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option pricing
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vijendra (IV012501)



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what do you think options with the same underlying stock and strike prices trade at same price or different price and why?

This message was edited 1 time. Last update was at 14/05/2013 11:12:36

pampa (IV0167101)



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options with same underlying and same strike price have different price. option price (premium) has two component: 1) intrinsic value 2) time value .
if options are of same underlying and same strike price have same same intrinsic value but the if the expiry of the options is different than they have different time value.So options with same underlying and same strike price have different premium. option pricing is also depends on the option type, if option type is call option it has different premium than put option.
sameer (IV01598701)



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If option is ATM with same expiry and same underlying, then the call option and put option premium will be same or not?
jiwant (IV0743501)



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Well this a good observation. Theoretically, Call premium is directly proportional to interest rate and put premium is inversely proportional to rate of interest so therefore At the ATM Delta of Call is always greater than premium of put option.

This message was edited 1 time. Last update was at 15/05/2013 13:26:33

Sunny (IV0397901)



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as we are talking about ATM option, my question is what happened if option expires at ATM?

This message was edited 1 time. Last update was at 15/05/2013 11:56:11

jiwant (IV0743501)



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Dear sunny As you know that at ATM all the option exercised they will provide zero returns . Therefore if option expires at ATM all option expires worthless.
sameer (IV01598701)



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Dear Jiwant as i have studied at ATM delta of both call and put option is 0.5. Can you explain me briefly about my question asked before?
Sunny (IV0397901)



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thank u jiwant ji
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