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Vaibhav Barge
Ashwin Ramani(Technical Chart Querries)
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webinar
 DERIVATIVE VALUE DERIVES FROM UNDERLYING ASSET

FUTURE & OPTION LEGAL CONTRACT BETWEEN BUYER & SELLE

24-Jun EXPIRY

SEGMENTS BETTING ACTION MARGIN

CASH FUNDAMENTAL BUY SELL FULL
DELIVERY BUYING IS ALLOWED
ONLY INTRDAY SELLING IS ALLOWED

MARGIN
FUTURE PRICE BUY SELL 20%
SHORTSELL SELL BUY
0

OPTIONS STRIKE PRICE BUY SELL

SHORTSELL SELL BUY

EXAMPLE
SHOPS RENT

BUYER SELLER
A2 B2
contract 11 M 2
ON STAMP PAPER

FUTURE ICICIBANK 607 27-May

BUYER SELLER FUT
A2 B2 2
BREAK FOR 5 MIN
NDERLYING ASSET

EEN BUYER & SELLER

OTY ICICIBANK
10 639
6390

LOT
1375

LOT
1375
 FUTURE

BUYER

CALL OPTION PRICE

CALL BUYER CALL SELLER

BULLISH NOT BULLISH

IN THE CITY
FLAT
PRICE

WHY?

OPTIONS IN THE MONEY

 INSIDEITM
14800 NEAR ATM
OUTSIOTM

AS A OPTION BUYER STRIKE PRICE SHOULD EXPIRE

AS A OPTION SELLER STRIKE PRICE SHOULD NOT EX
 SELLER

PUT OPTION PRICE

PUT BUYER PUT SELLER

BEARISH NOT BEARISH

NEAR CITY FAR FROM CITY

FLAT FLAT

E MONEY AT THE MONEY OUT THE MONEY

NIFTY 14800
 14500
14550
14600
14650
14700
14750
14800
14850
14900
14950
15000

E SHOULD EXPIRE AS A ITM THEN ONLY HE WILL GET PROFIT

CE SHOULD NOT EXPIRE AS A ITM THEN ONLY HE WILL GET PROFIT

BUYER SELLER
100 100

CMP 100BEP
OTM OUTSIDE
ATM NEAR 14800
ITM INSIDE
BREAK EVEN POINT THE POINT WHERE PROFIT & LOSS IS

CALL BEP = CALL STRIKE PRICE + STRIKE PRICE PREMIUM

PUT BEP = PUT STRIKE PRICE - STRIKE PRICE PREMIUM

EXAMPLE
A 100 B
BUY SELL

AT 100
WHAT IS P&L FOR BOTH?

0
FIT & LOSS IS ZERO

BOTH?
CALL INTRINSIC VALUE
Time Value of an Option: The additional value over & above the intrinsic value is
ØCall Intrinsic Value of an Option = Current market price – Strike Price

REMARK IF VALUE COMES IN NEGATIVE THEN CONSIDER INTRISIC VALUE ZE

ITM CALL
INTRINISIC VALUE OF
CALL STRIKE PRICE
ICICIBANK
CMP 640
STRIKE PRICE 620
STRIKE PREMIUM/LTP 26.35

BREAKEVEN UPSIDE POINT

NO PROFIT NO LOSS
BEP =

BEP =

CALL BUYER ICICIBANK

CALL SELLER ICICIBANK

ATM CALL
INTRINISIC VALUE OF
CALL STRIKE PRICE
ICICIBANK
CMP 640
STRIKE PRICE 640
STRIKE PREMIUM/LTP 14.1

BREAKEVEN UPSIDE POINT

NO PROFIT NO LOSS
BEP =

BEP =

CALL BUYER ICICIBANK

CALL SELLER ICICIBANK

IF VALUE COMES IN NEGATIVE THEN CONSIDER INTRISIC VALUE ZE

OTM CALL
INTRINISIC VALUE OF
CALL STRIKE PRICE
ICICIBANK
CMP 640
STRIKE PRICE 710
STRIKE PREMIUM/LTP 1

BREAKEVEN UPSIDE POINT

NO PROFIT NO LOSS
BEP =

BEP =

CALL BUYER ICICIBANK

CALL SELLER ICICIBANK
C VALUE
al value over & above the intrinsic value is called “Time Value”
rrent market price – Strike Price

N NEGATIVE THEN CONSIDER INTRISIC VALUE ZERO

CMP - STP = IV

=640-620
620 CE IV 20

CALL

STP + STP PREMIUM

=620+26.35
646.35 NO PROFIT NO LOSS
NET PNL

SHOULD EXPIRE ABOVE THE 646.35

SHOULD NOT EXPIRE ABOVE TH 646.35

CMP - STP = IV

=640-640
 640 CE IV 0

CALL

STP + STP PREMIUM

=640+14.1
654.1 NO PROFIT NO LOSS
NET PNL 0

SHOULD EXPIRE ABOVE THE 654.1

SHOULD NOT EXPIRE ABOVE TH 654.1

N NEGATIVE THEN CONSIDER INTRISIC VALUE ZERO

CMP - STP = IV

=640-710
710 CE IV 0 0

CALL

STP + STP PREMIUM

=710+1
711 0 NO PROFIT NO LOSS
NET PNL 0

SHOULD EXPIRE ABOVE THE 711

SHOULD NOT EXPIRE ABOVE TH 711
 TIME VALUE =PREMIUM - IV

=26.35-20
TIME VALUE = 6.35

NO PROFIT NO LOSS

TIME VALUE =PREMIUM - IV

=14.1-0
 TIME VALUE = 14.1

NO PROFIT NO LOSS

TIME VALUE =PREMIUM - IV

=1-0
TIME VALUE = 1

NO PROFIT NO LOSS
PUT INTRINSIC VALUE
Time Value of an Option: The additional value over & above the intrinsic value is
ØPut Intrinsic Value of an Option = Strike Price -Current market price

REMARK IF VALUE COMES IN NEGATIVE THEN CONSIDER INTRISIC VALUE ZERO

ITM PUT
INTRINISIC VALUE OF STP
PUT STRIKE PRICE
ICICIBANK
CMP 640 660
STRIKE PRICE 660
STRIKE PREMIUM/LTP 20.6

BREAKEVEN DOWNSIDE POINT PUT

BEP = STP -STP PREMIUM

=660-20.6
BEP = 639.4

PUT BUYER ICICIBANK SHOULD EXPIRE BELOW THE

PUT SELLER ICICIBANK SHOULD NOT EXPIRE BELOW THE

ATM PUT
INTRINISIC VALUE OF STP
PUT STRIKE PRICE
ICICIBANK
CMP 640 640
STRIKE PRICE 640
STRIKE PREMIUM/LTP 12.75

BREAKEVEN DOWNSIDE POINT PUT

BEP = STP -STP PREMIUM

=640-12.75
BEP = 627.25

PUT BUYER ICICIBANK SHOULD EXPIRE BELOW THE

PUT SELLER ICICIBANK SHOULD NOT EXPIRE BELOW THE

OTM PUT
INTRINISIC VALUE OF STP
PUT STRIKE PRICE
ICICIBANK
CMP 640 570
STRIKE PRICE 570
STRIKE PREMIUM/LTP 0.7

BREAKEVEN DOWNSIDE POINT PUT

BEP = STP -STP PREMIUM

=570-0.7
BEP = 569.3

PUT BUYER ICICIBANK SHOULD EXPIRE BELOW THE

PUT SELLER ICICIBANK SHOULD NOT EXPIRE BELOW THE
 CMP
ICICIBANK 1800
CMP 640
STRIKE PRICE 1900 =1900-1800
STRIKE PREMIUM/LTP 33
BUYING PRICE NET PNL
above the intrinsic value is called “Time Value”
nt market price

DER INTRISIC VALUE ZERO

- CMP = IV TIME VALUE =

=660-640
PE IV 20 TIME VALUE =

0 NO PROFIT NO LOSS
NET PNL 0

LD EXPIRE BELOW THE 639.4

LD NOT EXPIRE BELOW THE 639.4

- CMP = IV TIME VALUE =

=640-640
PE IV 0 TIME VALUE =
 0 NO PROFIT NO LOSS
NET PNL 0

LD EXPIRE BELOW THE 627.25

LD NOT EXPIRE BELOW THE 627.25

- CMP = IV TIME VALUE =

=570-540
PE IV 0 0 TIME VALUE =

VOLATILITY

0 NO PROFIT NO LOSS
NET PNL 0

LD EXPIRE BELOW THE 569.3

LD NOT EXPIRE BELOW THE 569.3
 100

=100-33
67
PREMIUM - IV

=20.6-20
0.6

PREMIUM - IV

=12.75-0
12.75
PREMIUM - IV

=0.7-0
0.7
HOMEWORK -

FIND OUT ITM, ATM & OTM CALL & PUT

CALCULATE INTRNSIC VALUE & TIME VALUE

BREAKEVEN POINT FOR CALL & PUT

 MARGIN

PRICE LOT SIZE

Bajfinance 4817 250
FUTURE
1204250 10% 120425
20% 240850
5% 60212.5
40%

Leverage 10000 10x 100000

1204250
OPTIONS
RIGHT TO BUY OR SELL THE FUTURE B

ACTION RISK VIEW

BUY CALL LIMITED BULLISH
SELL CALL UNLIMITED NOT BULLISH

BUY PUT LIMITED BEARISH

SELL PUT UNLIMITED NOT BEARIS

BAJFINANACE

BUY CALL 4800CE 217

ABOVE BEP =STP+PREM
5017
WHAT IS THE FORMULA F

ABC
100

ABC
100
 FUTURE BUT NOT THE OBLIGATION

PRICE
ULLISH PRICE SHOULD GO UP
OT BULLISH PRICE SHOULD NOT GO UP

EARISH PRICE SHOULD GO DOWN

OT BEARISH PRICE SHOULD NOT GO DOWN

4817

=STP+PREMIUM
ORMULA FOR P&L?

CMP PROFIT
BUY 100 110 10

P&L= SELL PRICE-BUY PRICE

CMP LOSS
SELL 100 110 -10
P&L= SELL PRICE-BUY PRICE
 BUY

GO UP CALL
BUY
OWN BULLISH
GO DOWN
 FUTURE

BUY SELL

CALL PUT
SELL BUY SELL
NOT BULLISH BEARISH NOT BEARISH
T BEARISH
CALL & PUT BUY OPTION P

CALL & PUT SELL OPTION P

LTP
CALL BUY

CALL SELL
PUT BUY

PUT SELL
1) CACULATE IV
2) P&L
OPTION P&L = SELL PRICE - BUY PRICE
INTRINSIC VALUE

OPTION P&L = SELL PRICE - BUY PRICE

INTRINSIC VAL

POSSIBLE CMP
IV
P&L

IV
P&l
POSSIBLE CMP
IV
P&L

IV
P&L
PUT IV = STP-CMP 4800-CMP
=SELL PRICE -BUY PRICE 190-BUY PRICE
Y PRICE 1)
2)
CALL IV
Y PRICE
TRINSIC VALUE
P&L
00-CMP 4800-4000 800
0-BUY PRICE
CALCULATE IV
P&L
= CMP-STP

= SELL PRICE- BUY PRICE

 BUY
FUT 100

P&L=

BUY
100

P&L=
 BUYER

CMP
110

SELL PRICE-BUY PRICE

=110-100 10

CMP
90

SELL PRICE-BUY PRICE

=90-100 -10
 SELLER

SELL CMP
FUT 100 110

P&L= SELL PRICE-BUY PRICE

=100-110 -10

SELL CMP
100 90

P&L= SELL PRICE-BUY PRICE

=100-90 10
 6/30/2020BUYER
A

200 100

2-Jul SQUARE OFF

SELLER

-100

NSE

Jan-01BUY A
1

Jan-02BUY C
5

Jan-03SQUARE OFF A
sell order -1
 Jan-04FRESH BUYING E
buyer 5

ON JAN NSE RELESED 10 CONTRACT

BUT BUYER & SELLER TOGETHER THEY CAN T
IF BUYER ASK FOR 1 THEN SELLER ALSO ASK
BECAUSE BUYER ASKING FOR 1
SAME IF SELLER WANT TO SELL 1 CONTACT H
IF ANY ONE REFUSE THEN CONTRACT WILL N

Jan-01BUY A
1
HERE BUYER & SELLER BOTH ASKING FOR NE

Jan-02BUY C
5
NOW NEW BUER C & NEW SELLER D ASKING
SO TOTAL CONTRCT ADDING PREV. DAY 1 TH

Jan-03SQUARE OFF A
-1
NOW OLD BUYER A COMING TO SQUARE OF
& OLD SELLER D SQUARE OF 1 CONTRACT SO
 Jan-04FRESH BUYING E
5
NOW E IS NEW BUER ASKING FOR NEW 5 CO
BUT C WAS OLD BUYER COMING TO SQUARE
SO TOTAL OI IS 5 CARRY FORWARD PREV OI

SBIN

3000
1

200
BUYERS 10
NEW BUYER 10
10

FUTURE OPEN INTEREST

CHANGE IN PRICE

3%

-4%
-5%

4%
 SELLER OPEN INTEREST
B

100 100

RE OFF
BUYER

-100 -100

DAY OI TOTAL OI
SELL B
1 1 1

SELL D
5 5 6

SQUARE OFF D
buy order -1 -1 5
 C SQUARE OFF BUY POSITION THAT IS SELL
seller -5 0 5
NIL

R THEY CAN TAKE CONTRACT

ER ALSO ASK FOR 1 HE CAN NOT ASK FOR 2 OR MORE

1 CONTACT HE WILL SHORT 1 SO BUYER HAVE O UY 1 CONTRACT

TRACT WILL NOT OPEN

DAY OI TOTAL OI
SELL B
1 1 1
SKING FOR NEW 1 CONTRACT SO 1 CONTRACT IS OPEN

SELL D
5 5 6
LER D ASKING FOR 5 SO ON THAT DAY 5 CONTRACT ARE OPEN
REV. DAY 1 THAT WILL BE 6

SQUARE OFF D
-1 -1 5
O SQUARE OF BUY POSITION
CONTRACT SO DAY OPEN CONTRACT ARE -1 ADDING PREV. OI THEN TOTAL O
 C SQUARE OFF BUY POSITION THAT IS SELL
-5 0 5
OR NEW 5 CONTRACT
G TO SQUARE OF HIS 5 CONTRACT SO 5-5=0 OI IS 0 ON THAT DAY
ARD PREV OI

SELLER 20

CHANGE OI ACTION

10% LONG BUILD UP BUY

15% SHORT BUILD UP SELL

-20% LONG UNWINDING BUY POSITION EX

-25% SHORT COVERING SELL POSITION EX

VOLUME
BID PRICE
ASK PRICE
200
 ENTER
EXIT

NTRACT

EXIT
EXIT

OI THEN TOTAL OI IS 5 EXIT

EXIT
AT DAY

ACTION
BUY POSITION EXIT

SELL POSITION EXIT

 OPEN INTEREST IS LEGAL AGREEMENT BETWEEN BUYER &
Mr. A has 10 shops & want to give it on rent
Mr. B want 1 shops on rent for 11 months

CHETAN BUYER 9000 IS THIS CONTRACT

JHONY SELLER 10000 NO

B BUYER 9500 BOTH HAVE CHAN

A SELLER 9500 NOW CONTRACT I
B(1) A (1) 1 CONTRACT FORM

Now Mr. C want to buy 2 shops for 11 months

C BUYER 10000 Mr. C CHANGED TH

A SELLER 10000 NOW CONTRACT I
C(2) A(2) 2 CONTRACT FORM

Now Mr. D want to buy 7 shops for 11 months

D BUYER 9000 Mr. A CHANGED TH

A SELLER 9000 NOW CONTRACT I
D(7) A(7) 7 CONTRACT FORM

AFTER 6 MONTHS
 Mr. B wants to colse his contract
Mr. E want 1 shop on rent
E BUYER 9500 IS THIS CONTRACT
B SELLER(SQURING OFF) 9500 YES

B(-1) E (1) 0 CONTRACT FORM

Mr. A wants to close his contract with C

Mr. C wants to colse his 2 contract

A BUYER 10000 IS THIS CONTRACT

C SELLER 10000 YES

A(-2) C(-2) -2 CONTRACT FOR

Mr. A wants to close his contract with E(1) d(7)

Mr. E & D wants to colse his 8 contract

A BUYER 10000
E&D SELLER 10000
A(-8) ED(-8) -8 CONTRACT FOR
BETWEEN BUYER & SELLER
Mr. A is Seller
STAMP PAPER

IS THIS CONTRACT COMPLETE?

ZERO CONTRACT FORMED

BOTH HAVE CHANGED THE PRICE

NOW CONTRACT IS COMPLETE
1 CONTRACT FORMED TOTAL OPEN CONTRACT

months

Mr. C CHANGED THE PRICE

NOW CONTRACT IS COMPLETE
2 CONTRACT FORMED TOTAL OPEN CONTRACT

months

Mr. A CHANGED THE PRICE

NOW CONTRACT IS COMPLETE
7 CONTRACT FORMED TOTAL OPEN CONTRACT
 Mr. A called new BUYER

IS THIS CONTRACT COMPLETE?

1 CONTRACT CLOSED & 1 FORMED

0 CONTRACT FORMED TOTAL OPEN CONTRACT

IS THIS CONTRACT COMPLETE?

2 CONTRACTS CLOSED

-2 CONTRACT FORMED TOTAL OPEN CONTRACT

(1) d(7) 8
8
-8 CONTRACT FORMED TOTAL OPEN CONTRACT
1

10
CONTRACT 10

CONTRACT 8
CONTRACT 0
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