2 years. Verifique este & # 8211; https://zerodha/tools/black-scholes/

Thanks for the sample size …works in progress…

I require formula not calculator as I know how to calculate the geeks from options chains table but I want to calculate the future premium for a strike price for predicted future index and current geeks…

Thanks and Regards,

Ah, expected premium? This has to be again based on how the expected change in greeks, not sure if something of this sort is available online.

I want to write the calculator based on the formula calculating the premium for a strike price for a range of forecast index price, based on calculated geeks from option chain table.

Please help, if possible.

Thanks and Regards,

I’m not sure about this, Arijit. Can you elaborate a bit more? Obrigado.

You are a True Teacher. Who Knows what the students expect …

We wanted this kind of Summary and reinforcement of complex Options in one single chapter!

Happy learning, Ravi!

Great learning from you. I just wanted to know how will you choose strikes in case I want to short options. This is because I have a portfolio and would like to hedge it and collect premiums. Do we still select strikes in the same manner as we do while buying options? Also, is it a good idea to short both call and put options to hedge each other out?

What standard checklist, pattern and indicators do you strongly use on a daily basis for intra day or 2-3 days type of trades while trading the “Nifty 50 Index Option”?

Whatever I’ve mentioned in this chapter. I avoid buying options close to expiries and buying when volatility is high.

This chapter is highly confusing!

If your target is achieved in 5 days do u square off at that point or continue till expiry? You target at the profit in premium or profit at the end in the strike price?

If the target is achieved, then you got to get out the trade. Why wait till expiry?

Ei! Since volatility increases when an important announcement is coming up, and increase in volatility is directly proportional to increase in premium, so irrespective of the result of the company, it would always make sense to buy a call option around 1-3 days before? If true, then what would be the appropriate strike price for this?

Volatility tends to increase, does not always increase! However, if it does, I would be comfortable buying slightly OTM, assuming there is at least 5- 8 trading sessions before expiry.

If we know the target is expected on expiry day, it is suggested to buy ITM strike option during the first half of series.

1. which ITM strike option to buy? Slightly ITM or ITM?

2. If we buy ITM option and there is no price movement in the underlying, would the premium erode due to Theta value and lose money? what happens to premium in this case?

1) Slightly ITM or ATM.

2) Yes, premium would erode.

Your pedagogy is excellent and reflects what you have gone through to arrive at level of excellence !

You get compute geeks from option table.

There should be formula with which one calculate the premium (by Black Scholes) for forecast index.

Hope the above is clear.

Thanks and Regards,

Ah, I get it. This may not very intuitive since both the premium and the index movement (delta) are co-dependent. So you will end up in some sort of a circular loop when trying to do this. Anyway, let me give it more thought. Obrigado.

It’s very good. the contents are so elaborative, I am good to read this. I shall apply it to real trades.

Good luck and happy learning, Rajiv!

how it is affecte to P&L ;

1) X share trading at 100(spot price). i know share will be up 20 points(i. e.120) within 25 days. i bought CE option with slightly ITM (first half of expiry). but market react early and target achieved within 5 days. how affected to p&L as well as any other point that should be keep in mind ?

2) which Moneyness for call option i have to choose when i only know X share have upward moves from current level ? May be 1st or 2nd half of the series.

3) what is the thought behind buying/selling of next months expiry ? or better to not jump at initial level.

1) In this case, the options premium will go much higher than the value predicted by delta. This is because of ample time value.

2) If you have sufficient time, then opt for slightly OTM option, else opt for ATM option.

3) Liquidity could be an issue with next month options, I’d suggest you stick to the current month options.

After going through this chapter on ” Reintroducing Call & Put option, Kindly clear my following doubts.

a) How is a Call option is different from a Put option for a same strike rate? for example How the ATM of today ( 16-01-2018 ) 10700 CE is different from the 10700 PE ?

b) How ITM shift from left to right after ATM ie the light yellow back ground.

If the answer is of long stretch kindly give me a link to this answer.

I have read this module no 5 two times . I could not get the answer for my above question.

Please allow me to give an example of some what same to compare.

Take chart of a Railway Time Table (RTT. in short) . This is a common chart familiar to almost maximum number of people.

Let us compare both charts. The Railway Time Table (RTT. in short) and the Nifty Option Chain (NOC. in short)

1 The central Strike Price column in the Nifty Option Chain (NOC) can be compared to the Train No and train name column of the Railway Time Table (RTT).

2. The left side of the strike price column in NOC is Call option and its details . same way.

left side of RTT is UP direction of the trains and details of stations on the route and arrival & departure time of those stations.

3 The right side of the strike price column in NOC is Put option and its details . same way right.

side of RTT is DOWN direction of the trains and details of stations on the route and arrival & departure time of those station.

Kindly compare like this and make it very simple to understand.

Considering the effort & time the full team of people have invested to prepare such a beautiful and versatile book, these type of comparison charts will go a long way. SORRY for taking your valuable time.

1) The basic difference is in terms of the directional opinion – you make money on call when the stock price goes up and you make money on a PUT when the stock price goes down.

2) This depends on the option type (calls and Puts). I’d suggest you read the chapter on Moneyness of option to understand this better.

The RTT example is nice, unfortunately, I’ve not traveled much, hence not too familiar with the railway chart. But appreciate your inputs. Obrigado.

margin money is like a loan or a debt. não é isso? so am i liable to pay the extra money that i borrowed as margin money for intraday trade that enhanced my profit??

Sort of yes, but this is a standard feature offered by most brokers and no one really charges for it.

i am actually new to trading and when i received a mail from NSE at the day’s end of stocks bought and sold and it showed that i actually traded in lakhs when i just had 5000 in my account, that really got me scared.

Yes, that would be the total value of the transaction. Thanks to leverage 🙂

The way you bifurcated one month option contract into 15 day i. e. the effect of time on premium .

Can you tell me the effect of time in premium in case on Bank nifty as the option contract are for one week (as per my knowledge. I am new to all this stuff correct me if I am wrong).

That would be too short-term a trade to classify options. I’d suggest you stick to ATM for all trade types.

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The Option Greeks (Delta) Part 1.

9.1 & # 8211; Visão geral.

Yesterday I watched the latest bollywood flick ‘Piku’. Muito bom devo dizer. After watching the movie I was casually pondering over what really made me like Piku – was it the overall storyline, or Amitabh Bachchan’s brilliant acting, or Deepika Padukone’s charming screen presence, or Shoojit Sircar’s brilliant direction? Well, I suppose it was a mix of all these factors that made the movie enjoyable.

This also made me realize, there is a remarkable similarity between a bollywood movie and an options trade. Similar to a bollywood movie, for an options trade to be successful in the market there are several forces which need to work in the option trader’s favor. These forces are collectively called ‘The Option Greeks’. These forces influence an option contract in real time, affecting the premium to either increase or decrease on a minute by minute basis. To make matters complicated, these forces not only influence the premiums directly but also influence each another.

To put this in perspective think about these two bollywood actors – Aamir Khan and Salman Khan. Movie buffs would recognize them as two independent acting forces (similar to option Greeks) of Bollywood. They can independently influence the outcome of the movie they act in (think of the movie as an options premium). However if you put both these guys in a single flick, chances are that they will try to pull one another down while at the same time push themselves up and at the same time try to make the movie a success. Do you see the juggling around here? This may not be a perfect analogy, but I hope it gives you a sense of what I’m trying to convey.

Options Premiums, options Greeks, and the natural demand supply situation of the markets influence each other. Though all these factors work as independent agents, yet they are all intervened with one another. The final outcome of this mixture can be assessed in the option’s premium. For an options trader, assessing the variation in premium is most important. He needs to develop a sense for how these factors play out before setting up an option trade.

So without much ado, let me introduce the Greeks to you –

Delta – Measures the rate of change of options premium based on the directional movement of the underlying Gamma – Rate of change of delta itself Vega – Rate of change of premium based on change in volatility Theta – Measures the impact on premium based on time left for expiry.

We will discuss these Greeks over the next few chapters. The focus of this chapter is to understand the Delta.

9.2 – Delta of an Option.

Notice the following two snapshots here – they belong to Nifty’s 8250 CE option. The first snapshot was taken at 09:18 AM when Nifty spot was at 8292.

Now notice the change in premium – at 09:18 AM when Nifty was at 8292 the call option was trading at 144, however at 10:00 AM Nifty moved to 8315 and the same call option was trading at 150.

In fact here is another snapshot at 10:55 AM – Nifty declined to 8288 and so did the option premium (declined to 133).

From the above observations one thing stands out very clear – as and when the value of the spot changes, so does the option premium. More precisely as we already know – the call option premium increases with the increase in the spot value and vice versa.

Keeping this in perspective, imagine this – you have predicted that Nifty will reach 8355 by 3:00 PM today. From the snapshots above we know that the premium will certainly change – but by how much? What is the likely value of the 8250 CE premium if Nifty reaches 8355?

Well, this is exactly where the ‘Delta of an Option’ comes handy. The Delta measures how an options value changes with respect to the change in the underlying. In simpler terms, the Delta of an option helps us answer questions of this sort – “By how many points will the option premium change for every 1 point change in the underlying?”

Therefore the Option Greek’s ‘Delta’ captures the effect of the directional movement of the market on the Option’s premium.

The delta is a number which varies –

Between 0 and 1 for a call option, some traders prefer to use the 0 to 100 scale. So the delta value of 0.55 on 0 to 1 scale is equivalent to 55 on the 0 to 100 scale. Between -1 and 0 (-100 to 0) for a put option. So the delta value of -0.4 on the -1 to 0 scale is equivalent to -40 on the -100 to 0 scale We will soon understand why the put option’s delta has a negative value associated with it.

At this stage I want to give you an orientation of how this chapter will shape up, please do keep this at the back of your mind as I believe it will help you join the dots better –

We will understand how we can use the Delta value for Call Options A quick note on how the Delta values are arrived at Understand how we can use the Delta value for Put Options Delta Characteristics – Delta vs. Spot, Delta Acceleration (continued in next chapter) Option positions in terms of Delta (continued in next chapter)

So let’s hit the road!

9.3 – Delta for a Call Option.

We know the delta is a number that ranges between 0 and 1. Assume a call option has a delta of 0.3 or 30 – what does this mean?

Well, as we know the delta measures the rate of change of premium for every unit change in the underlying. So a delta of 0.3 indicates that for every 1 point change in the underlying, the premium is likely change by 0.3 units, or for every 100 point change in the underlying the premium is likely to change by 30 points.

The following example should help you understand this better –

Nifty @ 10:55 AM is at 8288.

Option Strike = 8250 Call Option.

Delta of the option = + 0.55.

Nifty @ 3:15 PM is expected to reach 8310.

What is the likely option premium value at 3:15 PM?

Well, this is fairly easy to calculate. We know the Delta of the option is 0.55, which means for every 1 point change in the underlying the premium is expected to change by 0.55 points.

We are expecting the underlying to change by 22 points (8310 – 8288), hence the premium is supposed to increase by.

Therefore the new option premium is expected to trade around 145.1 (133+12.1)

Which is the sum of old premium + expected change in premium.

Let us pick another case – what if one anticipates a drop in Nifty? What will happen to the premium? Let us figure that out –

Nifty @ 10:55 AM is at 8288.

Option Strike = 8250 Call Option.

Delta of the option = 0.55.

Nifty @ 3:15 PM is expected to reach 8200.

What is the likely premium value at 3:15 PM?

We are expecting Nifty to decline by – 88 points (8200 – 8288), hence the change in premium will be –

Therefore the premium is expected to trade around.

= 84.6 (new premium value)

As you can see from the above two examples, the delta helps us evaluate the premium value based on the directional move in the underlying. This is extremely useful information to have while trading options. For example assume you expect a massive 100 point up move on Nifty, and based on this expectation you decide to buy an option. There are two Call options and you need to decide which one to buy.

Call Option 1 has a delta of 0.05.

Call Option 2 has a delta of 0.2.

Now the question is, which option will you buy?

Let us do some math to answer this –

Change in underlying = 100 points.

Call option 1 Delta = 0.05.

Change in premium for call option 1 = 100 * 0.05.

Call option 2 Delta = 0.2.

Change in premium for call option 2 = 100 * 0.2.

As you can see the same 100 point move in the underlying has different effects on different options. In this case clearly the trader would be better off buying Call Option 2. This should give you a hint – the delta helps you select the right option strike to trade. But of course there are more dimensions to this, which we will explore soon.

At this stage let me post a very important question – Why is the delta value for a call option bound by 0 and 1? Why can’t the call option’s delta go beyond 0 and 1?

To help understand this, let us look at 2 scenarios wherein I will purposely keep the delta value above 1 and below 0.

Scenario 1: Delta greater than 1 for a call option.

Nifty @ 10:55 AM at 8268.

Option Strike = 8250 Call Option.

Delta of the option = 1.5 (purposely keeping it above 1)

Nifty @ 3:15 PM is expected to reach 8310.

What is the likely premium value at 3:15 PM?

Change in Nifty = 42 points.

Therefore the change in premium (considering the delta is 1.5)

Do you notice that? The answer suggests that for a 42 point change in the underlying, the value of premium is increasing by 63 points! In other words, the option is gaining more value than the underlying itself. Remember the option is a derivative contract, it derives its value from its respective underlying, hence it can never move faster than the underlying.

If the delta is 1 (which is the maximum delta value) it signifies that the option is moving in line with the underlying which is acceptable, but a value higher than 1 does not make sense. For this reason the delta of an option is fixed to a maximum value of 1 or 100.

Let us extend the same logic to figure out why the delta of a call option is lower bound to 0.

Scenario 2: Delta lesser than 0 for a call option.

Nifty @ 10:55 AM at 8288.

Option Strike = 8300 Call Option.

Delta of the option = – 0.2 (have purposely changed the value to below 0, hence negative delta)

Nifty @ 3:15 PM is expected to reach 8200.

What is the likely premium value at 3:15 PM?

Change in Nifty = 88 points (8288 -8200)

Therefore the change in premium (considering the delta is -0.2)

For a moment we will assume this is true, therefore new premium will be.

As you can see in this case, when the delta of a call option goes below 0, there is a possibility for the premium to go below 0, which is impossible. At this point do recollect the premium irrespective of a call or put can never be negative. Hence for this reason, the delta of a call option is lower bound to zero.

9.4 – Who decides the value of the Delta?

The value of the delta is one of the many outputs from the Black & Scholes option pricing formula. As I have mentioned earlier in this module, the B&S formula takes in a bunch of inputs and gives out a few key outputs. The output includes the option’s delta value and other Greeks. After discussing all the Greeks, we will also go through the B&S formula to strengthen our understanding on options. However for now, you need to be aware that the delta and other Greeks are market driven values and are computed by the B&S formula.

However here is a table which will help you identify the approximate delta value for a given option –

Of course you can always find out the exact delta of an option by using a B&S option pricing calculator.

9.5 – Delta for a Put Option.

Do recollect the Delta of a Put Option ranges from -1 to 0. The negative sign is just to illustrate the fact that when the underlying gains in value, the value of premium goes down. Keeping this in mind, consider the following details –

Note – 8268 is a slightly ITM option, hence the delta is around -0.55 (as indicated from the table above).

The objective is to evaluate the new premium value considering the delta value to be -0.55 . Do pay attention to the calculations made below.

Case 1: Nifty is expected to move to 8310.

Expected change = 8310 – 8268.

Current Premium = 128.

New Premium = 128 -23.1.

Here I’m subtracting the value of delta since I know that the value of a Put option declines when the underlying value increases.

Case 2: Nifty is expected to move to 8230.

Expected change = 8268 – 8230.

Current Premium = 128.

New Premium = 128 + 20.9.

Here I’m adding the value of delta since I know that the value of a Put option gains when the underlying value decreases.

I hope with the above two Illustrations you are now clear on how to use the Put Option’s delta value to evaluate the new premium value. Also, I will take the liberty to skip explaining why the Put Option’s delta is bound between -1 and 0.

In fact I would encourage the readers to apply the same logic we used while understanding why the call option’s delta is bound between 0 and 1, to understand why Put option’s delta is bound between -1 and 0.

In the next chapter we will dig deeper into Delta and understand some of its characteristics.

Key takeaways deste capítulo.

Option Greeks are forces that influence the premium of an option Delta is an Option Greek that captures the effect of the direction of the market Call option delta varies between 0 and 1, some traders prefer to use 0 to 100. Put option delta varies between -1 and 0 (-100 to 0) The negative delta value for a Put Option indicates that the option premium and underlying value moves in the opposite direction ATM options have a delta of 0.5 ITM option have a delta of close to 1 OTM options have a delta of close to 0.

173 comments.

Very very thanks for new chapter. Contents are very good and clear but incomplete knowledge create confusion. So, I am waiting with Patience for your completing this module.

Thanks for you patience, we are working on the new chapter…will put up up as soon as we can.

Thank you very much for explaining the difficult subject in easy way. It’s really appreciable & thank you once again for taking so much pain to explain rather complicated things.

Mantem. Awaiting eagerly for next chapters.

waiting for next chapter …..

hey first of all thanks for explaining the delta in such a simple way.

when will be the chapter on option strategies will come?

The module on Option stratergies will take some time…we will start work on that once the ongoing module on Options Theory is through.

If i sell first a stock at 25 and then buy at 20 before expiry , then my profit is 5 plus premium received. Am i right?

Let me rephrase this – If you sell an option (not stock) at a premium of 25 and buy the option back at 20, then the profit you make is Rs.5/- times the lot size”.

why not premium received?

Can you please elaborate your query, I’m unable to understand the context. Obrigado.

You may have already realized answer to your question. If not, you received Rs25/- premium for selling the call option, which is already considered in the calculation, right ?

profit=(25-20)*lot size —- assuming you bought same number of contracts (lots), which you should be doing.

Your contents are very lucid that a layman in the Dalal Street can know more about the options trading.

This chapter particularly.

//the option is gaining more value than the underlying itself. Remember the option is a derivative contract, it derives its value from its respective underlying, hence it can never move faster than the underlying. If the delta is 1 (which is the maximum delta value) it signifies that the option is moving in line with the underlying which is acceptable, but a value higher than 1 does not make sense. For this reason the delta of an option is fixed to a maximum value of 1 or 100.//

its a fantastic explanation about the delta value. Thanks for the contents. Need More classes like this.

Thanks for the kind words and encouragement 🙂

We are working towards putting up the chapters soon. Should be out soon.

sir,(personnel)with all my experience&sufferings i strongly beleive technicals, charts, indicators, etc wont work in options trading, it purely depends on greeks&mass psycycology&what u advised in t. analysis ie best suited for equities&fut moreover i didnt got any justification correct me if iam wrong&i wantededucational moves in TRADING.

You are absolutely right – when it comes to option trading you should be using Option Greeks and other parameters to trade and not really Technical Analysis.

sir, thanks again(pnl) iam running a small business(mall) problem is iam unable to adjust money for trading, whatever comes by sales, borrowings will not be sufficieent for retail busin, iam unable to trade frely&give time to loss&repair in that pressure i end up loosing even i know many thiings which i learnt at somecost&3yrs now i dont want to waste my experience&knowledge&loose my passion which may turn to fortune in future if iam right so whats way, advise.

Take it easy is the advice 🙂 Here is what I would suggest –

1) Concentrate on your core business and try to improvise on the same.

2) Do not trade the markets if you feel you are getting too stressed and therefore making losses.

3) Slowly unlearn everything about the markets you know so far and then try to relearn in a structured way.

4) Start with small amounts of investments (no trading)

5) Invest small amounts and watch it grow.

6) Once you are comfortable with that, try investing significant amounts with an intention of creating wealth.

7) And if you have gained enough confidence by then maybe you can dabble with small amounts of restricted trading.

If you follow this, I have a feeling you will be in a much better position in the future.

sir, thanks, i dont think investing works in these econimic conditions as middleclass i cant about my core business my wife will always looks iam only a supporter with all this network i want something on my own, thatswhy iam passioate for this business for timebeing iam planning to trde 8 lots nifty options&1 fut stock as ur t. analysis teached sorry iam working smartly to overcome&win.

Good luck Narsimha. I hope you have all the success in the market.

sir, thanks will aiways follow, keep on learning&eventually turn to earning am i right.

That’s the spirited attitude 🙂

sir, when can we expect TRADING STATEGIES, LIKE BACKTESTING, WRITING OWN STATEGU&OTHER COMPLICATED SGIES, OFCOURSE THERE IS LOT INFORMATION IN NET ABOUT THESE BUT NOBODY WRITES LIKE U, WAITING.

We will come up with a module called “Trading Strategies” which will include all this – meanwhile check this https://zerodha/expert-advisors/

sir, in morning trade first 2 min, why cant we trade (open=low)for long (open=high)for short, ithink it is marubuzo can we trade for v short time within 10min.

Sir, as you mentioned in this conversation:

“We will come up with a module called “Trading Strategies” which will include all this – meanwhile check this https://zerodha/expert-advisors/”

When that module will be published?

Sometime soon, Arijit. Hard to put a timeline to this.

I am an intra day trader. So, I never wait expiry to collect premium. So my question is — suppose nifty CE with strike price of 8200 and premium of 120 and delta or 5.5. If I were execute an long or short order and price moves some favour in my direction then my profit is equal on long or short position and risk should also be same on long and short orders depending upon the points I trail on stop loss on either side. The only difference is that I have to deposit margin money on short orders. Am I correct. Please clarify.

When you say delta is 5.5 I hope you are talking about the 0 to 100 scale.

P&L on options is non linear. So when you buy a call option the profit you enjoy is very different from the profits you would enjoy when you are short. Likewise for risk.

Yes, when you short the margins are blocked from you trading account.

Where can we know the Greeks value for Nifty options?

How does the value of Delta change with time decay?

Where we can get the delta values?

You can get the delta value from the Options calculator. Will discuss Delta against time shortly.

One thing I am not able to understand since long is, how derivative follows underlying stock/index price and that too in very much sync? As per my understanding option price is decided by last trade price transaction(LTP) of that option. Then following somehting should not be practically possible. Lets say for example, If nifty is going down and suddenly some people try to buy options in extremely large quantity then that option price should increase but it does not happen. I have observed there is no relation of volume in price of options. if option price is calculated based on delta, theta, vega, time decay etc then who decides it? is someone punches that into system or exchange computers calculate based on these greeks formula and display as LTP? or is it just simple last trade price?

A derivative by definition is a contract that derives its value based on an underlying. Hence technically speaking derivatives cannot influence the spot. Option price is not decided by LTP, in fact LTP is decided by Option Pricing which in turn is depended on the Option Greeks. Volume is a function of pure demand and supply…so that is a different perspective all together.

I had the same question. Just to clarify myself, I have two more questions.

1. So, can we say that volumes in the options does not influence option prices?.

2. It should be the exchange that enforces the prices and not the participants in the options market right?

Obrigado pelo seu tempo.

1) No, not really. There are more influencing factors than Volume.

2) No, options is tradable, hence the market decides the rate. The Exchange does not have a role to play in option pricing.

Nifty @ 10:55 AM is at 8268.

Option Strike = 8250 Call Option.

Delta of the option = 0.55.

In above example how you take or calculate premium value 133 and delta option value 0.55.

This was just an illustration – also do notice I have mentioned spot @ 8268 and strike @ 8250, hence this is an ITM option … therefore the Delta should be more than 0.5 – hence the assumption that the delta is 0.55.

And sir what about premium.

How you take or calculate it.

Option premium is market driven (although based on the B&S formula).

Where can one get delta value of nifty options on a real time basis ?

Awesome…. Thank you so much for your untiring effort sir…

Pleasure is ours 🙂

When will you post the next part. We are waiting…

Part 2 is posted – working on Part 3 (chapter 11).

sir, for eod trades there is good website called TOP STOCK RESEACH IF U R FREE CHECK&ADVISE.

Avoid all such things my friend 🙂

sir, how many moniters we need for intraday, bcoz we cant see many charts atatime& capitalise on fast movings.

1 monitor is more than sufficient for trading!

It’s a really nice write up. I have some queries.

Say NIFTY is trading at 8300 and there are still 10 days to expiry. Assume NIFTY 8400CE is trading at 30. Suddenly NIFTY spikes by 50 points and 8400CE suddenly becomes 50 +. Why the demand-supply equation doesn’t govern the option price? Is it like sellers drop suddenly or buyers increase instantly? Even if the option greeks control premium pricing, shouldn’t buy/sell numbers decide the price ? Sometimes the nifty spot price moves by 10 points (+ve), nearest CE moves by 2 rs sometimes and sometimes 5 rs. So what should be the definitive way to calculate ?

You answered it yourself – this about it bit by bit –

1) What is demand supply situation in the market?

Ans & # 8211; It is the pressure to buy or sell a particular asset.

2) What happens when the pressure builds?

Ans & # 8211; Depending on the strength of the pressure (either there is more selling pressure of more buying pressure) the market moves in a certain direction.

3) What happens to options when the market moves?

Ans & # 8211; The premium changes.

4) By how much does the premium change?

Ans & # 8211; That depends on the delta!

So as you see – Delta is captures the effect of directional movement, which by itself is a function of demand and supply of the market.

Thanks a lot for the reply Karthik. So, can we directly bet on the delta then via some instrument which is like “derivative of a derivative” ?

Yes of course, you can trade the Delta. We will be discussing much more about these topics soon.

I have understood call & put options, but i m confused regarding trading with put on the trading terminal.

Lets say i buy nifty put 8150 @ 100.After 3 days the nifty spot is at 8000 and premium @ 110…so how do i profit from above trade…if i sell put 8150..i would make a loss of 110-100=10*25=250…am i right sir?

Let me just rephrase what you’ve said –

Tipo de opção & # 8211; Nifty Put.

Premium Paid – 100.

Trade type – Long Put (buy put option)

Nifty Spot – 8000.

Profit = 110 -100 = Rs.10/=

Total Profit = 10 * 25 = Rs.250/-

So you make a profit on this trade and not a loss 🙂

Sir, my question is related to the above example only. When we bought a put at 8150 and now the spot price is 8000 then isn’t the profit 8150-8000= 150.

& amp; 150-100(premium paid)= 50*25=1250.

Because in previous examples, u calculated profit with the difference in the value of underlying asset instead of the value of premium.

Saurabh – yes, the profit will be at least to the extent of the intrinsic value..which in this case happens to be 8150 minus 8000 = 150. However I dint want to say this as I was worried about creating confusion. Hence used the same numbers Pankit quoted 🙂

Now I am confused..shouldn’t SAURABH GARG calculation only be used when exercising the option and not when “trading” premium i. e. not waiting for expiry?

Yes, the Option P&L before the expiry will be lot different when compared to the P&L on expiry. The calculation here is for expiry.

Dear Karthik Rangappa,

You deserve praise and thanks for taking all the troubles to.

write it all quite clearly and making it all easily.

You do not have to publish the rest of this post: I just.

thought I will bring 2 minor items (nit-picking, really!) to.

Section 9.2 : “Delta of an Option” : 2nd sentence:

“The first snapshot was taken at 09:18 AM when Nifty spot.

was trading at 8278 (not captured in the snapshot). & # 8221;

1. The parenthetical remark “not captured in the snapshot” é.

not quite correct:

In fact, Nifty is right there: see the line immediately below.

Underlying Value : 8292.65.

2. Nifty is an Index: it is not a traded asset.

So, the second part of the the sentence.

“when Nifty spot was trading at 8278 ….”

can be stated more simply as :

(if one wants to be very pedantic and precise!)

If you agree on this change, you will have to make similar.

changes at quite a few other places as well.

A good teacher sometimes deliberately makes mistakes in the class to.

find out if the audience is alert or sleeping! Perhaps you too.

inserted such mistakes to test if your audience is alert!

Obrigado pela atenção.

Uau! Thank you so much for pointing out these errors. I have made the necessary changes. The errors are not intentional and attributable to oversight. I would be very grateful if you can help in pointing out these errors. Please feel free to email these errors to me at karthik. r at zerodha dot com.

We are expecting the underlying to change by 42 points (8310 – 8288), hence the premium is supposed to increase by.

Sir above 42 should be 22.

Thanks for pointing that, have made the changes.

Delta of the option = 1.55 (purposely keeping it above 1)

Sir this should be 1.5 (Please see 1.5*42=63)

Will look into this. Obrigado.

Change in Nifty = 68 points (8288 -8200)

Instead of 68 points it should be 88.

Changes done. Obrigado.

I know that if i am making loss as a buyer of an option i can simply allow my option to expire. and if i am making loss i will have to forgo the margin. But what if.

A. As buyer of a call or put option i am making profit on the expiry but i don’t exercise the option. will i get the profit or not.

B. If i sold a call or put option and i am making profit on the expiry day but do not square off my position on the expiry.

Agradecimentos e cumprimentos.

When you buy an option you pay the full premium required and not really margins. You pay margins when you short option.

1) When you buy options and hold it till expiry then on the expiry day whatever profits you are entitled will be credited to your trading account.

2) When you short options and hold it till expiry then on the expiry day whatever profits you are entitled will be credited to your trading account. However STT on short option positions is quite high, so its advisable to close the trade yourself and not hold till expiry.

Many articles including wikipedia.

(https://en. wikipedia/wiki/Black%E2%80%93Scholes_model) describe five Greeks, the last being RHO which is not described here. Why is it so ?

Rho is mainly with respect to Rate of change of underlying with changes in the interest rate. For all practical purpose the change in interest rate is minimal, and that makes Rho not a very active Greek…so I’m still contemplating to include this or not 🙂

is there is any option to calculate current delta of an option ?

right now pi providing these type calculation?

Not as of now Sarath.

is it come in soon right?

As mentioned in the above comments, while trading options it is advised to use Greeks and other parameters not really TA. My doubt is that after TA only we can predict the direction and position according to the view. Option Greek will increase the success probability but TA will be the base.. Correct me if am wrong.

Perfeito. Use TA to get a directional view…use that along with greeks to calibrate your trade.

Can you highlight the other parameters to be considered apart from Greeks while trading options?

Knowing Greeks really well takes you a long way when it comes to options trading.

Please give me link on NSE for these greeks. regards.

Not sure if NSE has a Greek calculator.

where to get values of Option Greeks before trading in options.

We will soon have a greeks calculator.

Do you have a strategy for getting monthly income through Nifty options, keeping in mind the market tank on 24Aug2018, are there any option strategy that will protect ones capital.

No strategy related to markets can guarantee capital.

You can try the strategy discussed in chapter 18.

I have a doubt. For example, if i sell a lot at X premium price and waited till the expire day. I think the value of premium will approaches 0 (or say some lesser value) at the time if i bought a lot. Then i may get profit of X/lot. Is it possible??

Yes, but to make sure X goes to 0, the security has to be below the strike in case of Call options and above the strike in case of PUT options.

In Buy side, If premium on particular day(lets say before 10 days or near to expire) is more than settlement i. e exercise amount then is it better to take the premium or is there any incentives if I let my ITM to expire and then exercise .

There is no guarantee that the option will remain ITM upon expiry. If you are a short term trader, better to book profits when you see it on the table!

dear mr. karthik ,

after a very very very long-time , something / someone has sparked the learning charge in me.

i entered the learning modules out of necessity with a mindset of boredom , but now i am simply hooked and continuing for fun .

options clearly are “magical” and many things can be done using them .

i have developed a belief that options can be used for a secure no-risk, low-risk trading/investing .

IS IT POSSIBLE TO USE OPTIONS TO HEDGE OUR FUTURES TRADE ?

for example i am long on USD OCT 15 AT 66 .0000 . if price goes down i make a loss .

but what if i also go LONGPUT same script at 66.0000 ?

as per my thinking . the loss i make in futures, is covered by profits in options and vice-versa .

i would like to know your comments .

long on USD OCT 15 FUT at 66.0000.

and LONG PUT same script at 67.0000.

what happens on expiry, in between ?

I’m glad to know that Varsity has ignited your learning enthusiasm. Yes you are right about Options, lots of possibilities with these instruments.

Yes you can hedge your future positions with Options. Both the examples you quoted are classic long future + long put hedging strategy….and both of them are very similar. Buying 66 PE or 67 PE does not make much difference.

Thank you so much for the lessons and really so easy to learn .

I have one doubt .

9.3 Delta for call option.

spot price = 8288.

strike price = 8250.

expected to reach 8200.

decline (8200-8288) = -88.

spot price = 8288.

strike price = 8300.

expected to reach 8200.

decline (8288 – 8200) = 88.

In first case decline is in negative value(8200 – 8288) and in second case decline is in positive value(8288 – 8200) , but both have same scenario . please explain why there is no negative delta value in call option with some other example. Obrigado.

Thats because the delta is lower bound to 0…it cannot go lesser than 0. If it was lesser than 0, it means the option is moving faster than the underlying, which is counter intuitive.

I have some doubt , call trading in different value where as put trading in same value , why there is variation in call premium , can you explain this and how to calculate the value ?

Raju – The B&S calculator gives the theoretical value. Could be different from market values.

Obrigado pela sua resposta.

hello mr kartik … i want to do option trading, please guide me with how much (minimum) amount, i can start with? 2) does option price (example yesterday dr ready 4300 put price was around 53+ and today was around 600+ …) does it move like stock price goes up n down? i mean want to know from a. b.c of live option trading..pls guide..thanks.

Deepak this whole module is dedicated towards helping people understand options trading. Suggest you go through this chapter by chapter.

To trade options minimum amount would be something like 5000/- I suppose (nifty options).

is there zany formula to calculate delta values?? or its consistent?

Nifty @ 10:55 AM is at 8288.

Option Strike = 8250 Call Option.

Delta of the option = + 0.55.

do this delta holds good in below case.

Option Strike = 7900 Call Option.

option spot = 7954.

whats delta value in above case and how do we derive it?

once again thanx for your patience for replying all quires.

Delta of the option is dependent of the moneyness of the option – the thumb rule is.

Option is ATM , Delta is.

Option is ITM , Delta is.

between 0.5 to 1.

Option is OTM , Delta is.

between 0.1 to 0.5.

Fantastic easy to understand and involving explanation. I have many times tried to study and understand Option Geeks from many sites but the explanation is so boring that I leave it mid way and close the site.

The difference between other site topics and your is that to understand the other sites the reader has to be an expert but by reading your site explanation the reader becomes an expert.

Avinash – I’m so glad to know this.

Please do stay tunned for more content here 🙂

Just not clear why we should buy option2 and not option 1? In option2 I will have to pay a higher premium and hence breakeven will be farther than in option 1 case?

Higher the delta, higher the probability of the option expiring in the money!

IV = SPOT - STRICK( FOR CALL OPTION) , SPOT MEANS SPOT PRICE OR FUTURE PRICE ?

Spot refers to spot values, not futures.

so in option underlying is spot right?

Karthik bro.. plzz.. update commodity and currency module.. i want to learn how to trade in currency market..and also want to improve my knowledge on commodity market..i think many here many traders who are trading in commodity markets.. want to improve there skills..

Will do, two more chapters in this module and will move one to Commodities and Currency.

understanding option with time principle is making me more tuff to solve the ENIGMA ,, i have an ready excel file with correct quote executed on the Trading Terminal , would lead to give a big junk of open interest to access .. i know there is a big potential behind the fortune gate …… i would strongly request you to give your few minutes of time on skype ,, i feel the place you and me stand here is we are just from skin of a teath .. i would like to share my knowledge with you on TIME ANALYSIS by W D Gann … ( square of 9 method) is generally understood as …

would be eagerly waiting for your reply .

Interesting, hopefully someday!

How to get the delta of an option ? Is it provided somewhere ?

Hello Karthik Sir,

This module is absolutely perfect for anyone who wants to trade options. But one thing I’m confused about Delta risk is, how it (delta) will behave when price moves other way around.

For Example, in above screen shots.

At 9:18 AM, NIFTY 8250 Call price was 144, when NIFTY spot was at 8292.

At 10:00 AM, NIFTY 8250 Call price moves up to 149, when NIFTY spot was at 8315 (an increase of 4 points in call premium, I think at that moment delta would be around 0.15 to 0.20)

My confusion lies in the other side of the trade i. e. what if I have shorted the put option, how much Put Option premium has been reduced between 9:18 to 10:00 ? or what will happen to Delta of put option (will it increase or decrease) i. e.

If at 9:18 AM, Put 8250 delta would be around -0.45, when NIFTY spot was at 8292 (this put would be slightly OTM)

At 10:00 AM, Put 8250 delta would be what -0.4, -0.3, -0.2 ?, when NIFTY spot moves to 8315 (now PUT will moves slightly more OTM). My confusion lies in how much value Put option will loose ? In short I’m asking the rate of change in delta when prices moves other way around. I hope I’m not confusion you.

I’m asking this question because when I look at the spread between Bid-Ask prices of options it gives me a sense that option are illiquid and it is better sell first and buy it later, and I don’t have to bother about STT when exchange auto-settle the ITM contracts.

Well, the Put option delta works the same way as the delta of a call, but in the reverse way. So if spot moves up, the call option delta increases and the put option delta decreases. Of course the delta for each strike varies based on the moneyness of the option. I’d suggest you read up further to know more on moneyness. By the way, 80%+ of all the F&O trading happens on options (Nifty especially), so there is ample liquidity in this particular market.

Ok NIFTY it is, I built my misconception on option by looking at RCOM current month option chain.

As to the question I asked, my confusion lies in the Writing Calls / Puts.

So going by the example you have mention in this chapter. How much is the change in delta when NIFTY spot moves down from 8315 to 8288. I’m simply asking how much change in delta a call option writer should expect when he/she short the call, since profit is directly related to fall in spot price.

Well, change in Delta is captured by Gamma, which is explained in the next chapter with an example 🙂

The content is very crisp and clear with very good examples and thank you for this work. I have one question over the Delta example you gave in the chapter. For the underlying movement of 100 delta of 0.05 and 0.2 will have increased premiums of 5 and 20.So I as as a Option call buyer will need to pay less premium in case of choosing the 0.05 delta right, but you have mentioned the 0.2 delta is better. Am I missing something. Please clarify..

The selection of Option should not really be dependent on the delta. Hence, I would not choose an option with 0.2 over 0.05 just because i perceive 0.2 as a better delta.

Ur. Modules are too good. I think. The so called trainers should go through this module first before charging money Hats off to u sir.

Thanks for the kind words, I’m glad you liked the content here 🙂

Great lessons. I’ve question though, I’m not clear on delta of CE cannot be negative. Does that mean, the option premium will never decrease, even if the underlying decreases?.

Yes, in fact this is exactly how a CE functions. When markets increase, the premium of CE decreases.

where can i find real time option greek on zerodha kite, pi.

Not as of now, Ankit.

Please correct the slightly ITM value from 0.6 to 1 to 0.6 to 0.8 in the delta table. At topic 9.4.

Thanks, will fix that soon.

how we hedge with f&o with delta.

Will be covering this topic soon 🙂

FUTURE AND OPTION CAN BE EXERCISED ONLY ON EXPIRY DATE ?? OR WE CAN EXERCISED THEM AT ANY TIME WITHIN EXPIRY.

Exercise is only on expiry day, however, you can square off the contract anytime you wish.

Amazing stuff written by youand big help in understanding options.

1 thing I was not sure about, In the table above where delta value is given for ATM, ITM and OTM.

In The value of ITM, should it be between 0.6 and 0.8 or 0.6 and 1 because for otm it is written the other way around.

Thanks for the kind words, Sarthak.

Well, if the option is anywhere between ITM to deep ITM, then it can range anywhere between 0.6 to 1. The acceleration of delta slows down when the option traverses from deep ITM to further deep ITM. This is why you will notice a flattish curve towards the tail. The same is applicable to deep OTM to further deep OTM.

I want to know about changes in premium.

For example yesterday’s banknifty close was 21640.

Premium for call for strike price 21600 was 100.

and for put it was 60.

Now today banknifty has moved by.

45 points either downward or upward now what.

Would be changes in premium.

I mean will be increment in premium equal to decrement.

in another premium.

You need to read up the chapter on Delta and Gamma to get a clear understanding of this. We have it covered in this and the subsequent chapters.

Sir I have read all modules 2-3times.

Today whatever I have knowledge about stock market, just because of you.

I am so grateful to you and to your team.

If we talk about banknifty what I have observed that if tomorrow’s opening is less than 50-60 points in either direction then premium of today’s ATM changes in one way and if opens by more than 50-60 points then in different way.

Why this happens.

Thanks for the kind words, Rohit.

That is because the premiums are dependent on the spot prices.

sir .. today i buy nifty 9300 PE at 87.30 rs at the time of buying Put option spot was trading at 9305 ,,after 1 hr spot was trading at 9294 and put option is trading at 87.35 ….why this happen…. ideally it should be (9305-9244)*.50+87.30 =92.80 rs …am i right or wrong …or these option greeks are not work in case of intraday ….plz ans …

Remember, the volatility is also dropping here. Volatility has an impact on option premiums.

I am slowly taking into option trading even though I have burnt my fingers before. (Experience wasthe best teacher for me into business)

Now I am trying a strategy though with smaller lots. So far my results are mixed.

My post here is:

Nifty Jun 9800 CE on 11th May 2017 was 18.80 (Nifty spot value was around 9450at that time). Of course Nifty was on unexpected upswing for the previous day due to IMD monsoon data tricking in)

Nifty Jun 9800 CE on 15 May 2017 was 15.45 even though Nifty spot levels are around the same.

India Nifty VIX value was -0.11 and 0.44 respectively on 11th and 15th May respectively. (This means volatility has increased)

Then why the option price divergence between 11th and 15th May 2017? Unable to fathom. Is anything I am missing? Your help is appreciated.

Attributable to time decay to some extent, but the bigger reason could be the trader’s lack of confidence that Nifty will go beyond 9800.

Obrigado pela sua resposta.

Not only option greeks option buyers/sellers should also take overall expectation of the market it seems. Indicators are not absolute, I understand.

Is it so? In this case, gamma (time variance) could not have depleted so strongly as the contract is of far month. delta is good, vega is OK.

Yes, along with the greeks you also need to consider the overall market sentiment. This makes a difference.

May I know what factors vega depend?

With respect to your explanation of impact of Delta on premium. in the example where the Delta of first option is 0.05 and Delta of second option is 0.2. Didn’t understand the reason why would a trader be benefited by paying higher premium of 20. Please help explain.

Remember, the delta also showcases the probability of an option closing ITM. For example, if the delta is 0.7, it also means there is a 70% chance of the option closing ITM. So when a trader pays for a higher premium strike, he is looking for a brighter chances of closing ITM.

I ‘ve a doubt about “Initial value of delta”.

I’m nowhere nearing to understand B&S model. What I’ve assumed is when spot price meets strike price the delta of that particular strike is 0.5 and say in call option the far most traded OTM stike price’s delta can be considered as zero. Similarly the far most traded ITM strike price’s delta can be considered as 1 and then on basis of relativity like percentile calculation all other strike price’s delta are calculated.

Is my assumption is correct? Pl shed some light over it.

Desde já, obrigado,

Your understanding of delta values seems to be correct. However, the deltas itself change due to market forces which is captured by the B&S model. You can keep it simple by assuming that the deltas of each strike is more or less an outcome of what the B&S model throws up.

If I buy a call option, at first I thought that I will have to wait till the expiry of the contract to actually gain profits or book ‘losses=premium’

Now with the new information of dealing with the premiums itself to gain profits I have a confusion.

Lets say I am dealing with NIFTY options for Strike Price 9700 and Spot price 9500 with 30 days to expire. The premium was 160 when I bought the shares and the lot size was 75. After 2 days the premiums rose to 180 with the spot price at 9600 and I sell the contract. Will I gain (180-160)*75 \? or will I book losses of 160*75 as I did not want the contract and sold it before expiry?

You will make a profit of (180-160)*75 = 1500.

That means I am selling my contract to someone else for the current premium price, if I sell the the contract before expiry. But if I chose not to sell it and wait till the expiry then my profits/losses will be based on the theory which you said in the first few chapters of the options module.

Yes, if you wait for expiry, then you will get the settlement price on expiry.

Obrigado. Love your work!!

Thanks for the kind words 🙂

i) ITM - ATM => 1 To .50.

iii) ATM-OTM => .50 To 0.

Will this be opposite for put option?

Yes, just the algebraic sign changes.

i have a account with zerodha in the name of my momm. You people are really doing good job of giving guidance and deep & explanation with simply way and good example. i really like zerodha varsity. God bless u people.

Thank you so much for the kind words, Niraj. Happy learning!

Where can i find the delta value on kite or nse website.

You can approximate the delta values yourself – check the delta table given the chapter. For the exact values, check this – https://zerodha/tools/black-scholes/

Why is CALL option premium directly proportional to spot price and PUT option premium inversely proportional to spot price?

Thats the way its structured 🙂

i have two question about maruti.

1.spot price-9647(down from 9705)

but CE of 9500 was increased by 8000 percent.

as the stock price came down than why call option of 9500 increased by these much amount.

2.if i bought call option of M&M with 770 at 11 rs and stock is trading at 757rs.

as i am bullish on stock and stock goes up and near to 765 the premium is also increase according to delta. but as per our calculation i made profit after 770+11 premium. but as stock goes up and as premium than if i sell my call option on higher premium than it would be profitable deal or not?

1) This can be attributed to the increase in volatility.

2) Remember, an option contract is also influenced by gamma, vega, and theta besides Delta. Hence you need to have a holistic view.

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Option Strategy – Zerodha Trader.

Trading in Futures and Options was introduced in the early 2000’s on the NSE. Futures was more popular among the two until the market meltdown in 2008 after which the popularity of options has increased tremendously, much more than futures today. Following are the reasons which probably attributed to the increase in popularity of options on the NSE:

1. For holding a future position, you would need NSE stipulated margins which would work upwards of Rs 25000 based on what future contract you are trading whereas in options a trader with even Rs 100 in his account could take some kind of an option position.

2. Future positions have unlimited risk, whereas in option buying the risk is limited to the premium you are paying.

3. STT(Security Transaction Tax charged by the government) for Future is charged on the contract value whereas for options it is charged on the option premium. What this means is if you buy and sell 1 lot of nifty futures at 6000, the turnover generated is Rs 6lks( 3lks+3lks). STT is 0.017% of Rs 3lks which is Rs 51, whereas if you had bought and sold an option with premium Rs 100, the turnover would have been Rs 10,000(5000+5000) and STT of Rs 0.85.

4.Options offer you an ability to setup trading strategies for multiple market scenarios.

Option Strategy is a tool which we have introduced on Zerodha Trader which suggests you and helps build option strategies. Find following brief on how to use it:

1. Login to ZT and make sure you launch plus while logging in. If you don’t know how please refer this link.

2. Option Strategy tool, based on your view suggests you various option trading strategies and their payoff graphs. As an example, if my view is that nifty will stay in the range of 5800 and 6200 for this expiry(NOV 2018). First step is for you to add all the nifty option strikes in this range on your market watch, so add 5800 – 6200 Calls and puts with November expiry. Visit this blog to know how to add options onto market watch.

3. See the pic below to launch Option Strategy:

4. The following window opens, follow the steps as shown in the pic:

5. Once you give a view the tool will suggest you 5 different strategies, as shown below. For the example, my view is that nifty will stay between 5800 to 6200 for Nov 2018 expiry. My View is that market will remain neutral(that means neither bearish nor bullish) and I also feel that market will be in a very narrow range. This suggests me 5 different strategies as shown in the pic below.

6. If you are not able to see the prices in the strategy section, click on the restore button as shown below.

The window will look like below when you click on the restore button and the prices should start refreshing as the data is fetched from your market watch. So Ensure that the option contracts mentioned is available on the market watch as mentioned in point 2.

7. Follow the steps below to look at the payoff graph for the strategy you select.

8. Create ” My Strategy” using combinations of strategies suggested, as shown below and you can look at the payoff graph and payoff table. See the Pic below:

Once you have decided to take an option trade, if it involves writing options(selling options), use the Zerodha SPAN calculator to know the exact margins required. Positions like the above will have margin benefits as they are partially hedged.*

* For all of you who are beginners to option trading, assume nifty 6000 calls is at Rs 100, if you want to buy it because you are bullish you will need only the premium which is Rs 100 x 50(lot size) so Rs 5000 in premium, the maximum you can lose is Rs 5000. But when you write options i. e Sell first and then buy back, you have chances to make unlimited loss and hence exchange blocks margin similar to how they block in futures. So to sell 6000 calls of nifty first and then buy back you would need almost 30k for an overnight trade. This margin goes down for a strategy mentioned in the above pic because the various option postions are counteracting each other. You can see exact margins for option writing/multiple positions on our SPAN calculator by simulating the trade.

Yes you can trade naked options i. e buy calls/short puts if you are bullish and buy puts/short calls if you are bearish, but options as a product especially combination of nifty options offer you an opportunity to setup trades with immenese profit potential. Use esta ferramenta para ajudar a configurar estratégias de opções, estudar o gráfico de recompensa e as opções de negociação proft na Zerodha.

Sua corretora de desconto de desconto amigável.

208 comments.

very nice..its useful to like me “option trader” but the major problem is ur not give intraday exposure for option writing..

if u r given more than present condition(i don’t know. how much u r given present) we will happy to trade in option..

Madhan, we give margins for option writing(intraday), pretty high actually. You require only 40% of the overnight required margins and you can use that till 3.20pm. zerodha/z-connect/blog/view/zerodha-margin-policies.

Hi sir , for option writing in Bank nifty Weekly Options for overnight Position what is the margin required, i have checked in calulator it is showing around 41000 per lot is this the right margin for overnight Position in option writing ………..and in Upstox the intraday margin for writing options is around 15000 Per Lot but in zerodha there is 27000 Per Lot for mis Order in bank nifty weekly options .

Hey Venky, the margin requirements are defined by our RMS team based on the liquidity and prevalent market conditions. The weekly option contracts do not have enough liquidity to afford very high leverage.

It is a very simple tool, but if you still need, shoot an email with your contact info to [email protected]

How do we see the Greeks. Delta Gamma, Theta etc.

Tried everything to see them In zerodha trader but unable to bring them on.

Do u have the same in PI.

Sir am new to it, am holding a account in zerodha, I want to learn the strategy of trading plz do refer for it, to whom I have to contact.

how to do option trading in zerodha kite. i also don’t have an idea. can you please suggest me. i have a zerodha demat account.

feel like bit complicated but still looks very good tool…thank you very much n nice explanation..

Interesting tool very helpful for people like me who trade on options.

One question don’t we have a lock script option on the strategy graph? So that I can open 2 or more graphs.

No Moses, you can open only one payoff graph at a time presently.

Do Zerodha provide Span margin on options Ex:

Date=25 Jan 13 Nifty=6000.

a) What in the margin to ‘Sell 6200 Nifty Feb 2018 call’

b) What in the margin to ‘Sell 6200 Nifty Feb 2018 call’ ALONG WITH ‘Buy 6000 March 2018 call’

Yes PS, we provide SPAN margin benefit and we have a [SPAN Calculator](https://zerodha/z-connect/blog/view/span-calculator) which lets you simulate a position like what you have mentioned and also tells you the margin benefit before taking the trade.

Is SPAN calculator available on NOW.

SPAN is available only on Zerodha Trader, if you are still using NOW trading platform send a request to migrate immediately..

very complicate, i need trading call.

I am New to option. I did not understand a thing. Is there any way to get some training??

Arm, the above would be beneficial to people who have an understanding on options.. We presently don’t have content on basics of options, but we intend to start something on zconnect, so keep following.. Cheers..

If I have 1L in my trading account, can I do the following option strategy.

Sell 3 contracts of Bank Nifty March 12200 put for 290.

Buy 3 contracts of Bank Nifty March 12300 put for 340.

I want to hold the position for few weeks.

I am guessing the margin required for NRML would be around Rs 3750 (Rs 50*3*25) for this hedge.

Please tell if my thinking is correct.

Sorry, it was Rs 3750 = 50 (difference in the two contracts) X 3 (no of contracts) X 25 (lot size).

Margin required for only writing 12200put per lot is Rs 22581. If you buy the 12300 put, because you are hedging the position, the margin required drops to Rs 15900/lot for both positions together. For taking 3 such positions, you will need 45k in your account..

The way you have calculated margin requirements is wrong, that is why we have introduced zerodha/z-connect/blog/view/span-calculator, SPAN calculator where you can mention your trade and it will automatically let you know the NSE stipulated margin requirements..

Espero que isto ajude,

Thank you very much for the prompt reply.

I was wondering if you guys could open an official forum for Zerodha members so that we could help each other out instead of disturbing the faculty.

You definitely won’t be disturbing us 🙂 , But what you said makes sense, we will try to figure something out on this..

The F&O margin calculator does not have Banknifty option (weekly) expiry.

Does this mean, i can not sell / write options in banknifty weekly expiry cycle?

Pls confirm at earliest.

You can write, margin required is around the same as monthly.

after step 8 how to save ” My Strategy”, so that we can access it later directly.

Is there a way we can exercise the options in Zerodha Trader ? If so, can you please tell me how to do it ?

All options on NSE today are european now, which means you can exercise it only on the expiry day. In any case on the expiry day all options get exercised by default, so need to have this facility as long as the options are european.

I thought only the Indices were european. Isnt option trading on listed Equities American style?

In PnL (3rd screenshot in this write up) only the Net premium paid is shown and not profit potential.

1. How to check the profit potential?

2. How to add my own strategy, if not available now, please make it available soon.

3. what is the use of the button PnL on last and best, both seem to be giving the same result.

1. Profit potential if you are checking for option buying positions is typically unlimited and hence won’t show on PNL, If you are using short options or any strategy where there is a maximum profit potential, it will show in PNL.

2. If you see on the 4th Snapshot, there is an option to add to my strategy.

3. Last is basically the last traded price and best is basically the best available price. If both are the same, the result will show the same.

1. In the payoff graph, and pay off, break even is missing, which is a key factor in determining which strike price to be taken for trade.

2. The pay off graph is not showing the pay off in between the strike price, say nifty at 5923, corresponding pay off is not showing, which is also vital.

Regarding your point 2 (add to my strategy), what I meant was to put my own strike price and check the outcome, for example 5800 and 6000 strike of nifty, whereas in your strategy only the nearest strikes are bundled together, like 5900 & 6000 strike price of nifty.

Abrar, Feedback taken, let me bounce it off my tech team and see how much time they will take to sort this.

Also there is a error in bearish strategy, instead of market wont fall, it should be market wont rise. please check all of the errors and whole strategy thoroughly once, strange that no one has pointed out these things even after yr strategy has been online for such a long time..

I want to sell one lot 9400 put and one lot 10800 call. when I checked the span margin it was rs.37048. Is this for intraday or shall i carry till expiry… If that is for intraday, how much should i have to carry til expiry?

If you are looking at the SPAN calculator for this by entering product type as NRML, this will be for overnight position and to hold till expiry.

If you are checking this with product type as MIS it will be 40% of the required overnight margin for intraday only.

Kindly go through the following scenario:

Nifty trading at 5310 then took Iron Condor as follows:

Sell to Open 5300 CE 5300 PE.

Buy to Open 5500 CE 5100 PE.

After couple of days nifty moved to 5625, if the client want to take new Iron Condor position By Sell to open 5500 CE and 5500 PE.

And Buy to open 5700 CE and 5300 PE.

Then the existing 5500 CE Long position will be offset?

Yes Sreejith it will be, you cannot hold opposite positions of same contract on a single trading account..

If I want to write 5800CE with 40 premium, minimum how much margin I need in my account?

around 20k, you can also check this blog on how to use the SPAN calculator.

Is there any difference between option writing and short selling?

Short selling and option writing are definitely very different from each other.

Short Selling: This happens when you sell an asset which you don’t own with the hope that you can buy it back at a lower price later since you expect the price of the stock to go lower. In equities, this can be done only on an intraday basis. For Futures, you can sell and hold until expiry by paying the margin amount for holding that short position.

Option Writing: This is totally different from short selling because you’re earning a premium from the buyer of the option which gives him the ‘right’ to buy or sell an asset at a given price on a later date if the strike price is achieved. Option writers may not necessarily own the asset but they still take on the obligation to deliver the asset if the conditions are met for which they receive a small premium from the buyer of the option.

Dear Zerodha team,

I cannot see the implied volatility figures for options. The pop up window shows all values as zero. Any solutions ?

The pop up window shows Zero, but to calculate the IV you can first add the contract on the marketwatch and click Shift + o, this opens up an option calculator window where you can calculate the IV.

Most of brokerage house around take FD as a collateral , I don’t understand why zerodha does not take FD, when nse has allowed FD’s as collateral.

I bought NIFTY options for 6300PE @ 120 and want to sell them at 134 premium. How can I sell the lot I bought back at 134? Do I need to open a sell order for that or can I simply square-off the position like in equity?

Ramesh, you can do it 2 ways.

1. Open a new sell order button and mention your price or sell it at market.

2. Go to Admin positions and click on the open position and say square off, this will sell it at market.

Thanks Nithin for the reply.

I went to Admin positions and selected the position, but I don’t see any option as Square-off there. Could you tell me where is it located in that page? Or is it not visible during off-market hours? Pls clarify..

Is there a cost to NestPlus?

The starter pack is free of cost which includes option strategy, charting, and more. There are certain products on Plus which are paid, you can see more here: https://plus. omnesysindia/NestPlus/Home/

sir intraday option best strategy.

I have never traded a option but i want to do some trade in it. take the example of today as market were constantly rising in that condition what option i have to buy or sell? For example Nifty 7500CE was trading at around 200 in morning. So to have profit shall i buy call or put option? And i know call is like long and put is like short position. So if market is bullish i shall buy call and if market is bearish i shall sell puts? Am i correct?

I am actually having a big doubt among the 4 thing-:

Long Call Option.

Long Put Option.

Short Call Option.

Short Put option.

is long call and short put same?

is long put and short call same?

And one more thing lets say Nifty 7500CE is trading at 200 then what margin i require to have a long position? Is it 200×50 which equals to 10000?

Please clarify my doubts in your free time.

Phew, you are starting at the very basic. I’d suggest you to read this once, I’d suggest you to read the equity derivative modules on this link.

Coming back to your question,

1. If you feel market is going up.

Buy Calls, if the market goes up, premium will ideally go up and you can profit. But there are days when market could go up but calls premium could loose you money when the implied volatility drops, for example today, even though market is up call premiums are down. When you buy calls, profits are unlimited but the risk is limited to the premium you pay.

You can Short puts, when market goes up, put values will come down and hence if you are short puts you can profit. When you short options, the risk is unlimited and profit is limited to the premium you receive when you short the option. Since the risk is unlimited, a margin is blocked in your trading account similar to futures.

2. Similarly if you feel market is going down.

Long calls and short puts, ideally will make you profit when market goes up, but they are completely different in terms of how you make money and similarly with long puts and short calls.

As explained If you want to buy 7500 CE when trading at 200, you need to have 200×50, but if you want to short 7500CE there is a margin required, which you can calculate using our SPAN calculator.

i am new to this field , the link which you have provided doesnt have any pdf, which can explain options and its characteristics. wish to know, is there any good material available, and if possible can you provide that.

Have you checked out Varsity? Our education initiative, has become quite popular. zerodha/varsity/

Hello sir please make me understand Buy price and buy average price and how is buy average price related to settlement price and why it changes on daily basis of options?

Confused with your question Praveen. If you buy 1 lot at Rs 50, your buy price will show 50 and buy average price will also show 50. If you buy the second lot at Rs 100, your quantity will show 2 lots and your buy average price will now show 75, which is the average of 50 and 100.

Buy average price has no relation to settlement price, can you be more specific.

sir i bought 1 lot of Nifty 7300 CE at 75 yesterday and sold it today at 82 but in my admin position it was showing Buy average price as 82.55 and there by it is showing a loss of 27.5.

I mailed to Customer care and they told me that daily settlement prices changes everyday.

Actually i m new to option trading and i thought i will make a profit of (82-75)x50= 350 but i made a loss of 27.5 instead of selling at 7 Rs higher. I just cant understand how my buying Average price shoot upto 82.55 although i bought only 1 lot of Nifty at 75 and squared it off at 82.

If m wrong somewhere then sorry but please make me understand the above.

On the trading platform, your profits for today will show based on the closing price of the options for yesterday and not based on your buying price and this is the reason you are seeing a loss and not profits on the platform today. There is nothing to worry, you are actually in profits, to know your exact P&L based on your buying price visit our backoffice. The backoffice will get updated end of everyday, so your trades executed today won’t show up on this, but if you check the open positions tab it will show your correct buying price.

sir i want to ask one small question is there daily settlement price in option too?

Just like futures lets say i bought and hold Nifty 29 May future at 7300 and lets say that day Nifty future closed at 7320 so i will be credited 20×50=1000, Similarly is there daily settlement in Options too let say i bought and hold Nifty 29 May 7200 CE at 100 and that day nifty 7200CE closed at 80 will i be debited 1000?

No there is no daily settlement on buy option positions, so if you bought on 29th May Rs 5000 will get debited (@100) from your account and when you sell at 80, Rs 4000 is credited to your account. If it is done on an intraday basis, Rs 1000 gets debited at end of the day.

Hello sir i want to ask one question. What happens to the value of option on expiration date? Does it becomes completely zero. Actually i have been holding a nifty 7300 CE at premium of 56. So shall i sell it or wait till expiration date. If the price becomes zero at expiration then i will sell tomorrow only. So kindly tell me.

Praveen, whatever value above 7300 Nifty closes on Thursday the expiry day, will be the value of your calls. If Nifty closes at 7400 it will be 100 and if it closes below 7300 it will be 0. Where will the market go is your call to make, but you can sell the calls whenever you want, there is no need to wait till expiry.

Sir I want to know about this…

Suppose I have bought 8400CE @20 on October 29 contract. And I want to hold this till expiry. Then on expiry should I sell the contract or it will be sold automatically. And also want to know on expiry if nifty close on 8500 …what will be the value of the position and if nifty close 8300 then what will be value of the position I hold.

If you don’t sell, it will get squared off automatically. If it closes at 8500 your option will be worth 100, at 8300 it will be worth 0. But do check this post, explains how STT charged is so much more for in the money expired options, it is best to square off all options that have any value to it in the market on expiry day.

just awesome. i was looking for this .. count me in. my number 9000083000.

i am already client will transfer funds today. but please make sure how i can start this setup.

I am completely new for trading registered few days back on zerodha platform want to clear few doubts regarding Option Trading,

1– Is it possible to buy option NIFTY PE 8100 in morning or in noon on Intraday basis and sell it on Next day when there is possibility of further increment ?

2—What will be the difference between if in Product Code I select MIS and NRML in terms of validity ?

3—When my desired price target is achieved then for selling my earlier purchased Option NIFTY PE 8100 what should I do ?

Please help me out with these basic things I hope I will learn it with time on this platform.

1. Yes, you can but the option and sell the next second itself or anytime before the expiry date of that contract.

2. If you are buying options, you rather use NRML as there is no additional margin you get by using MIS. If you buy using NRML you can hold it till end of expiry, if you buy it as MIS, it gets squared off at 3.20pm.

3. Similar to how you placed a buy, just place a selling order at whatever price. YOu can also go to the admin positions link, and click on the square off option.

What is the volume impact on Price of say a 100-lot (5000 contract) trade of Nifty 8000CE if i want to buy at the open and fill the order immediately.

Similarly, if have bought this quantity as an MIS order, at what price will it square off at close – will there be a volume impact on price on this side as well?

100 lots on Nifty can have an impact of upto around 1 point on the Nifty. At the market opening it is quite tough to call, it might sometimes be in your favor as well because of the higher volatility. At 3.20pm, when MIS is getting squared off automatically, there can be an impact of upto 1 point again.

Just want to confirm, If I trade a hedge strategy where my maximum loss is predefined, and I want to be in strategy till month end. Does Zerodha does autosquare off incase of heavy moment.

If I buy a Unitech Future for October @ 20.00 and simultaneously buy Unitech October 20 put say @ 1.55.

In this case my max loss would be 1.55*17000.

So incase like last week there is 20 % moment and unitech is down suddenly to 18 or below or say even upto 15….would my positions be auto square off…

If I buy a Unitech Future for October @ 20.00 and simultaneously buy Unitech October 20 put say @ 1.55 and sell unitech 25 call @ 0.40.

In this case my max loss would be 1.15*17000.

So incase like last week there is 20 % moment and unitech is down suddenly to 18 or below or say even upto 15….would my positions be auto square off…

Amit, we understand that this is a hedged position and won’t square the positions off intraday. But, the profits from your options(notional) can’t get adjusted with the loss on your futures (MTM), and if there is not atleast the minimum stipulated SPAN margin in your account, the positions will be squared off. If we don’t square off, the exchange would also charge a short margin penalty.

Thanks Nitin, If you give time say next day I can add margin, also would like to know more about opening an account..is there a contact person.

Also, are there any charges for pledgeing in and out shares…there are few who charges and few dont..just want to be clear..

You can send an email to [email protected] with an account opening query with your contact details. Someone will get back to you asap.

The entire pledge/unpledge costs around Rs 55/scrip.

If I place following order, what would be my brokerage for following order and can I place this combined order at one go at market price.

Buy Nifty future 1 lot.

Sell Nifty 8000 call 1 lot.

Buy Nifty 7800 put 1 lot.

Since these are 3 different orders, it would Rs 20 x 3. You can place at once using basket order, but since they are different scrips they will be considered different orders.

Dear All You Can Register on the Above Link of NSE and a Great Way to Learn Options 😀

I was checking the brokerage calculator and had a question on the brokerage charged for options. If I buy 2 lots of Nifty calls for 25 and sell them for 30, my profit before any charges is 50*(30-25)=Rs. 250.

Taxes will be very low since taxes will applied on the premium. I had assumed the brokerage too would be applied on the premium, and hence would be 0.01%*50*(25+30)=Rs. 0.275. However the calculator is showing a flat charge of Rs. 20 per order, hence a net brokerage of Rs. 40.

How is the brokerage calculated for options?

🙂 , we would be out of business if we charged brokerage on options the way you have said. Rs 20 per executed order or 0.01% of the contract value whichever is lower. For options, the contract value is Strike+Premium * lotsize.

I am a New Zerodha account holder. I have doubt regarding Options Trading on Zerodha Web Platform.

My Initial Pay in Amount: Rs. 25000/- on 11-12-2018.

On 11-12-2018 I bought PUT 8000 (Exp: 29-1-2018) 400 Qty for Rs. 33 each and after few hours the index was going up so the PUT value decreased So I decided to sell and sold at Rs 29.75. After that I bought CALL 8700 (Exp: 29-1-2018) 300 Qty for Rs. 45 each. But, I did not sell it until now, I received your margin statement stating that I have only Rs. 21,791.66.

If I click the order book, it shows nothing, I don’t understand and What should I do If I want to buy and sell it some other day.

Please explain how to trade on your web platform. because I could not run your application on my office desktop.

Lakshman, best to send your account specific question to [email protected] with your client ID.

To see your historical trades/reports login to our reporting tool Q. You will be able to see your historical trades, P&L statements, and everything else here. On the web based platform, if you go to positions/admin positions, you will be able to see your 8700 calls there, you can either square off from there or else place a selling order directly from the marketwatch.

dear nithin sir, i am new my id RR3456. if i buy 1 lot of asian paint 860 CE @10 on 09.03.2018 and sold it @ 20 on 25.03.2018. my profit would be 10*500=5000. am i right? pls help, know nothing (what is decay in option trading)

Yep you are right. Check this section that will explain you all the option greeks. Also suggest you to look at Varsity, we will be starting a module on Options shortly.

is there any decay in stock price when i hold up to expiry date in option trading ?

Not decay in stock price, but there is time decay in options premiums for sure. Option value = intrinsic + Time value. Time value decays as and when we get closer to expiry.

Could you please tell me how many maximum lots size in nifty or nifty option, one retail trader can place order or can hold.

It is 7500 in one order.

Sir I want Software Like Option Oracle.

Is it Availble in zerodha.

I mean If I enter quote like nifty It should give all strikes of calls, puts, all expiries with greeks.

anything like same availble in zerodha?

Not now Dasari, but we are working on something.

Hi nitin it is very useful for me if you provide any free version software name like option oracle.

my option oracle is not giving strike prices.

worked fine somedays but now it is not giving any strike price.

please help me on this error.

it is more helpfull or give me any other software name as suggestion as you know.

Dasari, can’t think of any software which gives this info out. As I said, we are developing something, might take some time.

new pi downloaded.

& # 8211; day separator is good , needed it badly.

Gostaria de saber se podemos criar estratégias ao combinar futuros e opções. If yes, then that would be very very nice. Can you please let me know this part.

Can you please let me know this part. Can you email the same to me at [email protected]

Hey nithin, have a few qus,

1)There are two types of options available in the Indian market — European and American. Index options, such as the nifty and sensex, are European-style. This means that they can be exercised only on the maturity of the option.

2)How soon can I sell the stock after I exercise a call option? and how to do it , do I PUT a new contract or excersicing means I bought it and sold it as well. I’m confused? please elaborate.

3)If you exercise an option, the settlement occurs in three business days, just as if you bought or sold stock on an exchange. Por exemplo, se você exerceu uma chamada e vendeu simultaneamente as ações equivalentes de ações, essas operações se compensaram. Supondo que a opção é in-the-money, não há necessidade de publicar margem para compensar transações. Como sempre, você vai querer verificar com sua corretora para garantir que você entenda suas políticas.

4)Consider a Put 300 was bought, if at the time of expiry, market price of Reliance is Rs 320/ – , the buyer of the Put option will choose not to exercise his option to sell. In this case the investor loses the premium paid (i. e Rs 25*100 = 2500) which shall be the profit earned by the seller of the Put option. So, if cmp was 350 would the buyer still lose only the premium if yes, who does this remaining loss of (350-300) rest with. i. e.(of Rs.50 per unit) * 100 = 5000rs.

Thanks in advance and great work with Pi.

1. All options on India are now European. So they can be exercised only on expiry day.

2. Ah.. looks like you are very new. Okay, so exercising options in India has no meaning as all contracts are cash settled. Let me explain, if you buy Nifty 8500 puts at Rs 100 on say Aug 1st, you can sell it immediately, next day or any day till the expiry day of the contract. On the expiry day, if you don’t do anything, if Nifty closes below 8500 your puts get exercised automatically. If it closes above, it gets expired worthless. So you don’t have to do anything to exercise. If nifty closes at 8450, 8500 puts get exercised and u get Rs 50 for those puts. Do check out zerodha/varsity/ and the option module.

3. This is not in the Indian context. In India, like I said, everything is cash settled.

4. hmmm.. ur question doesn’t really make much sense. Advise you to go through Varsity. Start at the futures module.

Sorry , a correction in the last one ” the remaining loss of (350-330) *100 = 2000 rest with”

If a 300 put was bought, and the stock price closes anything above 300, the entire premium the put option buyer had paid will become worthless. It will not have any value.

Hey thanks for the prompt reply.

I am new to options trading.

I have just the required amount to put a butterfly spread or an iron butterfly in place for a particular stock (around 20-25k). But if I only sell options for the same my margin requirement will be quite high around 70-80k. SO, in order to take benefit of the strategy for reducing the margin what should I do first. Should I buy the options first and then sell for applying the strategy.

Should I sell first and then buy the remaining legs.

I’ll be getting the benefit irrespective of what I buy first.

The main issue is funds in my account as it is just enough to cover the exposure of a particular startegy.

Also, is there anyone in Zerodha customercare to whom I can talk regarding this?

Antriksh, you can send an email to [email protected] , we can get someone to call you back on this. But here is the way to do this, use product type as MIS (intraday), take all the positions. Now convert all of them to NRML, this way u will be able to get into the strategy with lesser margins.

I tried my level best to get hold of you with regards to your software and trading platform issues. I have begged to your team several times that when there is an issue, please communicate to the customers so that they can look for alternatives. You and your team never believes in that. For few months now, we are facing several issues and especially on Monday’s, it is a mess. Today, since morning, none of your systems , Pi, Kite, trade and nest, none of them are working and after several communication with your team, they have accepted that kite is not working. what about other softwares? whenever I made a complaint to your support team, afternoon around 3 PM they call and ask me to update the Pi. I informed them several times that I am working in IT for last 25 years and dont give me such stuff. Now, when such things happens, who is responsible for all the loss occurring to customers? please reply? I am an unsatisfied customer and now started looking for other options. I am now fully confident that “Cheap can be expensive”

Por favor, responda-me.

[…] Option Strategy Tool: A tool which suggests various option strategies based on what your views on the markets are including the payoff graphs for each of the suggested strategies. [& # 8230;]

How to calculate profit and loss of options between the series.

Sir, I would like to know if I buy 5 lots of Nifty 7600 PE at 27.65 by paying a premium of Rs 10,500 and if I square off at 25(loss). Will I lose my entire premium or just a part of my premium?

Mais uma coisa. I would like to ask you. Why am I unable to check option chain or delta of an option on Pi?

This feature not yet enabled.

So I opted for Zerodha open trade, and I figured out how the futures market works. But I see some trades such as: XYZ purchased NIFTY16JUL8400PE NFO @ ₹ 21.0, and I am unsure where actually this was traded. Because in the future index the price of Nifty July is something around ₹ 8,555 and in the option index it’s ₹ 0.40. Could you enlighten me?

You will loose 0.65 x 375.

Obrigado pela sua resposta. I will lose 0.65 *375 or 2.65*375. May I know by when we can view option chain and calculate delta of an option on Pi like on ZT?

Ah my bad, yeah 2.65*375. The option chain bit will take a little longer.

While trading in Options, in the expiry date of F& O, we had to close the positions of the particular month. If there are no bidders, even if we put 0 or.05 the option is not getting traded. In these cases whether we still had to pay the STT.

I am guessing these are all out of the money options. If it is expiring worthless, there is no STT to be paid.

Kindly advise me when options strategy can be created and traded in the current month.

1. Whether option strategy can be created on the day before expiry or even on the day of expiry.

2. Is options strategy traded on intraday basis.

3. Once option strategy is created is it possible to square off the strategy when our target is reached.

4. Once option strategy is created on the day of expiry do we need to square off the strategy or will it automatically get exercised.

There’s a detailed module on option strategies on Zerodha Varsity here: zerodha/varsity/module/option-strategies/ which you may want to go through. You can post these questions on Varsity.

Hi, NSE has launched weekly Bank Nifty options.

1. However, there is no details available when I am trying to calculate the margin requirement using the Zerodha Margin calculator. The weekly Bank Nifty Options not available in Zerodha Margin Calciulator.

2.In KITE, could not locate the BANKNIFTY weekly contracts. The weekly contracts available in PI though.

Please resolve the above two at the earliest.

It will take a few more days to support weekly contracts on kite and on margin calculator. It is available on Pi, the desktop platform.

Hi Nitin, If I take a position in BANKNIFTY weekly contract through PI, is it possible to square off the position in KITE ? Or do I have to square it off through PI ? Also, is the margin requirement same as the monthly contract (Options)

Until we offer it on Kite (a few days away), you will have to sell it through Pi itself.

You mentioned we can take weekly option positions in Pi.

However , when I tried taking position ( after reading your answer ) , it automatically enters the monthly option position – even after specifying weekly expiry. This has cost me some money as well . I have sent a mail to your support team on that note. So, Can you please clarify 2 things here ?

1. Can we trade banknifty weekly options using ANY platform of Zerodha ? If no, just for an idea , when can we expect to trade these?

2. Can you please update the users ( via mail or something ) that weekly options are not working in Pi / Kite , so that they don’t take wrong positions .

I agree that you guys provide super-easy and fast platform to trade – but on the cost of numerous operational issues, which need to be given the first priority !

Hope things get better soon ..

1. It works on Pi, if you are not able to see this, can you update the latest patch of Pi. (go to help menu, and click on check for updates)

Kite should have the weekly options in the next two to three days.

Banknifty weekly option when will be added to kite? Ppz send me a mail with details how to add it also.

We should have it up in the next two days.

Bank Nifty weekly option still not available in Kite. Your days has turned into weeks and about to turn into months and then years. Can we expect from you that you be ready with your systems from day one of product launches. NSE announced the launch of the weekly option well in advance yet you are not ready.

Please tell where i will get the margin calculator for weekly bank nifty option trading.

in regular margin calculator it has not shown please guide.

You can’t compute weekly option margin using the margin calculator. However margins will be around the same as required for the closest expiry monthly contract.

If am selling an call option first, say for nifty jun 7600 CE, price is 430 * 75(1lot). so i should have a fund for 75*430=32250 rs.

then i can buy the same before EoD for 400 per lot.

Isso é correto? will there be any extra charges.?

Check this post, explains about option writing. You can use SPAN calculator for checking the margin requirements.

Hi Venu, checked the link you provided and tried to search “banknifty june 18500” in Kite just as shown in the screenshot at tradingqna/39158/how-to-add-weekly-banknity-options-in-kite-marketwatch, I am not getting the weekly option but I am getting the chain of options for the month (30th june expiry).Please check before responding. Most Harassive. I am sure this will be the case with MCX commodity options as well once they are launched. Finance minister announced in the budget in February that MCX commodity options will be launched and I am sure you guys are not ready as usual.

Check that link again. Search for Banknifty 16 Jun 17000 CE , this will give you Banknifty 17000 CE expiring 16th June. You can similarly select other weekly options.

i am not able to take intrday margins in weekly options why has it been blocked even when it has become very liquid.

Only certain strikes are liquid. We will wait before introducing additional intraday margins.

I am having positions of ANDHRA BANK – 100 , SBI -50 AND TATA STEEL – 50 Holding.

Now I want square off all position with SINGLE ORDER only . Is it possible with Zerodha kite or PI.

Single click not possible on both right now.

Please extend the intraday MIS square off time of 2:20.

Most of the time we see that during the last few minutes the market varies allot.

Você está planejando adicionar cadeia de opções com cálculo de gregos na posição de espera como Sharekhan?

Na nossa lista de coisas para fazer.

Sir, how do I trade Iron Condors on Zerodha Trader. Please explain with example.

You will have to take all the legs individually.

If all the legs have to be traded individually, Sir can the iron condor be traded on Zerodha Pi also.

Yes, u can trade on all the platforms .

does Pi or Kite has this option strategy tool?

Not for now, it is not available on Zerodha trader now as well.

Hi Nitin, Has the option strategy tool been removed in Z trader, I still have it on mine. And found some errors in the strategy window test where moderately bearish says fairly certain market wont fall..looks like there were some other errors too.

Yeah, not supporting this for now.

do you have any near plans to reintroduce it or can you suggest any tool like this?

i find it very handy in calculating the payoffs.

You can try options oracle from Samoa sky, it is probably the most widely used. Will take some efforts from your side to integrate data.

We badly need Greeks for option positions. Also getting Option Oracle seems like horse’s horn. What are your future plans for Option traders.

We are working on it, will take us a couple of months.

I too cant emphasize enough the need for Options Chain in Kite and Pi… The calls and puts should be directly tradeable from the Options chain. Also there should be columns for Option Greeks like Delta, Theta, Gamma which are updated in real time with the Option prices.

Hope its implemented at the earliest !

I am new customer. During using Pi (latest version) I selected a contract as :

NFO – NORMAL – OPTIDX – NIFTY – 29SEP2018 – CE – 8800 – NIFTY16SEP8800CE.

It added as : NIFTY16SEP8800CE.

1) why it is added as NIFTY16SEP8800CE , not as NIFTY29SEP8800CE when the expiry is on 29-Sep-2018 ? It can create confusion especially in BANKNIFTY which has weakly and monthly expiry while NIFTY has only monthly expiry.

2) why the various details are not displaying correctly in Pi. They are either overlapped, some part is hidden, not displayed correctly ? Is some resolution on which Pi display correctly ?

1. 16 represents year and if it is represented as NIFTY29SEP8800CE how one will know which year it is as nifty has 5 year option contracts at any point of time?

2. If you can write to [email protected] in detail mentioning the same we will answer accordingly or if it is required will call take access of your system and fix it.

Thanks for the clarification of question 1.

Regarding question 2, I have sent email with screenshot to support yesterday around 11:00 AM but till now no response even support ticket is not generated.

I have a query regarding call option writing. For example I have 1 lakh rupees in my wallet. I want to write a NIFTY 8600 call(1 lot, qty: 75) at 100/- premium with NRML. Let us suppose it needs 40k as margin. So my order gets executed and I have 60k in my wallet.

Now, premium starts going up.

1. As it is going up, remaining 60k keeps reducing?

2. For example, that day premium ends at 120 and I am not buying it to exit. Next day morning how much will I have in my wallet?

3. Again on that day premium came to 80 and I buy and exits.

Now how much money I will have in my wallet after I exits..

As per my assumption, I will have 1,00,000 – 40,000 – (75×20) + (75×40) + 40,000 = 1,01,500. Estou correcto?

1. No, when you short options, the margin blocked will keep going up when in loss.

2. Your wallet remains the same, But there will be more margin blocked.

Can we use Option Strategy tool in PI and Kite if yes then would it be possible for you to guide me.

Can you please calculate and the show the premium receivable on Nifty 9100CE – Today it closed at 77.05 including the brokerage tax etc. Because Margin Calculator shows Rs.5554. My manual calculation i. e. 77.05 x 75= 5778.75. Difference is 224.75. Am I right or wrong in calculation. Or is it the tax and brokerage added( So High). As I am a new trader , I am eager to know and plan according to it. Agradecimentos e cumprimentos.

You’ll always receive credit of (Premium*Qty) to your account.

Your varsity module helped me clear NISM VIII Equity Derivative in first attempt. Muito bem explicado. Obrigado.

I had stopped trading for a while after making some silly common errors which u mentioned in your modules that normally new traders make. But after going through your derivative modules again and again I have learnt a lot specially your shorting OTM call options. I am not trading yet just watching the movement and trading virtually on paper.

Why bank nifty weekly symbols are not seen in the symbol selection in F&O margin calculator in case i need to know the margins for sell. For eg. i want to short bank nifty Dec 8th CE option, but in margin calculator the symbol is not available to calculate the margin required to short, only monthly contracts available.

We’re working on making them available. The margins required for weekly options will be roughly the same as required to the closest expiring monthly contract.

I am using Kite and PI and also have installed Nest. Actually I was looking for Option Strategy Payoff chart. But could not find it any where. Can you help me for the same?

Currently no payoff chart available on the platform.

In the case of Weekly Option in Bank Nifty, Is it an American option or European. Can we buy and sell at any point of time as in the case of monthly option?

It works exactly like the monthly option, all options in India are European.

Dear Sir / Madam,

Please let me know is there any way in Zerodha kite / PI platform to view the option chain and define Option strategy.

These features are provided by other brokers trading plat form.

In case of zerodha has this features guide me how to use the same or is it in your pipe line for development or future release.

Obrigado e saudações.

It is on our list of things to do.

I’m eagerly awaiting viewing Option chain in PI. This has been on your list since Last year. Please help us on this. This would save lot of headache and would make us more efficient. Any tentative date when we can see option chain in PI ?

We will be providing more than option chain related to options in coming months, but these will take more time. Till then you’d have to use NSE option chain.

when i buy my bank 9thmarch option it always used to say margin exceeds.

BEst to send account specific queries to [email protected]

hi sir, if i already take a position say reliance may call of 1440 and nw i want to take a position to sell reliance 1500 call of april can i get margin benefits and how much capital is required for shorting 1500 call pls help me out. thankyou.

You can check it out yourself on SPAN calculator.

Can you please provide some link of option payoff diagram generator to test my own strategies.

is option strategy tool given in pi.

No, this tool is deprecated now.

No, such a tool isn’t available yet.

Is it possible to watch option chain in 1 click in Kite. I need to add the option with strike price every time than only i am able to see the rate. Instead if i can get the option chain with 1 click on underlying scrip than it will be easy to trade. it will save time as well.

On our list to do. Milan, you’d have to use NSE option chain until then.

I am not able to see Option startagies in Nest platform. Could you please let me know how to place option strategy in Zerodha.

This feature is no more supported.

Thanks Nithin. Can you please let me know how to initiate Option Strategies in Zerodha?.

This tool is currently not there anymore.

ok Nitin. Do you have any plans to Implement all option strategies in Zerodha?

Yes, but will take time.

How can i login to Zerodha trader (Nest Platform). as im not comfortable with Kite.

Can you please help me about this message while i am trading for NFO optios buy or sell.

rms:rule: option strike price based on ltp percentage for entity account-zt4839 across exchange across segment across product.

I have around 3300 rs in my account and trying to buy bank nifty 1 rs PE, lot size is 40 but it is giving the above message.

When were you facing this? If you are trading on banknifty weekly options, we run restrictions on the strikes you can trade on the last day.

No, this has expiry date as month end date, I have tried to buy on whole week but no luck.

Best to send account specific query to [email protected]

please let me know why the strategy builder is no longer available. is there any chance it might come back. is there any other places in zerodha where we can analyse before taking an option strategy. without this zerodha platform seems useless for an option trader.

hmm.. this is no more there. Nothing planned for now.

Appreciate your reply, I can understand why it’s not a matter of concern at least as of now. When it comes to tech in trading I saw that innovation in zerodha and by far more attractive than the zero brokerage success formula.

Similarly, when it comes to trading, options are far..far innovative than the conventional equity gimmick, don’t take me wrong 90% of the community do it as a no-brainer.

Being an innovative brokerage firm, I expect you to take much more concern to the options market because why I say is that, I know options market in India is far less superior in innovation than what we see outside (say US) but when a person who wants to think different and do different look upon there must be something that stands out and support him in the endeavour and who knows, where lies the future.

Once again thanks for finding time to reply.

Where to find Option Calculator in Pi?

i am new to options trading. pls clarify my doubt.

suppose if i sell an option (stock or index) which i dont have in my portfolio,

how long can i hold and buy?

You can hold an options short position until expiry. Check out the options module on Varsity to learn more.

Really Nice Article.

Can you please clarify this below :-

3. STT(Security Transaction Tax charged by the government) for Future is charged on the contract value whereas for options it is charged on the option premium. What this means is if you buy and sell 1 lot of nifty futures at 6000, the turnover generated is Rs 6lks( 3lks+3lks). STT is 0.017% of Rs 3lks which is Rs 51, whereas if you had bought and sold an option with premium Rs 100, the turnover would have been Rs 10,000(5000+5000) and STT of Rs 0.85.

what is Rs 6lks ?

Desde já, obrigado.

This post was written when the lot size of Nifty was 50. So, 6000×50 is 3 lakhs. Buy and sell together come up to 6 lakhs.

Estratégias de opção.

1. Orientação.

1.1 - Definir o contexto Antes de iniciar este módulo na Estratégia de Opção, gostaria de compartilhar com você um artigo de Behavioral Finance que li há alguns anos atrás. The article was titled “Why winnin ..

2. Bull Call Spread.

2.1 – Background The spread strategies are some of the simplest option strategies that a trader can implement. Spreads are multi leg strategies involving 2 or more options. When I say multi leg stra ..

3. Bull Put Spread.

3.1 – Why Bull Put Spread? Similar to the Bull Call Spread, the Bull Put Spread is a two leg option strategy invoked when the view on the market is ‘moderately bullish’. The Bull Put Spread is s ..

4. Call Ratio Back Spread.

4.1 – Background The Call Ratio Back Spread is an interesting options strategy. I call this interesting keeping in mind the simplicity of implementation and the kind of pay off it offers the trader. ...

5. Bear Call Ladder.

5.1 – Background The ‘Bear’ in the “Bear Call Ladder” should not deceive you to believe that this is a bearish strategy. The Bear Call Ladder is an improvisation over the Call ratio back spr ..

6. Synthetic Long & Arbitragem.

6.1 – Background Imagine a situation where you would be required to simultaneously establish a long and short position on Nifty Futures, expiring in the same series. Como você faria isso e muito mais ...

7. Bear Put Spread.

7.1 - Spreads versus posições nus Nos últimos cinco capítulos, discutimos várias estratégias bullish de várias pernas. Essas estratégias variaram para se adequar a uma variedade de perspectivas de mercado e # 8211; a partir de ..

8. Existir a propagação de chamadas.

8.1 - Escolhendo Chamadas Sobre Pistas Semelhante ao Bear Put Spread, o Bear Call Spread é uma estratégia de duas pernas invocada quando a visão no mercado é "moderadamente baixista". The Bear Call Spread ..

9. Put Ratio Back spread.

9.1 – Background We discussed the “Call Ratio Back spread” strategy extensively in chapter 4 of this module. The Put ratio back spread is similar except that the trader invokes this when he is b ..

10. The Long Straddle.

10.1 – The directional dilemma How many times have you been in a situation wherein you take a trade after much conviction, either long or short and right after you initiate the trade the market move ..

11. The Short Straddle.

11.1 – Context In the previous chapter we understood that for the long straddle to be profitable, we need a set of things to work in our favor, reposting the same for your quick reference – The vo ..

12. O Longo & # 038; Short Strangle.

12.1 - Antecedentes Se você entendeu o straddle, então, entender o 'Strangle' é bastante direto. For all practical purposes, the thought process behind the straddle and strangl ..

13. Max Pain & PCR Ratio.

13.1 - Minha experiência com a Teoria da dor de opções Na lista interminável de teorias de mercado controversas, a teoria da "dor de opção" certamente encontra um ponto. Opção de dor, ou às vezes referido ...

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A reprodução dos materiais do Varsity, texto e imagens, não é permitida. Para consultas na mídia, entre em contato com [email & # 160; protected]

Greek Calculator.

21.1 – Background.

So far in this module we have discussed all the important Option Greeks and their applications. Agora é hora de entender como calcular esses gregos usando o Black & amp; Scholes (BS) Options pricing calculator. The BS options pricing calculator is based on the Black and Scholes options pricing model, which was first published by Fisher Black and Myron Scholes (hence the name Black & Scholes) in 1973, however Robert C Merton developed the model and brought in a full mathematical understanding to the pricing formula.

This particular pricing model is highly revered in the financial market, so much so that both Robert C Merton and Myron Scholes received the 1997 Noble Prize for Economic Sciences. The B&S options pricing model involves mathematical concepts such as partial differential equations, normal distribution, stochastic processes etc. The objective in this module is not to take you through the math in B&S model; in fact you could look at this video from Khan Academy for the same –

My objective is to take you through the practical application of the Black & Scholes options pricing formula.

21.2 – Overview of the model.

Think of the BS calculator as a black box, which takes in a bunch of inputs and gives out a bunch of outputs. The inputs required are mostly market data of the options contract and the outputs are the Option Greeks.

The framework for the pricing model works like this:

We input the model with Spot price, Strike price, Interest rate, Implied volatility, Dividend, and Number of days to expiry The pricing model churns out the required mathematical calculation and gives out a bunch of outputs The output includes all the Option Greeks and the theoretical price of the call and put option for the strike selected.

The illustration below gives the schema of a typical options calculator:

On the input side:

Spot price – This is the spot price at which the underlying is trading. Note we can even replace the spot price with the futures price. We use the futures price when the option contract is based on futures as its underlying. Usually the commodity and in some cases the currency options are based on futures. For equity option contacts always use the spot price.

Interest Rate – This is risk free rate prevailing in the economy. Use the RBI 91 day Treasury bill rate for this purpose. You can get the rate from the RBI website, RBI has made it available on their landing page, as highlighted below.

As of September 2018 the prevailing rate is 7.4769% per annum.

Dividend – This is the dividend per share expected in the stock, provided the stock goes ex dividend within the expiry period. For example, assume today is 11 th September and you wish to calculate the Option Greeks for the ICICI Bank option contract. Assume ICICI Bank is going ex dividend on 18 th Sept with a dividend of Rs.4. The expiry for the September series is 24 th September 2018, hence the dividend would be Rs.4. in this case.

Number of days to expiry – This the number of calendar days left to expiry.

Volatility – This is where you need to enter the option’s implied volatility. You can always look at the option chain provided by NSE to extract the implied volatility data. For example, here is the snap shot of ICICI Bank’s 280 CE, and as we can see, the IV for this contract is 43.55%.

Let us use this information to calculate the option Greeks for ICICI 280 CE.

Spot Price = 272.7 Interest Rate = 7.4769% Dividend = 0 Number of days to expiry = 1 (today is 23 rd September, and expiry is on 24 th September) Volatility = 43.55%

Once we have this information, we need to feed this into a standard Black & Scholes Options calculator. We do have this calculator on our website – https://zerodha/tools/black-scholes , you can use the same to calculate the Greeks.

Once you enter the relevant data in the calculator and click on ‘calculate’, the calculator displays the Option Greeks –

On the output side, notice the following –

The premium of 280 CE and 280 PE is calculated. This is the theoretical option price as per the B&S options calculator. Ideally this should match with the current option price in the market Below the premium values, all the Options Greeks are listed.

I’m assuming that by now you are fairly familiar with what each of the Greeks convey, and the application of the same.

One last note on option calculators – the option calculator is mainly used to calculate the Option Greeks and the theoretical option price. Sometimes small difference arises owing to variations in input assumptions. Hence for this reason, it is good to have room for the inevitable modeling errors. However by and large, the option calculator is fairly accurate.

21.3 – Put Call Parity.

While we are discussing the topic on Option pricing, it perhaps makes sense to discuss ‘Put Call Parity’ (PCP). PCP is a simple mathematical equation which states –

Put Value + Spot Price = Present value of strike (invested to maturity) + Call Value .

The equation above holds true assuming –

Both the Put and Call are ATM options The options are European They both expire at the same time The options are held till expiry.

For people who are not familiar with the concept of Present value, I would suggest you read through this – zerodha/varsity/chapter/dcf-primer/ (section 14.3).

Assuming you are familiar with the concept of Present value, we can restate the above equation as –

Where, Ke (-rt) represents the present value of strike, with K being the strike itself. In mathematical terms, strike K is getting discounted continuously at rate of ‘r’ over time‘t’

Also, do realize if you hold the present value of the strike and hold the same to maturity, you will get the value of strike itself, hence the above can be further restated as –

Put Option + Spot Price = Strike + Call options.

So why should the equality hold? To help you understand this better think about two traders, Trader A and Trader B.

Trader A holds ATM Put option and 1 share of the underlying stock (left hand side of PCP equation) Trader B holds a Call option and cash amount equivalent to the strike (right hand side of PCP equation)

This being the case, as per the PCP the amount of money both traders make (assuming they hold till expiry) should be the same. Let us put some numbers to evaluate the equation –

Trader A holds = 1200 PE + 1 share of Infy at 1200.

Trader B holds = 1200 CE + Cash equivalent to strike i. e 1200.

Assume upon expiry Infosys expires at 1100, what do you think happens?

Trader A’s Put option becomes profitable and he makes Rs.100 however he loses 100 on the stock that he holds, hence his net pay off is 100 + 1100 = 1200.

Trader B’s Call option becomes worthless, hence the option’s value goes to 0, however he has cash equivalent to 1200, hence his account value is 0 + 1200 = 1200.

Let’s take another example, assume Infy hits 1350 upon expiry, lets see what happens to the accounts of both the trader’s.

Trader A = Put goes to zero, stock goes to 1350/-

Trader B = Call value goes to 150 + 1200 in cash = 1350/-

So clearly, irrespective of where the stock expires, the equations hold true, meaning both trader A and trader B end up making the same amount of money.

All good, but how would you use the PCP to develop a trading strategy? Well, for that you will have to wait for the next module which is dedicated to “Option Strategies” J. Before we start the next module on Option Strategies, we have 2 more chapters to go in this module.

Key takeaways deste capítulo.

The options calculator is based on the Black & Scholes model The Black & Scholes model is used to estimate the option’s theoretical price along with the option’s Greek The interest rate in the B&S calculator refers to the risk free rate as available on the RBI site The implied volatility can be fetched from the option chain from the NSE website The put call parity states that the payoff from a put option plus the spot equals the payoff from call option plus the strike.

169 comments.

When can we expect Option Strategies Module.

Very soon, another 2 chapters in the current module and we move to Options Strategies.

sir, what happens to overnight futures position in case of stock split like adani ent, idfc today.

I notice that the delta of 280 PE is -0.873. But, only deep ITM have such high deltas, right?

Where did you get this value from Ajay?. Delta should be less than -0.5.

Think i got my answer. By the way, eagerly waiting for the next chapter. 🙂

Next chapter (22) will be uploaded next week Ajay.

sir, why should we use calender days in calculating theoratical option value, when trading days excluded whats use, enlighten me.

Well, the number of days is treated on something called as the ‘day count convention’…NSE adopts a day count convention called as ‘actual by actual’ according to which you need to take 365 days.

Hi In the black scholes option calculator the input for IV is one but the theoretical prices for both put and call are computed based on that one IV INPUT Whereas in reality the IV puts and call for the same strike differ, so using which IV can be better? Can we use the VIX % instead?

Vix is a good approximation for Nifty. For stock specific IV check the stock’s option chain for IV.

As per Khan Academy video the Implied Volatility (IV) is not an input to Black-Scholes (BS) formula. The input to BS formula is standard deviation of log returns. In fact the IV is calculated by applying BS formula in reverse, see the link to khan academy video that explains how IV is calculated:

I believe the BS formula if fed with standard deviation of log returns would give provide (predict) option price which may differ slightly form the actual price that is settled in market.

Sunil, yes I’m aware of that. In fact check this zerodha/z-connect/queries/stock-and-fo-queries/option-greeks/how-to-use-the-option-calculator . From what I’ve noticed people tend to get confused with reverse engineering BS model to calculate IV’s, so we decided not do it with the our version of BS calculator. We are trying to keep this very simple and intuitive.

We have learned so far that when you buy ATM options , delta is in the region of 0.5-0.6 and as the trade goes in favor , delta increases and therefore for every 1/- move on the stock/index, we get higher (>0.6 ) move on the option…………I want to understand the opposite side…..

When i buy ATM options and the positions go against me on the same day, i am assuming that delta will reduce and i will lose less than 0.5 or 0.6 pts in relation to a 1 pt move against me…..Let me explain with an example….Suppose i go long on 7900 CE when nifty breaks through 7940 and then i decide to keep a 40 pt stop loss. I expect to lose around 20 pts (give and take a couple of points) in options if my SL is trigerred. However my observation is that often i lose close to 40 pts in options as well. What can i attribute this loss to? Most times, SL gets triggered on the same day, so time value impact is minimal…..I am guessing vega plays a role but at all times. What could i be missing?

Prashanth – When underlying moves by one point, the premium is expected to move to the extent of delta. So if the delta is 0.6, then for every one point move in the underlying, premium is expected to move by 0.6 points.

I’m elaborating your case here – You buy 7900CE (ATM), premium is 180/-, Delta is 0.5. Spot moves to 7940, 40 points increase..so new premium will be old premium plus delta times movement in the underlying. Hence new premium is 180 + (0.5*40) = 200. However now that spot is at 7940 (slightly ITM) delta is 0.6 (approximate value). While you have a 40 point SL on underlying the premium will react a bit differently. So if market falls by 40 from 7940, then you will lose 40*0.6 = 24 points. So…that would take the new premium to 200 – 24 = 176 points.

Besides, as you mentioned, Vega has a massive impact on options premiums.

Next chapter pls..

Nowadays U r taking too much of time (abt 15days),pls reduce the time at least to 1week..

Keshav – you dont want me to write rubbish right? So please give me the time, I will make sure the content is worth your patience 🙂

i think some small typos in 2 places one in icici option input eg.& prashanth nairs Q&A.

icici option price calculation interest rate typed as 4769% inteaad of 7.4769%•

regarding premium calculation 180 + (0.5*40) =220,this is not 220,but 200 and calculation is right 220 – 24 = 196,but as per eg. we should subtracct from 200-20=180.

Ah, thanks for pointing this, will look into it.

Karthik, good efforts thanks, i hope you are well aware the greek calculatore, in.

ODIN Diet, when you select paricular stock or strike and click CTRL + pg up, a window pop up with BS calculatore, which have all input information as default, you just click on calculate and will get all output, hope you also can do that.

Karthik, you are a very innovative person and trying to give latest and best trading system to your client, hence request to look in to that system, i am sure you will appreciate.

When you will post “Option strategy” in Varsity? any specific timeline?

Starting work on next module soon.

Very good explanation in a simple way. In MBA i studied Derivatives during my higher education, but it was all theoretical and also difficult to implement in real world. This explnation was really help. But i have some doubts.

https://zerodha/tools/black-scholes in this page you are telling to calculate historical volatility to calculate option price, where as in this web page zerodha/varsity/chapter/greek-calculator/ you are telling to calculate option price using implied volatility. Could you pls explain.

I’m glad you liked the explanation 🙂

The historical volatility is a simple “Quick & Dirty” approximation.

For Nifty options, what can be the dividend.

as per your link nifty ‘s today’s dividend is 1.51 right?

For Nifty Premium calculation In BS options, in the Spot (underlying) option whether nifty index value or current month future value to be entered?

Does the theta derived in BS clculator denotes the decay of premium per day. Is it so. The varsity article doesn’t mention that.

Yes, theta is the decay in premium value attributable to passage of time, provided all else is equal. Let me check this again on Varsity. Obrigado.

Which module covered Rho ?

Not covered Rho, as Rho indicates the change in premium wrt to change in interest rate. Interest rate does not change that often, hence decided to skip this Greek.

Can i get Balck schole option formula in excel spread sheet so as its is convenient to home work on it.

Verifique este & # 8211; stern. nyu. edu/

I am satish srinivasan and I am trading in my sister’s account. Till date I haven’t succeeded in trading and I haven’t asked anybody’s help I don’t know who is the technical person who is supporting traders at zerodha my personal wishes to him. I hope if you lend your hand to me it will be very useful. I hope a conversation with a wise man around a table is as good as reading thousand many books.

If you are reading this, I think I am close to you. If I could able to come this far, I think I can come little further. I will keep an eye out for you. I will be hoping that this letter finds you.

Satish – not sure with whom you need to speak. We will be more than happy to respond to queries posted here, so please do not hesitate asking questions here.

Rho is the rate of change of premium with respect to change in interest rate.

sir, i just calculated option Greeks of usd inr and current call option premium is 0.2700 but in option calculator show option premium is 0.1600 is it ok or is there any mistake ? and also in theta put option have no theta please explain .

Well the option calculator gives you the theoretical option price of an asset based on the factors playing out in the market. It is not necessary that it should match the current market price.

Not sure about the Theta, will check and get back. Obrigado.

in volatility box actually which volatility have to enter, call option iv or put option iv? Por favor explique.

In fact you can use ViX values (for Nifty) for both Calls & Coloca.

Regarding using of vix values for both call and put, I would like to seek your clarification that can I use the same vix volatality ie suppose today which is showing 17.35 at that particular moment of entering into a strategy for both call and put same vix. thanks and regards. r v n sastry.

Yes, you can use the same ViX values to get the approximate Greek values.

What is options smile.

Refer section 20.1.

1. In RBI site 91 day T bill is blank, what does it implies?

2. where to find wipro is going to give in feb month or not, to enter dividend on B&S calsulator?

You need to enter in a value – the interest rate of the T bill. This is available on the RBI website.

Dividend info is available as and when its made available.

T bill value is empty in rbi website I have encircled that.

Oh, in that case you can take the 180 day bill rates.

strike-360, contract expiry - 25 feb.

actual premium obtained from nse website or 360CE-7.70.

I have attached the snapshot of values got by B&S calculator.

Now suppose spot moves by +25 points and new spot is 365.

so the below calculations-

new premium - 7.70 + 25*(.357) = 16.63.

new delta - .357 + 25*(.0089) = .579.

My question is delta is constantly changing with change in underlying(stock), so from what point onwards premium should be calculated with new delta and not the old one? Means if calculate premium with delta .357 different value of premium will come, and if I stop in between and calculate premium after increase of 10 points( of stock) then new delta value will come and premium corresponding to this will be different.

This is a tricky problem Rohan. In reality the Delta is a continuously evolving variable and it does not stop to change till expiry. For all practical purposes, its best if you define your timeframe and evaluate the deltas at that period.

If I enter values in B&S calculator it gives values of delta, gamma etc for both call and put options for given spot ( 1200) and strike (1220).

But if IV of call and put option is different than what should be entered in calculator? I have encircled different IV’s for same strike.

I assume you are talking about the B&S calculator on Zerodha. We’ve put up a very basic version of the calculator. You need to be aware of which option you are calculating for and enter the relevant IV.

i enter all data for getting option greek for USDINR 68.75 CE . 25 FEB EXPIRY. AND I GOT THE OUTPUT BUT I THING IT IS NOT CORRECT DATA BECAUSE IT SHOWING GAMMA OF : 1.6398 PLEASE FIND THE SCREENSHOT AND PLEASE EXPLAIN .,

Thanks for posting this, Gamma of an ATM option invariably shoots up as we approach expiry. However I think this gamma value is extremely high. Let me dig in deeper and get back to you as soon as I can. Obrigado.

Thanks for the quick reply,…and i am waiting for the more information…

today (25.02.2018) i look the nifty option chain but i cant see any strikes IV , In IV column showing blank, please find the screenshot and please explain.

Not sure why, you will have to speak to NSE for this.

how to find Intrest and volatility parameter values on dialy basis, is there a way to get/find them, answer to this will be much appreciated.

Interest rates don’t change daily, so that should not worry you much. For stock specific volatility information I’m not sure where we will find it…maybe you will have to calculate it yourself. From my experience, knowing the rough volatility figure is good enough, unless you are dealing with some volatility sensitive trades. For Nifty, I’d suggest you check ViX, that will give you an approximation.

Hi sir by using block and scholes calculator for nifty vix i have give as input for volatility % , but if i do same thing giving vix as input to volatility % in case of bank nifty theoretical values are far different from actual price , here what should we given as input to volatility in case of bank nifty. thanks in advance.

1.How does RBI interest rate effect options? Can you share some details on it?

2.How to find dividend for stock rather than Index as you have posted in earlier reply.

The effect of interest rates are captured by a Greek called Rho, I skipped discussing this as Interest Rates dont change frequently. In general interest rate and options premium have an inverse relationship.

You will have to keep track of corporate events for info on dividends, bonus, splits etc.

Can you refer any site where I can track of corporate events for dividends, bonus, splits etc of each stock in NSE/BSE? I have searched in many but didn’t get any appropriate result.

obrigado. I searched in money control but didn’t get at that time.

In the NSE option chain, the Interest rate considered is 10% (Note at the bottom).

Why is it different from RBI [91 day T Bill] Interest Rate?

Isn’t it appropriate to consider the interest rate mentioned in NSE, because that is the basis we pay as premium ultimately while trade?

Also do we have to separately calculate the Daily Volatility, although it is mentioned in NSE Quote Page? Can we take the same value while calculating the premium (for Options) or stop-loss (for Futures) – I understand that knowing how to calculate is a better to understand the concept as covered in Chapter 7.

Ah! I never noticed the interest rate bit in the option chain. Thanks for pointing that out. Not sure why NSE assumes 10%, it does not make sense to me. Also, there is no harm taking the values from NSE…although its good to know how to crunch the number!

Well, Thanks to you for such wonderful modules and in-depth explanation!

I tried to calculate the premium and Greeks based on the description in the module, using Zerodha Black & Scholes Options calculator, but it was not matching the NSE option chain. When we put the values of Interest rate and volatility as per NSE website, the figures mostly match.

Yes, we have taken the interest rates as per the t-bill rates.

When we put all data in Black & Scholes calculator we get the present premium of the stock/index. But how to calculate the future premiums. Por exemplo; shorting Nifty 8800 CE at 62/-. If Nifty rises to 9000 what will be the premium. How to calculate.

You can do that using the Delta, this will give you an approximate value.

While going thro NSE website to read volatality of Bata, nothing is mentioned in the column. In that case what fig. need to be put in Black Scholes formula.

Yes, if you are referring to the Implied volatility. If you are talking about historical volatility, I’d suggest you use the the ‘=STDEV’ function in excel.

Karthik, firstly thankyou for the great explanation. and i have a small doubt, in the above video there is only B&S call option formula THEN what is the formula for B&S put option ?

The calculation for Put option is quite similar Rakesh.

Karthik, Im very confused about IV and vega.

actually my doubt is , in the B&S formula should i input IV which is shown in options chain(IS THAT IMPLIED VOLATILITY NOT VEGA )?

how is that IV calculated for different strikes? is it same as theSD calculation?

Please karthik please clear the doubt.

Hi Karthik, can we calculate the IV of a specific strike through using the LTP’s (premiums) of past 1year of that strike and can we find out SD or IV of that particular strike ?(yes or no). correct me if im wrong.

IV is more like the volatility at this moment…its kind of forward looking. Moment we look at volatility we are referring the the ‘realized/historical’ volatilidade.

Hi Karthik, Is there any link on Zerodha where we can find options strategies based on our view on market, acceptable P/L range, etc like it is provided in following link:

I think it is good, may be little improvisation possible, considering Greeks as well.

Nothing as of now Santosh…but don’t be surprised if we have something like this soon 🙂

Thanks Karthik, I am sure you guys will definitely come up with something better than that. Muito bem sucedida. 🙂

Great Explaination . thanks alot.

I have following queries.

1) from where do i get the value of ViX.

2) When i calculate Option Pricing using BS Calculator with IV of Call option with 10% interest rate and IV Put option with 10% interest rate (different IV for Call and Put from NSE option Chain with 10% interest rate) then Greek values of BS calculator matches with NSE Option chain. But when you put 91 day Tbill interest rate then values doesn’t matches. Why do so?

1) India ViX values are available on NSE, please do take a look at their website.

2) That’s because NSE considers 10% interest rate values.

I have gone through this module….you have done wonderful job ……

As i am newbee to options ….Pls correct me if i am wrong. After reading all the chapters what i have concluded is the options trading requires all Greek consideration as well as view on the broader market(if trading on the Nifty)/underlying assset. não é isso?

Every chapter is specific to individual greeek and very much clear. When it comes to trading , i couldn’t able implement.

Can you list down the mechanical rules while trading options. Ex : If i want to trade only on Nifty index then how to start building trade plan.

Hello Sir, After reading all related chapter of option, Its really wonderful. Thanks alot for ur effort.

Doubt: After doing technical analysis, I put the stop loss according to the my spot price. i.e i calculate the stoploss price and see the delta value…and according to that i m trying to use it but failed to do successfully because i am not able to correctly estimate the the combination all the Greek at once. there is any calculator for intraday or positional position to solve my problem..I tried black and scholes calculator and not able to understand how to calculate the target/stopploss using greek value. Please guide me sir…Thanks in advance.

Avinash – If you wish to identify SL price, I’d suggest you stick only to technical analysis. As far my experience goes, apart from vega, no other greeks helps you identify sl/entry prices.

I have a question on period or duration of Implied Volatility. When we calculate historical volatility, we calculate it for a particular period like – daily or annual or 30 days etc.

Does Implied Volatility refer to any particular forward period ? For example, If Implied volatility of Bank Nifty Call Option 24 Nov 2018 is 24% , does it mean market is expecting a volatility of 24% in the index value of for the next year or only till option expiry date ?

Sim. If the IV is 24%, then its the market’s volatility expectation (at this very moment) for the next 1 year forward.

I was trying to use the option calculator and stumbled upon this strange thing on NSE website while looking at different nifty strikes for Jan 2017. This 8250 PE for Jan series shows a net change of +118 points and 7750 PE shows +44 points but for almost all other strikes the net change was in negative. can you help me understand?

This must be the option chain 🙂

Different strikes behave differently for the same movement in the underlying. The option chain summarizes these changes along with other changes. Understanding option chain requires you to have some background in options. I’d suggest you start from chapter 1.

Thanks Karthik, your teachings changed our approach to the trades with conviction.

30-Jan, idea cellular, call 95CE SPOT WAS AT 78,IV:45,delta 0.05,gamma:0.012(as per zerodha option calc) now spot has moved by 20 points to 98,delta is supposed to be 0.6 to 1.but manual calc of new delta shows 0.29 or 0.3. (0.05+0.012*20)Why is that? Estou esquecendo de algo.

Yes, since the spot is at 98, 95CE is ITM and the delta is likely to be 0.7 or higher. Not sure why the calculator is not reflecting this value. Can you please check again?

Daily volatility calc as per excel is different from number shown on nse, difference observed was 14 -15 bips, similar difference is observed for annualised volatility as well. IS THIS NORMAL.

Yeah, I guess it is because of the date selection.

Hello kartik how to calulate implied volatility in excel.

Not sure, you will have to adopt one of the models which will help you calculate the same.

i got an problem while understanding B&S calculator.

I tried it eith nifty 50 figures such as.

Strike 9350, spot 9198, premium is 32,Expiry 27/4/17.

And according to formula premium arises at 22.76 for calls and 147.78 for Puts.

sir i wanna ask you is this future value for premium or current fair valye which should be.

If this future value then for which date.

Tenha um bom dia.

It is the fair value of the premium for the give strike and spot value.

What’s the formula to calculate the call and put options Gamma, Theta & Vega using excel.

I’ve not gotten into the formula as it can deep dive into quants. But just to give you a direction – the formula is a 2nd order differentiation of Black & Scholes formula.

But it is giving different premium values.

Here are the screen shots. Please have a look.

It is giving some different values. Please let me know what mistake i am making.

Not sure why the difference, but I’d like to believe our calculator is accurate.

means input values are correct?

also i wanted to know that IV will be according to call and put? certo?

IV should be same for both call and put for the given strike. However, you may notice some difference here.

what are all the ways to find ( PCR is steadily rising and declining)?

You will have to stick to regular PCR techniques. Its been tried and tested, cant go too wrong 🙂

I am still in the process of learning. Can you please tell me how many days before Ex-Dividend date I need to buy the stock and keep so that I can enjoy the dividend. Is this possible or else do I need to keep it for 1 complete year so that I get the dividend. I am confused. Also I see that there is lot of buying and selling happening when the Ex-Dividend date is nearby and on that day. Can you please brief on this please.

Sure will check the link. Obrigado 🙂

How can I calculate option pricing for strike price of 350 in option chain image of ICICIBANK above since IV is not given?

The call and put delta calculated for ICICIBank ATM 280 strikes in the picture is 0.127 and -0.873 respectively. Aren’t these values for Deep OTM CE and Deep ITM PE.

Also I notice that: Delta (CE) + Delta (PE) = 1 in this case. Does this mathematically hold true everytime?

PS: Thank You for the modules. This has indeed helped me and others to gain a much deeper understanding of the Financial Markets.

Yes, by virtue of delta it is deep OTM and ITM.

Yes, for ATM strike.

Felicidades! Aprendizagem feliz 🙂

Does this mean, an option can be classified to have a different moneyness than its actual based on the greeks. And at same time, it can be classified as different moneyness by different greeks at the same moment in time (because the interactions is hanging everything dynamically every second)?

If yes, then what should we consider for a strategy (I haven’t read the option strategies module yet, maybe that will shed some light on this). For a delta neutral strategy, I guess we would consider just the deltas. But this is a wide variation if an ATM option is classified as Deep ITM/OTM. And it may soon change its delta. But say I want to build a strategy myself, what should matter most for a classification?

Sujeet, the moneyness comes for the difference between the strike and spot. The greeks do not really have a play on moneyness. However, the changes in the greeks itself can alter the moneyness 🙂

I’d suggest you take a look at the strategies module 🙂

WHICH SHOULD BE TAKEN AS SPOT VALUE in calculator for bank nifty. Underlying or future value?

It seems there is a difference between the values(from option calculator and actual market value?)…why sir?

The difference is expected. This can be attributable to the market inefficiencies. If you feel the difference is too high then you could sell the option, otherwise, buy….in both case hoping it would align to fair value.

Ei! About the dividend, if it’s within the period, then we write the value (in percentage terms I believe?), if not, we leave it as zero?

from where can i get dividend rate in case of nifty in order to get nifty future value for the current expiry.

Today 24.11.17 Nifty Spot closed @ 10390.

Nifty Dec 10400 Call @ 175 and Nifty Dec 10400 Put @ 123.

As per Black & Scholes Option Pricing Formula with volatility 13.5 call should be @ 163 & put should be @ 173.

Both call & put are ATM.

1. Why so much difference in premium?

2. What would be the expected move for nifty in coming days in such situation?

3. How would you trade in this type of situation?

4. Is it wise to buy a ATM put as the premium is low?

1) Two things – (a) If markets price the options wrong, then the difference could occur. But I suspect this is the case. (B) Your assumption on Volatility could be wrong.

3) Assuming my volatility input is correct and the markets are pricing the options wrongly, I’d buy both the options as they are cheaper compared to their respective fair price.

4) Yes, for reason stated above.

Thanks for your quick reply.

volatility 13.5 is as shown in the NSE India Vix Website.

call option is trading according to B&S Formula but why not put too.

as for my 2nd question i am sure there must have been similar instances in history and you must be knowing the aftermath of such situations.

If your pricing is correct, then you can make profitable trades as the market price will eventually catch up with the fair price. Anyway, I’m not sure if Nifty ATM puts can trade with such a large discount to fair price.

Thank for your quick reply karthik.

I am also little surprised to see such huge difference between 10400 ATM CALL & Put.

What could be the reason.

Will the put price rise later on.

Check today, I’m assuming the prices have corrected.

Can you explain a bit further on your 3rd point.

Please don’t mind, me asking silly questions.

Just clarifying myself.

You will have to tell me which 3rd point 🙂

First of all thank you karthik sir. I learned alot with Zerodha varsity. I tried to calculate Option premium by using zerodha B&S option premium pricing formula for Nifty as on 08.12.2017 closing time. the details are as below.

Nifty Spot: 10265.65.

Strike price: 10500.

Expiry: 28.12.2017 15:30Hrs.

Volatility: 13.67% (India VIX)

Interest: 6.15% (91 day T-bill rate from RBI website)

The output from B&S calculator is as follows.

CALL OPTION PREMIUM - 49.41.

The actual LTP premium price is 37.20.

Nifty Spot: 10265.65.

Strike price: 10500.

Expiry: 28.12.2017 15:30Hrs.

Volatility: 10.57% (IV from NSE website)

Interest: 6.15% (91 day T-bill rate from RBI website)

The output from B&S calculator is as follows.

CALL OPTION PREMIUM - 27.61.

The actual LTP premium price is 37.20.

it seems to be there is vast difference between actual premium and the theoretical premium calculated. Kindly explain me where did i got wrong and correct me.

The dividend for Nifty 50 is 1.11 from NSE website. B&S fromula in Zerodha website not taking decimals. i tried with 1, 2, 3 so on. whatever the value of dividend the premium is not changing.

CALL OPTION PREMIUM for 10400 Strike is – 49.41 but The actual LTP premium price is 37.20.

Well, in that case, I think there is mispricing. Market partici[ants will correct this sooner or later.

I have calculated call option premium for Nifty 10600 strike.

Case1: with implied volatility 11.61 ( from option chain)

the calculated premium is 21.97 where as actual LTP premium is 27.60.

Case2:with annualised volatility 12.62 ( from futures contract )

the calculated premium is 27.57 where as actual LTP premium is 27.60. this is matching perfectly.

i have calculated premium for reliance 960 strike using volatility from option chain and futures contract. in this case the IV selected from option chain is giving better result.

my understanding is that volatility of future contract for nifty is giving better result whereas for stock IV of option chain is giving better result.

Kindly clarify which volatility have to be chosen.

You need to considered the implied volatility of the option for calculating the option’s premium. However, you’ve made an interesting point of futures volatility. Let me check if this can be taken as a substitute.

I have made position for Nifty 10600CE on 14.12.2017 (Nifty Spot is 10252) during closing hours of market at a premium of 25.62 in anticipation of market opens gap-up on the back of positive gujrat exit polls which will be announced later in the evening. Later in the day all the Exit polls predicted BJP majority.

Market Today as expected opened gap-up 94 points but not made any follow through. The premium for my position opened at 35.6 and dropped to 27 after 30 minutes of market opening, but the underlying Nifty fell only 20 points.

My question is why premium fell suddenly when underlying not fell substantially.

This is because the volatility dropped the next day and with that the premiums also did.

It could be really better if we can view the Greeks in the ‘Positions Table’ in Kite. Hope you will work on this.

Noted. Will pass the feedback, Rajesh.

1.B&S options calculator is used to know the Greeks values for that strike as per the spot how the premium calculated based on the volatility?

Correct me if I am wrong.

2.If the first point is correct.

Now I want to modify the volatility increase/decrease, I can get the theoretical option price as per the B&S options calculator.

Is B&S options calculator used for test cases?

3.Ideally this B&S options calculator value should match with the current option price in the market.

How can figure out if options are over or under-valued and if volatility itself is under or over-estimated.

1) Not too clear with this – can you please rephrase it?

2) Yes, you can use B&S to calculate premium prices by altering the implied volatility. So essentially you can test for different scenarios.

3) Not necessarily, the market can misprice the option leading to the difference in price.

Thank you for clarifying.

Whenever I use option calculator this gives me the theoretical value of option premium and then I compare this value to the actual value of premiums most of the time I found that the option calculator is providing a value for premium which is less than the actual market price of the premium it means that premiums are expensive to trade from the buyer’s perspective right sir.

So I should not buy the options. Because they are expensive.

Ankit, the value obtained from the calculator is a theoretical value, whereas the value seen in the market is reflective of the sentiment prevailing in the market. If the difference is beyond an acceptable value then it does not make sense to buy…rather you can opt to sell them and collect the premium.

Yes exactly this is the dilemma that what should be the acceptable difference of theoretical value of premium and actual value of premium for buying purpose.

Actually sir I have an open position in currency.

Where I bought February expiry 63.75PE @0.3675 ITM and position is working for me but after buying this I realise that I paid much more than should I need to pay to buy this option.

When I divided this premium into intrinsic value and time value I found that the intrinsic value something near 0.2625.

I want to tell you that I got this intrinsic value from the following strike rate - RBI reference rate yesterday which was set by RBI @approx 64.54 like and after buying this the premium value actually dropped to that 0.2625 and came back after touching that level with my experience I observed that time value in ITM option THE TIME VALUE SHOULD NOT BE LIKE ABOVE.

So to avoid this silly mistakes in future I have some question.

1. is I bought an expensive option.

2. How to calculate intrinsic value means what should be the formula.

Is it strike - RBI reference rate OR strike – future rate or something else.

By the way I was slightly bullish on Rupee but not sure about the future direction actually in coming future so I played safe and bout IDM option I expected some 40 to 50% value gain in 4 to 5 days.

Thanks for help sir.

Ankit, if the RBI Reference rate is 64.54, then the intrinsic value of 63.75PE is 0. So the entire premium of 0.3675 is attributable to the time value. Such high time value is justified since you’ve bought the Feb contract, which will expire only next month. Intrinsic value is a non-negative number or 0. It is Strike – RBI Ref, but if it is - ve number, then the IV is considered 0, hence the rest becomes attributable to the time value.

Thanks but I am sorry RBI reference rate was 63.54 not 64.54.

I mistakenly wrote that 64.54.

But now I got the point clearly that.

INTRINSIC VALUE(PE)= STRIKE PRICE – RBI REFERENCE RATE.

Thank you so much sir.

Yes, that makes sense now. Good luck with the trade and remember, the intrinsic value of an option is always a non-negative number or 0.

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