Option Maths and Markets

All Questions on Option Calculations and Markets

What model are you using to price options and calculate IVs?
We use an improvised Black 76 model instead of the conventional Black Scholes model, which suits Indian markets better. Most professional traders across the...
Tue, 4 Aug, 2020 at 10:06 AM
How do you calculate IVs?
We use the price and derive the IV by reverse calculation using the Black 76 model.
Tue, 4 Aug, 2020 at 10:03 AM
Why is the IV on NSE website different from Sensibull’s IV?
NSE uses Black-Scholes model with a constant interest rate assumption of 10%. The observed interest rate in the market is not 10% but it varies from time to...
Tue, 4 Aug, 2020 at 10:06 AM
Is the IV mentioned in the calculator for the Call or Put?
We always calculate IV for a strike from the OTM option of a Strike. ITM IVs are wrong because of low liquidity, and STT.  Example: Market is at 10400.I...
Tue, 4 Aug, 2020 at 10:05 AM
Why is the IV on the call and put the same in your option chain? Why don't you have two separate IVs?
In academic theory, as well as in an efficient market, the call and put IV should be the same for the same strike. Examples include US / EU markets and OTC ...
Tue, 4 Aug, 2020 at 10:06 AM
Why are IVs different across different strikes?
This is because of IV skew. Usually, in equities IV is higher for lower strikes, and higher for lower strikes.  Learn more about it in the webinar here.
Tue, 4 Aug, 2020 at 10:09 AM
How do I interpret Theta?
Theta is not always positive. Theta is positive or negative depending on whether you have net earning time value decay or losing time value decay. Theta po...
Tue, 4 Aug, 2020 at 10:09 AM
How do you handle things like dividends in your model?
We use the futures price instead of the underlying stock price. Future prices capture the expected dividend correctly and cleanly. This is all the more a re...
Tue, 4 Aug, 2020 at 10:09 AM
How do you compute PCR?
We do not calculate the PCR off one expiry only, we calculate it off the next three expiries. The reason for this is: Sometimes there is significant OI i...
Tue, 4 Aug, 2020 at 10:11 AM
What is this Bank NIFTY implied weekly future?
Options are priced off the underlying futures. NIFTY options are priced off the NIFTY Jan Future.  However, for BANK NIFTY weekly options, there is no s...
Tue, 4 Aug, 2020 at 10:12 AM