Comment on Theta

punit417 commented on 12 Aug 2016, 08:09 PM

Dear Sir,

How can time value for a call option be negative when there are still 2 weeks left for expiry? Please see below example I took from NSE website today, i.e. 12th Aug 2016:

Spot price – 365.55
Option type – Call option
Strike price – 320 (ITM)
Premium price (Call Option) – 29.5

Derived Intrinsic value = 365.55 – 320 = 45.55
Time risk value of option = Premium minus Intrinsic value = 29.5 – 45.55 = (16.05)

Please explain the rationality of such premium pricing. Can there be any trading opportunity in above?

Thanks

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