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...
Thu, 4 Apr, 2024 at 2:23 PM
How do you calculate IVs?
We reverse calculate the IV from the options price using the Black 76 model.
Thu, 4 Apr, 2024 at 2:22 PM
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...
Thu, 4 Apr, 2024 at 2:22 PM
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 ...
Thu, 4 Apr, 2024 at 2:22 PM
Why are IVs different across different strikes?
This is because of IV skews. Normally in equities IV is lower for higher strikes, and higher for lower strikes. Learn more about it in the webinar here.
Thu, 4 Apr, 2024 at 2:21 PM
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...
Thu, 4 Apr, 2024 at 2:21 PM
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...
Thu, 4 Apr, 2024 at 2:21 PM
What is this Bank NIFTY implied weekly future?
Options are priced off the underlying futures. However, for NIFTY and BANK NIFTY weekly options, there is no such thing as weekly futures. So we derive ...
Thu, 4 Apr, 2024 at 2:21 PM
Does this USDINR Futures strategy really have 100% POP?
Trade details The Strategy Builder shows 100% probability of profit because we make some assumptions:  Let's consider the above trade as an examp...
Thu, 4 Apr, 2024 at 2:20 PM
Will my real P&L match the projected values that I see in the Strategy builder?
In the Strategy Builder, the profit and loss are projections, and they depend on premia, liquidity, IV, etc. While we make the best effort to ensure they ar...
Thu, 4 Apr, 2024 at 2:20 PM