TECHNO CHARTS

OPTIONS
SUMMARY
2024

BY: JAYNESH KASLIWAL

 NOTE

01 In all my charts

02 Red line is 21 ema

03 Green line is 50 ema

04 MACD as normal settings

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 BASICS
Index option: These options have index as the underlying asset. For
example options on Nifty, Sensex, etc.

Stock option: These options have individual stocks as the underlying

asset. For example, option on ONGC, NTPC etc.

Buyer of an option: The buyer of an option is one who has a right but
not the obligation in the contract. For owning this right, he pays a
price to the seller of this right called ‘option premium’ to the option
seller.

Writer of an option: The writer of an option is one who receives the

option premium and is thereby obliged to sell/buy the asset if the
buyer of option exercises his right.

Option price/Premium: It is the price which the option buyer pays to

the option seller. In our examples, option price for call option is Rs.
71.70 and for put option is Rs. 174.80. Premium traded is for single unit
of nifty and to arrive at the total premium in a contract, we need to
multiply this premium with the lot size.

Lot size: Lot size is the number of units of underlying asset in a

contract. Lot size of Nifty option contracts is 75. Accordingly, in our
examples, total premium for call option 51 contract would be Rs. 71.70
x 75 = 5.377.50 and total premium for put option contract would be Rs.
174.80 x 75 = 13,110

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 BASICS OF OPTIONS

01 PE : Put Option

02 Buying when View is Bearish

03 Selling when View is Bullish

04 CE :Call Option

05 Buying when View is Bullish

06 Sellingwhen View is Bearish

07 Time is Friend while selling

Options
08 Momentum in right direction is
Friend while buying Options

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 OPTIONS GREEKS SIMPLIFIED

01 Delta Delta measures how much an option's price

can be expected to move for every 1 Rs change in
the price of the underlying security or index .

02 IfDelta Is 0.5 then if Stock Moves 1 Rs Option Will

move 0.5 Rs Nearer the Option More the delta.

03 Delta = Change in option premium/ Unit change in

price of the underlying asset.

04 Delta for call option buyer is positive. This means that

the value of the contract increases as the share price
rises. To that extent it is rather like a long or ‘bull’
position in the underlying asset.

05 Delta for call option seller will be same in magnitude

but with the opposite sign (negative).

06 Delta for put option buyer is negative. The value of the

contract increases as the share price falls. This is similar
to a short or ‘bear’ position in the underlying asset.
Delta for put option seller will be same in magnitude
but with the opposite sign (positive).

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 2. GAMMA
Gamma is the rate of change for an option's delta.
Gamma is at its highest when an option nearest and is at its
lowest when it is further away from strike
If gamma Increases the price of option will change very fast
as it boosts delta .
Gamma = Change in an option delta/ Unit change in price of
underlying asset
Gamma works as an acceleration of the delta, i.e. it signifies
the speed with which an option will go either in-the-money
or out-of-the-money due to a change in price of the
underlying asset.

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 3. THETA
Options don't Move linearly

The term theta refers to the rate of decline in the value of an

option due to the passage of time.

Theta is generally expressed as a negative number and can

be thought of as the amount by which an option's Value will
reduce.

Theta = Change in an option premium/ Change in time to

expiry

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 VEGA
This is ameasure of the sensitivity of an option price to
changes in market volatility.

It is the change of an option premium for a given change

(typically 1%) in the underlying volatility.

Vega = Change in an option premium/ Change in volatility

Vega is positive for a long call and a long put. An increase in

the assumed volatility of the underlying increases the
expected payout from a buy option, whether it is a call or a
put.

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 ITM Options (In the money options)
a) A call option is said to be in ITM if the strike price is
less than the current spot price of the security.
I.e. Spot- Strike > 0
b) A put option is said to be ITM if the strike price is
more than the current spot price of the security.
I.e. Spot- Strike < 0

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 ATM Options (At the money options)
a) A call option is said to be in ATM if the strike
price is equal to the current spot price of the
security.
I.e. Spot- Strike = 0
b) A put option is said to be ATM if the strike
price is equal to the current spot price of the
security.
I.e. Spot- Strike = 0

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 OTM options (Out of the money options)
a) A call option is said to be in OTM if the
strike price is more than the current spot
price of the security.
I.e. Spot- Strike < 0
b) A put option is said to be OTM if the strike
price is less to the current spot price of the
security.
I.e. Spot- Strike > 0

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 OTM options (Out of the money options)
a) A call option is said to be in OTM if the
strike price is more than the current spot
price of the security.
I.e. Spot- Strike < 0
b) A put option is said to be OTM if the strike
price is less to the current spot price of the
security.
I.e. Spot- Strike > 0

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 LONG ON OPTION
Long on option Buyer of an option is said to be “long on
option”

You have the right to exercise that option.

Your potential loss is limited to the premium amount you

paid

Profit depends on the level of underlying asset price at the

time of exercise/expiry of the contract

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 SHORT ON OPTION
Short on option Seller of an option is said to be “short on
option”

Your maximum profit is the premium received.

You can be assigned an exercised option any time during the

life of option contract .

Your potential loss is theoretically unlimited

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 OPTIONS PRICING
There are five fundamental parameters on which the option
price depends:
1) Spot price of the underlying asset

2) Strike price of the option

3) Volatility of the underlying asset’s price

4) Time to expiration
5) Interest rates

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 OPTIONS VALUES

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 ORDERS OF OPTIONS
Market

Limit
Stoploss Market
Stoploss

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 PAYOUT FOR LONG OPTIONS

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 CHECKING GREEKS

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 QUESTIONS
17400 Ce what is intrinsic value ?

17600 ce what is intrinsic value

17000 Pe What is intrinsic value

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 CACULATE VALUES :
17400 : ATM
Price at 116
Spot at 17375
17400-17375 = 25
Extrnsic Value = 116-25 Rs
Similarly what is of 17300 CE ?

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