My Account
Follow us on:
Powered By
Find & Invest in bonds issued by top corporates, PSU Banks, NBFCs, and much more. Invest as low as 10,000 and earn better returns than FD
Invest Now
Powered By
Unlock Your Trading Potential: Trade like Experts with SEBI registered creators, Learn from Courses & Webinars by India’s Finest Finance Experts.
Invest Now
AMBAREESH BALIGA
Fundamental, Stock Ideas, Multibaggers & Insights
Subscribe
CK NARAYAN
Stock & Index F&O Trading Calls & Market Analysis
Subscribe
SUDARSHAN SUKHANI
Technical Call, Trading Calls & Insights
Subscribe
T GNANASEKAR
Commodity Trading Calls & Market Analysis
Subscribe
MECKLAI FINANCIALS
Currency Derivatives Trading Calls & Insights
Subscribe
SHUBHAM AGARWAL
Options Trading Advice and Market Analysis
Subscribe
MARKET SMITH INDIA
Model portfolios, Investment Ideas, Guru Screens and Much More
Subscribe
TraderSmith
Proprietary system driven Rule Based Trading calls
Subscribe
Curated markets data, exclusive trading recommendations, Independent equity analysis & actionable investment ideas
Subscribe
Curated markets data, exclusive trading recommendations, Independent equity analysis & actionable investment ideas
Explore
STOCK REPORTS BY THOMSON REUTERS
Details stock report and investment recommendation
Subscribe
POWER YOUR TRADE
Technical and Commodity Calls
Subscribe
INVESTMENT WATCH
Set price, volume and news alerts
Subscribe
Check your Credit Score for Free and Get Guaranteed ₹100 Cash Reward!
Check your Credit Score for Free and Get Guaranteed ₹ 100 Cash Reward!
NSE Nifty 50, Bank Nifty and other index option premiums have fallen since October with realised volatility, and are likely to remain subdued in the run up to 2024 general elections as the market factors in a higher certainty of stable government.
In October and November, the option premiums were very low, making it challenging for option writers to generate substantial profits. Amid a bull rally in December, the option premiums have risen somewhat with a gain in Vix, but will likely fall back to the prior levels, said Nandik Mallik, Chief Investment Officer of Avendus Capital Public Markets Alternate Strategies.
On December 8, NSE Nifty 50 hit the 21,000 mark as the Reserve Bank of India held the repo rate steady at 6.5 percent.
Volatility is a key factor influencing options value. A lower VIX makes options cheaper, resulting in smaller premiums for options writers and making it challenging for them to secure significant profits. In the November series, India VIX hit a low of around 8.4 amid a lack of major triggers in the markets, with indices moving higher with positive momentum.
“Option prices have historically followed cycles, with periods of low premiums and low Volatility Index (VIX), followed by sudden spurts in option prices and VIX,” said Mallik.
Bank Nifty option prices far lower now than previous state election results period
“Bank Nifty At the Money (ATM) weekly Put options on December 10, 2018, a day before election results, were priced at around 1.4 percent of notional for December 13 expiry,” Mallik pointed out.
Compare that with the current prices. On Friday evening, Bank Nifty ATM Put option at 44,800 strike was trading at just Rs 257, a mere 0.57 percent of notional — about 60 percent lower than before.
Option premiums going ahead, closer to general elections
Going ahead, as general elections near, option prices will likely remain low also due to better price discovery and decoupling from global equities. “Price discovery has improved as option volumes have swelled up,” Mallik said, adding, “The decoupling from global equities has further compressed market variation vis-a-vis global equities.”
India has shifted from being a high beta market to now being independent of the US markets. As recently as the year 2020, Indian indices would fall and rise much more than the move in the S&P 500 in the US. But since then, Nifty 50 has shown movement independent of S&P 500, even rising in the face of a fall in the US index.
Hence, “option premiums will remain low in months to come, and the most powerful manifestation of that will be seen in pricing—coming May should be nowhere close to what they were in May five seasons back,” says Mallik.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Check Free Credit Score on Moneycontrol: Easily track your loans, get insights, and enjoy a ₹100 cashback on your first check!
Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express writtern permission of moneycontrol.com is prohibited.
You are already a Moneycontrol Pro user.
Access your Detailed Credit Report – absolutely free
Nifty, Bank Nifty option premiums to remain low as volatility ebbs, poll certainty increases – Moneycontrol
Leave a comment